Key Takeaways: 

• Selling a rental property comes with a unique set of legal, tax and conveyancing processes, including the decision to sell with or without a tenant. 

• When selling without a tenant, follow the legal process of evicting them through either a Section 21 (no-fault) or Section 8 (fault-based) eviction notice. 

• Know the tax implications of selling a rental property, including paying Capital Gains Tax (CGT) on the profit. 

• The conveyancing process for selling rental properties involves unique documents and requirements. Work with an experienced conveyancing solicitor to make the process as quick and stress-free as possible. 

• Proper planning and professional help are the keys to a successful and profitable sale of a rental property. 

A Guide to Selling a Rental Property in the UK 

Selling a rental property deals with a unique set of legal, tax and conveyancing processes that may or may not involve an existing tenancy agreement. 

Selling a rental property should be an easy transaction because of the rental income potential that it can bring. However, it will have a unique set of legal, tax and conveyancing processes, especially if there’s a tenant living in it. You want to ensure that the way you handle existing tenants won’t compromise the sale of the property. 

In this guide, you’ll get a comprehensive list of information that’ll allow you to make smart decisions when it comes to selling a rental property efficiently, compliantly and profitably. 

Selling a Rental Property 

Before deciding to sell a rental property, you need to do a couple of things. 

First, conduct market research to get a feel of the local property market. Focus on average property selling prices, trends and economic conditions. This will give you an idea if selling your rental property is the right move. 

Second, assess your property. Check its condition and determine if it’s market-ready. When you list the property to sell, will it attract higher offers and give you a huge profit? 

Third, decide if you’ll sell it with a tenant or vacant. Know the pros and cons of each option so you can understand how it will impact the sale of the property. 

Selling with Sitting Tenants 

Usually, buyers are attracted to the idea of buying a property that’s currently earning a rental income. But when selling a rental property with tenants, you’ll have to consider the existing tenancy agreement. The potential buyer will inherit that agreement. They need to be aware of the details so they can decide if it’s an agreement they want to be a part of. 

Here are the benefits of this type of property sale: 

• Continued rental income. You’ll keep earning rent until the property is sold. 

• Greater buyer appeal. The existing rental income will appeal to a wider range of buyers, including property investors and landlords who want to buy a second property to earn from. 

• No eviction hassle. You don’t have to deal with the process of evicting tenants. 

Of course, there are also downsides to selling while the property has a tenant. 

• No owner-occupiers. Buyers who intend to live in the property won’t be interested in the property if they have to be the ones to evict the tenant. 

• Lower price. The specific buying pool will likely lower the selling price, as only investors and landlords are likely to be interested in the property. 

• Viewing issues. Coordinating buyer viewings may be more complicated as you need tenants to cooperate with the schedule. 

Selling with Vacant Possession 

Selling a vacant property means the unit is ready for moving in. The tenant already vacated the premises before the property was listed. 

Here are the benefits of selling a vacant possession. 

• Wider range of buyers. Investors, landlords and owner-occupiers will be interested in buying the property. 

• Higher selling price. You can set a higher price for the property since more buyers are bidding for it. 

• Easier viewings. With no tenant to coordinate with, it’s easier to set a viewing schedule, or maybe even an open house. 

There are also downsides to selling a vacant property. Here are some of them: 

• Loss of rental income. Asking the tenant to vacate the property will lead to a loss of potential income. If selling a home takes between 17 and 34 weeks and the average weekly rent is £321.75, you’ll be losing £5,469.75 to £10,939.50 in rental income. 

• Eviction process. You need to legally evict the tenant, which can be a tedious and time-consuming process. 

Legal Process for Serving Notice 

If you choose to evict your tenant to sell a vacant property, you need to follow the legal process of ending the tenancy agreement. There are two ways to do this. 

• Section 21 Notice. This refers to the “no-fault” notice, which allows landlords to end an Assured Shorthold Tenancy (AST) without reason, as long as they give tenants at least 2 months’ notice. However, the Renters’ Rights Bill will soon abolish the Section 21 notice. But until it passes into law, this remains an option to evict tenants. 

• Section 8 Notice. This is the new “fault-based” notice that landlords can use to evict a tenant after a breach of the tenancy agreement. For instance, falling into rent arrears can be a cause for eviction. The Section 8 notice period will depend on the grounds for eviction, which is typically between 2 weeks and 2 months. 

Tip: Make sure the notice for eviction is served within the right time frames to avoid issues and ensure it’s legally binding. 

Legal Requirements When Selling a Rental Property 

Selling a rental property involves a specific set of legal requirements. Understanding the legal landscape will help you prepare for the sale, avoiding potential delays and issues. 

Reviewing the Tenancy Agreement 

One of the important documents you need to review is the tenancy agreement. This outlines the rights and obligations of the landlord and existing tenant. If you’re selling a rental property with a tenant, you need to check for a clause that allows access for buyer viewings. You should also check notice periods to ensure you’re staying compliant in case you need to evict the tenant. 

Serving Notice to Tenants (Section 21 or Section 8) 

Do your research and update what you know about how to evict tenants using Section 21 or Section 8. As mentioned, Section 21 is the “no-fault” eviction notice and will be abolished after the Renters’ Rights Bill passes into law. Section 8 is the “fault-based” notice that allows landlords to evict tenants as long as it meets the grounds for eviction. 

You should also be aware that failure to meet specific requirements like the provision of a valid EPC (Energy Performance Certificate), Gas Safety Certificate, etc, will render a Section 21 notice invalid. 

Tenant Rights and Minimum Notice Periods 

Tenants also have the right to a minimum notice period. Before you proceed with the sale process, make sure you know the eviction notice period for Section 21 (at least 2 months) and Section 8 (between 2 weeks and 2 months, depending on the grounds for eviction). 

This also includes notice for viewings. Tenants are not legally required to allow viewings unless there’s a specific clause in the tenancy agreement that allows it. Even so, tenants should be given at least 24 hours’ notice before the actual visit. The schedule should also be at a reasonable time. 

Tax Implications of Selling a Rental Property 

Do you pay tax when you sell a rental property? Yes, there are tax implications when you decide to sell your rental property. 

Familiarise yourself with these obligations, specifically with the HMRC, to avoid penalties or unexpected costs. 

Do You Pay Capital Gains Tax When You Sell a Rental Property? 

Yes, you need to pay Capital Gains Tax when selling a rental property. Also referred to as CGT, this is a tax imposed on the profit you’ll make after selling an asset, including rental properties. 

How CGT Works for UK Landlords 

The CGT will be calculated against the difference between the sale price and the original purchase price, but it’s not always a straightforward computation. There are allowances or exemptions that you can apply to lower this tax liability. You can declare upgrades (capital improvements) and allowable expenses (e.g. estate agent or conveyancing fees) or tap into reliefs to offset your CGT liability. 

Usually, the CGT is 18% for the basic rate or 24% for the higher rate. Check out the Capital Gains Tax page of the government to get an updated CGT rate. 

Feel free to consult with a tax advisor or conveyancing solicitor like Muve to ensure you’re maximising available tax benefits. 

How and When to Report CGT to HMRC 

Selling a rental property requires you to report and pay the CGT within 60 days after completion. Use the Capital Gains Tax on UK property form to file it on the HMRC website. Accomplish the report on time so you don’t have to pay penalties or interest charges. 

Get the help of a tax advisor or conveyancing solicitor to ensure your CGT liability is correct and reported accurately. 

Conveyancing Process for Rental Properties 

The conveyancing process for selling rental properties is similar to that of any real estate asset, but with a few key differences. 

Here’s what you have to go through to get the conveyancing process started. 

Choosing a Conveyancer 

Start by choosing a conveyancer with experience in processing the sale of rental properties. They can guide you in completing the sale and meeting all the requirements specific to rental properties. 

Muve is experienced in managing the additional legal documents that are specific to selling a rental property. 

Required Documents and Disclosures 

Rental properties for sale require the usual conveyancing documents like property title deeds, EPC, gas safety certificates, etc. 

Apart from that, you also need to provide copies of the following: 

• The current tenancy agreement 

• Proof of deposit protection scheme (approved by the government) 

• Eviction notice served to the tenant (Section 21 or Section 8) 

The earlier you can provide these documents, the faster the conveyancing process will go. 

Leasehold vs Freehold Considerations 

The conveyancing process differs between freehold and leasehold properties, with the latter requiring more documents and having additional steps and costs. 

If you’re selling a leasehold property, you’ll also need to provide the Leasehold Information Pack (LPE1) that contains the following information: 

• Lease term period 

• Service charges 

• Ground rent 

• Details of the freedholder or managing company 

• Restrictions or covenants 

• Planned improvements or upgrades in communal areas 

• Building or property insurance 

• Management company accounts or notices 

All this information may take time to obtain, so start the process of gathering the documents as early as possible. Find out more about the leasehold conveyancing process. 

Selling a Buy-to-Let Property with a Mortgage 

Having an outstanding mortgage on a rental property for sale won’t keep you from a successful transaction. However, it will involve additional steps before it is completed. 

Informing Your Lender 

Before you take the first step to sell your property, you need to inform your mortgage lender about your intention. They will provide you with a mortgage redemption statement to confirm the balance and any early repayment fees you need to settle. The conveyancer will handle these repayments on your behalf using the proceeds from the rental property sale. 

Mortgage Porting or Redemption Fees 

The mortgage lender may ask you to pay an ERC or early repayment charge for selling before the fixed-rate term ends. This could be a significant amount. Talk to your conveyancer and review your mortgage agreement to check the details. 

Some lenders will offer mortgage porting as an option to avoid paying ERC, but only if you have plans to buy another property. This means transferring the existing mortgage on a new property you own. This will still require a mortgage application, but it usually adopts the same mortgage rate and features as the one you transferred from. 

Considerations for Portfolio Landlords 

If you have multiple properties other than the one you plan to sell, you may need a special conveyancer who can manage multiple transactions. Portfolio landlords deal with a unique financial structure and you want to ensure you’re transactions are legally accurate and financially beneficial. 

Common Challenges When Selling a Rental Property 

Selling a rental property may involve additional steps or unique requirements. The process is manageable, especially if you work with the right conveyancing solicitor. However, there are challenges that might cause delays or issues before completion. 

Issues with Tenant Communication 

The lack of tenant cooperation can slow down the sale of a rental property. A good relationship between the landlord or property owner and tenant is a great way to keep this from happening. Open communication and a reasonable notice period can encourage cooperation. 

Incomplete or Delayed Paperwork 

Any delay in receiving documents can also cause issues with the sale of the rental property. For instance, delays in getting the LPE1 from managing agents or tax inquiries can delay the completion date. Your conveyancer should be proactive in chasing third parties to prevent delays in the sale process. 

Unexpected Tax Liabilities 

Make sure you have a plan to finance the CGT rate or other tax liabilities. Usually, this is paid using the profits from the sale. Work with your conveyancer to ensure these tax liabilities are funded and paid on time. 

Is It a Good Time to Sell a Rental Property? 

Deciding to sell a property is a personal choice. However, if you want to maximise the profit you will get from the sale, you need to ask yourself, “Is it a good time to sell a rental property?” 

The answer would depend on your personal financial goals, current market conditions and your long-term strategy. Here’s a breakdown that could help you make a smart choice. 

Selling Now vs. Waiting: What to Weigh Up 

When deciding whether to sell now or wait, there are a couple of things to consider. 

• Market demand. Check if the housing market has a high buyer demand, specifically from investors and landlords. If this is the case, it’s usually a good time to sell as you can command a higher price. 

• Rental yields. If your property is still providing high rental yields, you might want to hold on to your property. You can still benefit from the rental income. If the yields are low, it’s a good sign to exit the market. 

• Regulatory changes. Stay updated on regulatory changes (e.g. Renters’ Rights Bill) and see if they are still aligned with your long-term strategy. If not, you might want to start your exit strategy before the changes take effect. 

• Financial goals. If selling a rental property will help you liquidate your assets, pay off debts, or diversify your investments, then proceed with the sale to meet your financial objectives. 

To help you make a smart decision, read our guide on the best time to sell your property. 

How Muve can Support Rental Sales 

At Muve, we have a team of expert conveyancers who use a digital-first approach to support the sale of rental properties. Our process is designed to provide landlords with a stress-free experience as they navigate the complexities of selling a rental property. 

Whether you have a sitting tenant or a vacant possession, you need an experienced conveyancing solicitor to proactively manage the legal requirements of the sale. Thanks to Muve’s digital systems, local expertise and dedicated team, you can assure that all related documents are reviewed and coordinated well with other solicitors and third parties. 

If you’re ready to sell your property, get a free quote from our award-winning team. 

Are You Ready to Sell Your Rental Property? 

Selling a rental property requires careful planning and a deep insight into the legal and tax implications of the property transaction. Once you’ve decided to sell your rental property, you need to decide if you want to do it with or without tenants. This will set the foundation for what you have to prepare to make the selling process as quick and smooth as possible. 

Make sure you’re aware of the process and rules when serving a notice for eviction. You should also seek expert advice, especially when it comes to the tax obligations. Get a conveyancing solicitor with experience in rental properties so you can complete the sale with confidence. 

With Muve’s fast, transparent and reliable conveyancing services, you’ll get expert support and proactive reports at every stage. We’ll handle the conveyancing details so you can focus on the next step in your investment journey. 

Are you ready to sell your rental property? Get a free quote today. 

FAQs: Selling a Rental Property in the UK 

How long does it take to sell a rental property in London? 

A property for sale stays in the market for an average of 17 to 34 weeks before being sold. For rental properties for sale, the period may be longer, depending on specific factors such as property condition, the terms of the tenancy agreement, and the level of tenant cooperation. 

What is the average Capital Gains Tax for UK rental properties? 

The Capital Gains Tax (CGT) for residential properties is 18% (basic-rate taxpayers) and 24% (higher-rate taxpayers). The exact rate would depend on the taxable profit and can be offset by declaring capital improvements, allowable expenses or tax reliefs. Consult your conveyancing solicitor to ensure you’re paying the right amount. 

Can I sell a buy-to-let property with tenants (e.g. London)? 

Yes, you can sell a buy-to-let property with sitting tenants in London as long as you adhere to the existing terms of the tenancy agreement. Make sure the tenant is aware of the sale so they can prepare for the transfer of ownership. 

Do I need a specific conveyancer for selling a rental property in the UK? 

Any licensed conveyancer can handle the sale of a rental property. However, it’s recommended that you choose one who has experience in selling buy-to-let properties. With the right expertise, you can enjoy a quick and stress-free conveyancing process despite the unity legal and tax implications of selling a rental property, whether it’s in London or anywhere else in England or Wales. 

Discover how Muve can assist with the conveyancing process.