Buying a property at auction that already has tenants paying rent can look like a dream investment – instant income, right? While it can be a good strategy, buying auction properties with sitting tenants needs careful thought and extra checks compared to buying an empty property. You're not just buying the building; you're taking over a legal agreement and becoming a landlord instantly.

Imagine this: you buy a tenanted property at auction, hoping to increase the rent quickly. But then you discover the sitting tenants have an old type of tenancy agreement that stops you from doing that easily. Or, worse, you find out after buying that the previous owner skipped essential safety checks, leaving you to sort out the problems and potentially face legal issues.

This shows why doing your homework before bidding is so important. When you buy a property with tenants, you take on all the landlord's responsibilities from day one.

UK Auction List is where you can find all sorts of properties up for auction, including ones sold with tenants. Feel free to browse the listings.

Just remember our role: UK Auction List is strictly a property directory. We list properties from UK auction houses. We don't offer legal advice, check tenancy details, arrange viewings, or handle the auction itself. This guide gives general information for England and Wales (rules differ elsewhere). For specific legal advice about tenancies, always talk to a qualified solicitor who specialises in housing law before you bid.

Let's break down what you need to look out for when buying auction properties with sitting tenants.

Understanding the 'sitting tenant' scenario

What does it mean if a property is "sold with sitting tenant(s)"? It simply means you buy the property, and the current tenants stay on under their existing rental agreement. You become their new landlord immediately after you buy it.

Why are properties sold like this? It could be that the landlord is retiring, selling off investments, or maybe the type of tenancy makes it hard to get the property empty before selling.

Potential upsides

• Instant Rent: Money comes in from day one, with no gap while you find tenants. This is one possible benefit of buying at auction for investors.
• Lower Price: Sometimes, these properties are cheaper to reflect the fact that there's a tenant with rights living there, especially if the rent is low.
• Good Tenants: You might inherit reliable, long-term tenants who look after the place.

Potential downsides

• Problem Tenants: You could be taking on tenants who don't pay rent on time, cause damage, or disturb neighbours.
• Low Rent: The current rent might be well below market rates, and you might be very limited in how much you can increase it.
• Getting the Property Back: If you want to live there yourself, do major renovations, or sell it empty later, getting the tenants to leave can be difficult or even impossible, depending on their agreement.
• Immediate Duties: You have landlord responsibilities (like repairs and safety checks) from the moment you own it.
• Past Mistakes: The previous landlord might not have followed all the rules (like protecting the deposit), and you might have to fix their errors.

Essential due diligence: The tenancy agreement

This document is vital. It sets out the rules of the tenancy. You must get a copy and read it carefully – it should be in the auction legal pack.

Getting the agreement

• It should definitely be in the legal pack provided before the auction.
• If it's missing, be very wary. Ask the auctioneer or the seller's solicitor for it straight away. Buying without seeing the tenancy agreement is a huge risk.

Key details to check

• Type of Tenancy: This is the most important part. Different types have very different rules:
  • Assured Shorthold Tenancy (AST): Most common type now. Landlords have clearer ways to increase rent (with rules) and eventually regain possession (using Section 21 or Section 8 notices, following strict procedures).
  • Assured Tenancy: Less common, usually pre-1997. Gives tenants strong rights to stay long-term. Rent increases are restricted, and getting possession is much harder.
  • Regulated (Protected) Tenancy: Usually pre-1989. Tenants have very strong rights, including 'fair rent' limits and high security of tenure. Getting possession is extremely difficult. Buying with a regulated tenant means accepting a long-term situation, likely with low rent.
• Start Date & Term: When did it start? Is it a fixed-term contract, or rolling month-to-month (periodic)?
• Rent Details: How much is the rent, and when is it due? Try hard to get proof of recent rent payments (a rent statement) from the seller. Are there any arrears?
• Tenant Names: Who is officially named on the agreement?
• Deposit Info: Was a deposit paid? How much? For ASTs, is it protected in a government-approved scheme? (TDS, MyDeposits, DPS). Get the scheme details. If it wasn't protected correctly by the old landlord, it can cause you problems later. You'll need to ensure the protection is properly managed after you buy.

Missing paperwork?

• No written agreement? A tenancy can still exist legally based on verbal agreement and rent payments, but it's much harder to prove the terms. This creates risk. Get legal advice.

Legal compliance check: Inheriting responsibilities

As the new owner, you immediately inherit the duty to ensure the property meets all legal rental standards. Check these before buying:

• Gas Safety: Is there a current Gas Safety Certificate (CP12)? Needed annually if gas is present.
• Electrical Safety: Is there a satisfactory Electrical Installation Condition Report (EICR) from the last 5 years? Required for all rentals. Check for any urgent work needed.
• Energy Performance (EPC): Does the property have an EPC rating of E or higher? This is the minimum required for rentals. An F or G rating will likely mean you need to make improvements. This links to your overall buy-to-let strategy.
• Alarms: Are working smoke alarms fitted on each floor? Is there a carbon monoxide alarm if needed (near boilers or solid fuel burners)?
• Deposit Protection: Double-check if a deposit was taken and if it's correctly protected in an approved scheme. You'll need to handle the transfer correctly after purchase.
• Right to Rent: Were checks done to ensure the tenants have the legal right to rent in the UK? (Required in England for tenancies post-February 2016).
• Licensing: Check with the local council if the property needs an HMO licence (if multiple occupants) or falls within a Selective Licensing area (where all rentals need a licence). Make sure it complies if needed.

Practical considerations when buying tenanted auction properties

Think about the real-world practicalities too:

Viewings

• Getting access to view the property depends on the tenant's cooperation. You might only get a limited time inside, or it might be hard to arrange. Build this potential lack of thorough inspection into your assessment of the risk involved when preparing before auction day.

Condition

• Tenants might not always report problems, and wear and tear can be higher in rentals. Try to assess the condition as best you can during viewings and budget extra for potential repairs you might discover later.

Contacting tenants

• After you buy, you need to introduce yourself formally as the new landlord and tell them where to pay rent. Serving a 'Section 48' notice with your contact details is a legal requirement. Good communication from the start helps.

Rent increases

• As mentioned, this depends heavily on the tenancy type. Don't assume you can just put the rent up. There are specific rules and procedures to follow for ASTs, and severe restrictions for older tenancy types.

Getting possession

• If you need the tenants to leave (e.g., to live there yourself or sell empty), be aware that this can be complex and lengthy. It depends entirely on the tenancy type. Getting possession from tenants with Assured or Regulated tenancies is particularly difficult. Ending any tenancy requires following strict legal procedures; always get proper legal advice first. Making a mistake can lead to serious consequences.

Financing tenanted properties

Some mortgage lenders can be wary of lending on properties with sitting tenants, especially if the tenancy isn't an AST or the rent is very low.

Check with lenders

• If you need a mortgage, talk to a broker or lender early on about their policies for tenanted properties. Make sure the property meets their criteria. You can find general information on finance within guides covering how to buy property at auction.

Conclusion

Buying auction properties with sitting tenants can be a successful investment, offering instant income. However, the risks are higher if you don't do thorough checks beforehand.

Success really depends on doing your homework before the auction:

• Get and carefully read the tenancy agreement. Know exactly what type it is.
• Check the rent payment history and deposit protection.
• Verify compliance with all landlord safety rules (Gas, Electric, Fire, EPC).
• Understand the rules around rent increases and possession for that specific tenancy.
• Be realistic about potential issues with viewings and assessing the condition.
• Budget for immediate landlord costs and potential fixes.

UK Auction List lists these opportunities, but a detailed investigation using the legal pack and advice from specialist solicitors is essential before you bid.

Please note: This guide provides general information for England and Wales and is not legal advice. Landlord and tenant law is complex. Always seek advice from a qualified solicitor specialising in housing law before buying with sitting tenants. For queries about the UK Auction List website or selling property via auction, please use our dedicated contact form. We do not provide legal or specific investment advice.