Buying a flat that already has a tenant
Tenanted flats sell at a discount to vacant ones, and for an investor that discount can be genuine value while for an end-use buyer it is frequently a trap. The difference is entirely about what the existing arrangement actually says and whether you can live with it.
You buy the arrangement, not just the flat
An existing tenancy does not disappear because the property changed hands. As the new owner you step into the seller's position, and the agreement continues on its terms.
That means the rent, the licence period, the notice provisions and the deposit obligation all come with the property.
So the first thing to obtain is the agreement itself, read in full, rather than a summary of what the seller says it contains. Our note on rent agreement registration covers what a properly documented arrangement looks like.
An unregistered or verbal arrangement is a different and worse proposition, because what binds whom becomes considerably less clear and our note on recovering possession explains why documentation determines the remedies available.
- The tenancy continues; you step into the seller's position
- Rent, period, notice and deposit obligations all transfer
- Read the agreement itself, not a summary of it
- Unregistered or verbal arrangements are materially worse
The deposit is the trap buyers miss
The tenant paid a deposit to the seller, and at the end of the tenancy it must be returned by whoever is then the owner, which will be you.
If the sale price is not adjusted for that, you are effectively paying the deposit twice: once in the purchase price and again when you return it.
The correct treatment is for the deposit to be accounted for in the transaction, either transferred to you or deducted from the price, and documented so the tenant knows who holds it.
Confirm the amount with the tenant directly rather than relying on the seller. Our note on security deposits covers what should have been documented at the start of the tenancy.
What to verify before committing
The agreement, its remaining period, and the notice provisions on both sides. A long remaining lock-in with a short landlord notice is very different from the reverse.
The rent actually being paid, verified through the seller's bank records rather than stated. Overstated rent inflates the apparent yield and is a recurring pattern in tenanted sales.
The payment history, since a tenant who pays late consistently is a liability you are acquiring along with the flat.
And the tenant's own understanding of the arrangement. Speak to them. A tenant who believes something different from what the agreement says is a dispute waiting to become yours.
- Remaining period and notice provisions on both sides
- Actual rent verified from bank records, not stated
- Payment history, not just the current position
- The tenant's own understanding of the terms
For an investor this can be genuinely good
You acquire an income-producing asset from day one, with no void period and no letting cost, which our note on rental yield in Kharghar explains is where a landlord's return is actually won or lost.
A sitting tenant with a good payment record is an asset rather than an encumbrance, and buying at the tenanted discount while acquiring reliable income is a legitimate advantage.
The discount exists because most buyers want vacant possession, which means the investor is being paid for wanting something the market does not.
Verify the numbers properly and this is one of the clearer opportunities available to a buyer who is genuinely investing rather than housing themselves.
For an end-use buyer it usually is not
If you need to move in, the tenancy is an obstacle, and how much of one depends on its remaining term and notice provisions rather than on anyone's good intentions.
Sellers frequently say the tenant will vacate before completion. That is a promise about someone else's behaviour, and it should never be relied upon without a mechanism.
Where vacant possession is required, make it a condition of completion, with the sale conditional on the tenant actually having left rather than on an undertaking that they will.
Buyers who complete on an assurance and then face an occupant who has not moved are in exactly the position our note on recovering possession describes, and it is not a quick one.
- The remaining term and notice provisions govern, not intentions
- A seller's assurance is a promise about a third party
- Make vacant possession a condition of completion, not a term
- Completing on an assurance can mean a long recovery process
The paperwork at completion
The tenant should be formally notified of the change of ownership, with instructions on where rent is now payable, and that notification should be documented.
The deposit position should be recorded so all three parties agree who holds what.
Whether the existing agreement continues or a fresh one is executed with you depends on the circumstances and is worth taking advice on rather than defaulting to whatever is easiest.
The society transfer proceeds as usual, and our note on society transfer and NOC covers it, though a society may have its own view on tenanted flats which is worth establishing early.
Is the discount worth it?
For an investor with verified rent, a documented agreement, a transferred deposit and a tenant with a good record, frequently yes, and it is one of the few places where an ordinary buyer can find a real edge.
For an end-use buyer, only where vacant possession is made a genuine condition and the discount survives that condition, which it often does not.
For anyone facing an unregistered arrangement, an unverifiable rent or a tenant who has not been spoken to, no. Those are the cases where the discount is compensation for a problem rather than an opportunity.
Our note on how to value a flat covers building the comparison properly, and a tenanted flat should be valued on its income as well as against vacant comparables.
