Legal Q&A: what does vacant possession mean and why is it important if we're buying a rented property?
Question: We have found a house to buy which is currently let. The estate agents say this is not a problem because the tenants will be gone by the time we want to move in, as the seller will serve notice on them once contracts are exchanged.
Our solicitor says that is not acceptable and we should only exchange contracts once the tenants have gone. What normally occurs in this situation?
Answer: The seller may be reluctant to serve notice on the tenants prior to contracts being exchanged for fear of losing rent should you fail to complete the purchase.
Your solicitor suggests exchanging contracts once the tenants have left because if you exchange contracts with them in occupation, they could ignore the notice served upon them and fail to vacate.
If they did that, the seller would not be able to sell to you with vacant possession and so would be in breach of contract — in which case you could repudiate the contract, ie refuse to complete because of the seller’s breach, and the seller would then need to take action to remove the tenants.
Furthermore, if you could not move into the property because the tenants were still there, you could pursue the seller for any related inconvenience and loss you suffered.
If you exchange with the tenants in occupation, the contract should expressly state that vacant possession is a fundamental term, and your solicitor should check both the tenancy agreement and the notice served upon the tenants.
If you have a question for Fiona McNulty, please email legalsolutions@standard.co.uk or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE. We regret that questions cannot be answered individually, but we will try to feature them here. Fiona McNulty is a solicitor specialising in residential property.
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.