Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property118. Read the original article for full details.
Direct Sales to Tenants: Key Considerations for Landlords and Agents
A recent Property118 report highlights the potential benefits and challenges for landlords considering selling their rental properties directly to existing tenants. The report notes that, in the twelve months to March 2026, Savills recorded 254,000 previously let homes listed for sale in Great Britain, with almost all going through estate agents and few landlords approaching tenants as potential buyers.
The article outlines the legal and financial implications of seeking vacant possession before a sale. Under section 16M of the Housing Act 1988, as amended by the Renters’ Rights Act 2025, landlords must give four months’ notice that cannot expire within the first twelve months of the tenancy. This creates a minimum sixteen-month period during which the property cannot be re-let, marketed for letting, or licensed for occupation for money. Breaching these restrictions can result in civil penalties of up to £40,000 and a rent repayment order of up to twenty-four months’ rent.
The report also details the financial impact of withdrawing a property from letting. Once a property is no longer available to let, running costs such as insurance, service charges, ground rent, standing charges, and mortgage interest may no longer be tax deductible. Council tax is also payable at the full rate from the day the property becomes empty, with potential premiums after a year, unless the property is actively marketed for sale.
Selling directly to a tenant can help landlords avoid these costs and restrictions, as the property remains occupied until completion and rent continues to be paid. However, the report notes that tenants may face challenges in raising a deposit. Some lenders accept concessionary purchases or vendor gifted deposits, where the landlord sells below market value and the discount is treated as gifted equity. As of March 2026, 42 out of 74 lenders reportedly accept this arrangement when the seller is the landlord and the buyers are the tenants.
For letting agents and inventory clerks, these developments highlight the importance of understanding the legal and financial landscape when advising landlords on sales to tenants.
Source: Property118