Can having tenants hinder your sale?

Presentation is paramount when it comes to selling your property. Trying to find a buyer with a tenant still in situ may not be as financially smart as you think, writes ALANNA GALLAGHER

Selling a property in this market is challenging. Many home owners are selling with vacant possession but have a tenant in situ when the property goes to the market.

According to the Non Principal Private Residence section at the Department of the Environment 65 per cent of landlords in this country only own one property other than their own home. Many of these are now stretched financially and have to sell. “By June 2011, 55 per cent of those with Section 23 properties had restructured their loans,” Margaret McCormick, information officer at the Irish Property Owners Association explains.

With house sales taking at least six months, most feel they can’t afford to carry the cost of the property without a tenant in place. But is renting your place out when you plan to sell it a false economy?

Should you put your property on the market with a tenant in situ or should you give them notice to quit before going to the market?

Estate agent Pat Mulleran of DNG is unequivocal. “Homeowners should get vacant possession. The reason most landlords want to sell with a tenant still in situ is to continue collecting the rent. Present the house well and the money you lose in rental income you will get back on the sale.”

Agent Felicity Fox agrees but understands that there are “an awful lot of people with second homes rented out that can’t afford to pay the mortgage without the tenant in place. It’s all very well an agent recommending they get vacant possession before showing but for most that simply isn’t practical.”

Agents agree that cutting a deal with the tenant, offering them a reduction in rent in return for an assurance that the property will be presented in a favourable condition, is a good option. Christopher Bradley of Sherry Fitzgerald suggests a mark down in rent to the order of 10 to 15 per cent on condition that the house is presented for viewings. By this he means beds made, bedrooms decluttered, and bathrooms and kitchens spotless. The owner is responsible for the garden, he says.

In return, as an agent, Christopher would be looking for “a Saturday appointment in addition to an evening or lunchtime appointment, depending on the property style and its location. First-time buyers usually prefer lunchtime and families prefer evenings.”

Not all tenants will agree to this and if they don’t, Christopher suggests giving them notice. Under the Private Residential Tenancies Board (PRTB) tenants are entitled to certain notice.

Legislation entitles the tenant to “enjoy peaceful and exclusive occupation of the dwelling”, says Anne Marie Caulfield, director at the PRTB. “However, the landlord is entitled to access the property for the purposes of inspection but would be expected to make a prior appointment (unless an emergency arises).”

Mary Byrne is one tenant who is living in a house that is up for sale. She and her husband and two sons moved from London back to Dublin 18 months ago. They sold their London property and have been renting since they returned. “We’ve just been given notice. We have been living in a comfortable house in Dublin 6. Now we’re being forced to move house again, to pack our bags. I hate the fact that I have to keep the house clean and tidy. I don’t want viewers coming at the weekends. At the end of the day I’m paying money to rent the house. I don’t feel I should be moved on an agent’s whim.”

The house is a receivership sale. To date the landlord hasn’t reduced their rent. But she will be asking for a reduction “because of the inconvenience”.

This view is in contrast to the one Mary held when she sold their London house. Then she had a cleaner in the property “three to four times a week because we wanted to sell”. They sold in three weeks. “While I was like that about my own house I’m not that particular about a rented house,” she admits.

“The property is not ours but it is our home,” she explains. “It’s the idea of people walking around your home. It is also inconvenient for the children. My younger son is upset by those viewings. He says ‘I don’t want to move’.”

Felicity Fox’s experience is that any rental reduction in return for keeping the property in a “presentation” state “works for about two to three weeks only. After that it is not in the tenant’s interest to continue keeping the property up to show-house presentation standard.”

One landlord with a portfolio of nine properties, a mix of houses and apartments, advises “any landlord who has to sell a dwelling where a tenant is in place do his utmost to have the tenant leave the dwelling to give him freedom to offer his property for sale without any encumbrance”.

This allows him to do the necessary refurbishments and maximise the property’s value on the open market, he says.

“With a sitting tenant I would advise taking the appropriate steps to have the tenant vacate the property. Under the 2004 Residential Tenancies Act a landlord has the right to issue a termination order, to give notice to a tenant giving the relevant reasons – in this instance because he wishes to sell the property. The tenant is obliged to adhere to that and not to overstay. The number of days notice is determined by the tenant’s length of time in situ.”

Under the Residential Tenancies Act 2004, a tenancy that has been established for more than six months is known as a “Part 4 Tenancy”, Anne Marie Caulfield, director of the PRTB, explains.

“The legislation sets out that, within the first six months of a tenancy the landlord, or tenant, can terminate at 28 days written notice without having to give grounds for their termination, where no fixed term contract or lease is in place.

“However, after that six month probationary period, the tenant of a Part 4 Tenancy has an entitlement to remain in occupation for a period of four years from the commencement of the tenancy.

“Where a landlord intends to sell within three months of the termination of the tenancy, the Act allows him or her to validly serve a Notice of Termination. The notice period that the Landlord is required to give the tenants varies depending on how long the tenancy is in existence.”

Where a landlord has entered into a lease it cannot be terminated early unless provision to do so has been made in the terms and conditions of the lease, Anne Marie Caulfield continues.

“For example, if the landlord has signed up to a 12-month lease agreement then he or she must honour that. A lease cannot legally provide for shorter notice terms than those prescribed by the Act – ie, one cannot contract out of the minimum legal rights conferred by legislation.”

She recommends that landlords seek legal advice before giving tenants notice.

It’s tricky to advise, says Felicity Fox. “If we had a choice we’d have a vacant property, devoid of even the owner, with time to light lamps, put on the sound system and even have a fire blazing before the viewers arrive. But that is a wish list. People’s financial circumstances dictate how we sell.”

It’s a fact that a house with tenants in it is never going to be as well presented as if it was empty, she concludes.