Selling a Tenanted Property: What Scottish Landlords Need to Know

The private rental sector in Scotland is evolving rapidly. Some landlords are leaving because of rising costs, stricter regulations, and a changing political landscape, but selling a tenanted property in Scotland isn’t easy. The country has its own tenancy laws, which provide significant protection for tenants, and landlords are not allowed to simply list and sell. If a landlord chooses to sell tenanted property in Scotland, they cannot simply give notice and wait for the property to be empty. The Private Residential Tenancy (PRT) introduced in December 2017 abolished the automatic right to terminate a fixed-term tenancy, establishing a new tenancy framework with no fixed end date and a defined list of grounds that must be met before a landlord can lawfully ask a tenant to leave.

The Private Residential Tenancy and Its Implications

The PRT system provides for a tenancy with no fixed end date, unless the tenant terminates it or the landlord proves one of the grounds for repossession set out in the PRT. One of the 18 grounds covers the landlord’s desire to sell the property. Still, it can only be used if the landlord gives a notice to leave, giving the tenant a certain period of notice, and if the tenant disputes the notice, the landlord must go through the First-tier Tribunal process. The minimum notice a landlord must give if they want to sell the property varies depending on the length of the tenancy: 28 days for tenancies that have not lasted 3 years or more, or 84 days for tenancies that have lasted more than 3 years.

Tribunal Process and Realistic Timelines

If a tenant challenges a notice to quit on the grounds of a proposed sale, they can appeal to the First-tier Tribunal for Scotland, which will determine whether the landlord’s intention to sell is sincere. The tribunal process can take months, and the outcome is uncertain. Many landlords who do not take the time to understand the process of recovering vacant possession through this option are taken aback when what seemed like a quick way out of the market takes 12 to 18 months to complete. The property is not ready for open-market sale.

Selling With Tenants in Place

If you are not going to seek vacant possession before selling, the alternative is to sell the property with the tenancy in place. This route offers practical benefits unavailable with vacant possession. The property is still being rented out during the sale process, thus reducing carrying costs. The landlord doesn’t have to serve and possibly defend a notice to vacate. The transaction can proceed without altering the tenant’s lifestyle, minimising the risk of an awkward relationship with the occupier during the marketing period.

Who Buys Tenanted Properties

Tenanted properties in Scotland constitute a smaller market than the overall residential market. The majority of buyers, especially in the lower price brackets, are owner-occupier buyers, and they cannot buy a house they can’t live in. The realistic buyer base for a tenanted property includes other private landlords, portfolio investors, and cash-buying companies willing to accept a tenanted property. Knowing about this market trend before making a sale can help landlords target the right buyers rather than marketing to a non-transacting audience.

Cash Buyers and the Tenanted Sale Advantage

Tenanted property companies provide landlords with a solution to the main issues of the Scottish landlord exit. The transaction does not require vacant possession, avoiding the legal process and timeline uncertainty associated with the notice-to-leave process. The time to completion is much shorter than a traditional sale to an investor via open-market marketing. The rent remains in effect until the project is complete, and the tenant’s situation doesn’t change due to the sale. Landlords looking for a clear, unambiguous way out of the business will find that this is the only way to ensure the other options are not comparable.

Practical Steps Before Deciding

If landlords are thinking about selling their tenancy, they need to know how their tenancy is performing, the notice period they must give under the PRT, the rental income they are receiving from the property, and the property’s value when empty and when occupied. This information will guide you in determining the best route to take and what to look for from each buyer type. At this stage, legal advice from a solicitor experienced in Scottish residential tenancy law is worthwhile, both to ensure that the correct notice procedure is followed when the property is intended to be sold with vacant possession and to review any sale documentation if it is a tenanted sale.