Buying a house with tenants: properties sold with tenants in situ

Updated June 2026

Buying a property with tenants already in place, known as buying with tenants in situ or buying a property sold subject to tenancy, has become common in the UK buy-to-let market. With many private landlords leaving the sector, occupied properties are widely available, often at a discount to vacant possession value. This guide covers the financial case, the due diligence checklist, the finance hurdles, and your legal position as the incoming landlord, including how the Renters’ Rights Act changes the picture now that it is in force.

What does “tenants in situ” mean?

A tenant in situ is a renter who stays in the property when ownership passes from one landlord to another, so instead of taking vacant possession you inherit the tenancy along with the bricks and mortar. It is worth being precise about one thing the property adverts often blur: “tenant in situ” and “sitting tenant” are not the same. A tenant in situ is almost always on an ordinary modern tenancy, which since 1 May 2026 means a periodic assured tenancy. A sitting tenant, strictly, is a tenant on a regulated tenancy that began before 15 January 1989 under the Rent Act 1977, with security of tenure, a registered fair rent and, in some cases, succession rights. The two carry very different levels of protection and very different risk, so establishing which one you are actually buying is the first job of due diligence.

What does “sold with tenants in situ” mean?

A property advertised as sold with tenants in situ, or sold subject to tenancy, is bought as an occupied investment: the tenants stay, and you become their landlord on completion. The price usually reflects a discount to vacant possession value, compensating you for the added complexity and the loss of immediate access. That discount is the heart of the deal, and whether it is worth taking depends almost entirely on the tenancy type and the quality of the due diligence behind it.

The financial case

The clearest advantage is immediate cashflow. From day one of ownership you receive rent without the void period that follows a standard purchase, which improves your return from the outset. The purchase price is typically lower too, often in the region of 10 to 20 per cent below vacant possession value, which for a cash buyer in particular can be a genuine discount rather than a notional one. You also skip the work of finding, referencing and onboarding tenants, saving several weeks. And unlike a vacant property marketed on an estimated rent, a tenanted property comes with a proven income history you can verify: actual rent received, payment reliability and occupancy, which removes some of the guesswork from the investment case.

The challenges

Finance is the biggest practical hurdle. Many mainstream lenders will not lend on a property that is already tenanted, or will ask for a larger deposit, so you will often need a specialist buy-to-let lender or a broker who knows the niche, typically with a higher deposit and a slightly higher rate than a standard buy-to-let. Beyond finance, you are inheriting someone else’s choice of tenant rather than selecting your own, so the tenant’s reliability and the previous landlord’s standards are unknowns until you investigate. Landlords sometimes sell with tenants in place precisely to avoid spending on a property that needs work, so deferred maintenance and compliance gaps are a real risk. And if problems arise, regaining possession is slower and harder than many buyers expect, which is exactly why the tenancy type matters so much.

Essential due diligence

Thorough investigation before completion is critical, and while your conveyancer handles much of it, you should verify the key points independently.

Start with the tenancy itself. Establish what you are inheriting: since 1 May 2026 assured shorthold tenancies are no longer created and existing ones converted to periodic assured tenancies, so in almost all cases you are taking on a periodic assured tenancy, unless the let pre-dates 15 January 1989, in which case it may be a regulated tenancy needing specialist advice. Check the rent, the payment method, any unusual terms and any side agreements not recorded in writing, and speak to the tenant directly to confirm the rent actually being paid matches what the seller claims, since a discrepancy can hint at an informal arrangement or concealed arrears. Where there are gaps in the paperwork, work to a consistent standard using the principles in our guide to tenant referencing, and confirm the tenant’s right to rent in England following the Home Office rules at gov.uk on proving a tenant’s right to rent.

Verify the deposit. The current landlord must have protected it in an approved scheme within 30 days and served the prescribed information, and you need proof of both. This matters because the liability transfers to you: if the deposit was mishandled, the tenant can claim between one and three times its value from you as the new landlord, even though the original breach was not yours. Confirm scheme membership and prescribed information before exchange, and review our comparison of the deposit protection schemes if you need to re-register after completion.

Check licensing. Many properties need a licence, whether mandatory HMO licensing, selective licensing across a whole council area, or additional licensing, and operating without one when it is required can mean a civil penalty of up to £40,000 and a rent repayment order of up to 24 months’ rent. Our overview of landlord licensing across England and Wales is a good starting point before you check the specific position with the local council.

Confirm safety compliance. You need a current gas safety certificate renewed annually, an EICR no more than five years old, an EPC of at least E, working smoke and carbon monoxide alarms on each storey, a legionella risk assessment, and fire safety measures appropriate to the property, which matter most in HMOs and flats. The government has also proposed raising the minimum energy standard to EPC C, with consultation pointing to phasing through to 2030, so factor the likely cost of getting there into your numbers using our EPC improvement calculator, and read our MEES guide for the current position. Missing or out-of-date certificates are a red flag for management that may have been poor in other ways too.

Your legal position now the Renters’ Rights Act is in force

Since 1 May 2026 the legal position for inherited tenants has changed materially, and any guide written before then will be out of date on this point. Section 21 “no-fault” possession has been abolished, so you cannot simply give notice to end a tenancy you inherit. Existing assured shorthold tenancies converted to periodic assured tenancies on that date, and new lettings are periodic from the outset, so there are no fixed terms to wait out. Possession is now available only on a defined ground, set out in the grounds for possession, and pursued through a Section 8 notice. The mandatory arrears ground, Ground 8, now requires at least three months’ rent to be unpaid rather than the previous two. The practical consequence for a buyer is simple: because removing a difficult tenant is harder than it used to be, the quality of the tenant you inherit matters more than ever, and “I will just evict if it goes wrong” is no longer a workable fallback.

Rent increases are also more constrained. On a periodic assured tenancy you raise the rent using a section 13 notice no more than once a year, giving at least two months’ notice, and the tenant can challenge it at the First-tier Tribunal, which cannot set a rent higher than the figure you proposed. The government’s guide to the Renters’ Rights Act sets out the framework.

Regulated tenancies are the genuine sitting-tenant case and a different proposition entirely. A tenancy that began before 15 January 1989 under the Rent Act 1977 carries security of tenure that makes possession extremely difficult, a fair rent set by a rent officer that limits your income, and in some cases succession rights that can extend occupation to a family member for years beyond the current tenant. The discount on such a property can look dramatic, but it reflects real and lasting restrictions, so never buy one without specialist legal advice.

Completing the purchase and handover

Where you can, complete on a rent due date, which keeps the apportionment between seller and buyer simple; if that is not possible, your solicitor will adjust through the completion statement. Your conveyancer handles the deposit transfer between schemes, but make sure there is never a gap in protection, since that recreates exactly the liability you checked for during due diligence, and ensure the tenant receives updated protection information with your details. You must also serve a section 48 notice giving the tenant an address for service in England or Wales, because until you do you cannot lawfully pursue rent arrears. Finally, make the rent collection transition clear: give the tenant your payment details, update any standing order, and set the tone for the relationship with a short introduction confirming the deposit position and how to reach you. Moving collection into a single system from the start helps, and August’s rent tracking keeps payments, arrears and reminders in one place through the handover.

Yields, returns and tax

Even with a discount, the numbers have to work. Calculate the gross yield as annual rent divided by purchase price, and the net yield as annual rent less annual costs divided by purchase price, and pressure-test both with our rental yield calculator. Factor in the higher specialist mortgage rate, a realistic contingency for early remedial work, the risk of the tenant leaving soon after completion and creating a void, and any restriction on rent increases where the tenancy is regulated. A 15 per cent discount looks attractive, but if you are paying a point more on the mortgage and facing several thousand pounds of deferred maintenance, the advantage narrows quickly.

On tax, the standard five per cent stamp duty surcharge for an additional property applies, calculated on the discounted price you actually pay. Repairs that count as maintenance rather than improvement are deductible, so document the property’s condition at purchase to support future claims. Mortgage interest relief is restricted to a 20 per cent basic-rate credit under Section 24, whichever lender you use. And when you eventually sell, your capital gain runs from the price you paid, so the discount you secured effectively increases the gain you may pay tax on later.

When it suits you, and when to walk away

Buying with tenants in situ suits experienced landlords who are comfortable with tenancy law, cash buyers who can sidestep the finance hurdle and capture the discount, and long-term investors after steady income rather than a quick refurbishment and resale. It is a poor fit if you are a first-time landlord still learning the basics, if your finances cannot absorb an unexpected repair or an early void, if you lack access to specialist finance or cash, or if you intend a major renovation that vacant possession would make far simpler. Above all, trust the due diligence: if the seller is evasive, the documents are incomplete, or the tenant seems uneasy discussing the property, treat those as the warning signs they usually are. The discount means nothing if it comes with a problem tenant, a non-compliant property or a regulated tenancy you did not price for.

A note on the rest of the UK

This guide reflects the law in England. Scotland uses private residential tenancies with their own grounds and procedures, Wales uses occupation contracts under the Renting Homes (Wales) Act 2016, and Northern Ireland follows different rules again, so the detail of what you inherit and how you regain possession varies by nation. Our overview of landlord law across the UK is a useful orientation before you take jurisdiction-specific advice.

The bottom line

For the right investor in the right circumstances, buying a property with tenants in situ can deliver immediate, verified income at a discount to vacant value. The case rests on doing the work: confirm the tenancy type, verify the deposit and compliance, arrange specialist finance early, and price the risk honestly rather than chasing the headline discount. Done well, these purchases can be a strong addition to a portfolio. You can manage the whole let, free for up to two properties, with August.

Disclaimer: This article is a guide, and not intended to be relied upon as legal or professional advice, or as a substitute for it. August does not accept any liability for any errors, omissions or misstatements contained in this article. Always speak to a suitably qualified professional if you require specific advice or information.