“I don’t want to tell my tenants that I’m selling”
“I don’t want my tenants knowing that I’m selling my HMO”, is a line I hear once or twice a week.
It’s usually followed by me saying something like, “At some point, they’ll find out and it is best they find out from you in a sensitive way rather than have a shock and feel like actions have been taken behind their backs…”
So, how should you deal with the conundrum of whether you should tell your tenants that you’re selling or not, and when?
Honesty is the best policy
We’re dealing with people’s homes at the end of the day and the tenants should be afforded the respect they deserve for all being loyal, sensible housemates and prompt payers that have caused no issues.
Even the ones that have caused you headaches, actually!
In all cases that I’ve known, it has never been a positive situation when a tenant (or a group of tenants – an HMO Mob, if you will) confronts a managing agent or landlord with the acquisition, “our house is up for fucking sale, you bastard, why didn’t you tell us?!”.
But, likewise, a premature disclosure can also cause issues such as a mass exodus of tenants as soon as you post in the Whatsapp group that you’ll no longer be their master or a mutiny of non-paying lunatics holding your property hostage and refusing access to the gentle EPC assessor (I’ve witnessed both).
Where’s the middle ground?
If we were together right now, you’d see me holding up my right hand with 5 fingers stretched out and I’d be saying, “with tenants, you get around 5 chips of credit before they start to get annoyed with access requests”.
I’d then proceed to put one finger down for ‘me’, the initial appraisal from a sales expert (this could be an estate agent, auctioneer, specialist HMO broker or property sourcer).
Then there’s the unavoidable visits of a survey/mortgage valuer and a likely visit of at least one credible buyer doing their physical DD.
That only leaves around 2 (3 max) worth of ‘chips’ that you can afford to spend on extra access requests so choose who views very carefully or tenants will start to get weary – and weary tenants start to put blocks in place, understandably.
Best Practice
Ultimately, the tenants will find out and you don’t want this to be via a shared Rightmove link or via doomsday hearsay across the hallways and unused communal rooms.
Do not put a for sale board up. There’s tip 1. This is a sure fire way of reminding the tenants that their home may be about to change every time they go to the front door to collect their Deliveroo.
If you own a student HMO, the for sale board will end up in the front bedroom alongside the road cone, the rainbow flag and the 84 empty Smirnoff bottles.
The first visit (from the sales valuer) can be passed off as “for mortgage purposes” or “for an EPC” or “a friend who is considering getting into HMOs locally”…
I’ve had an eclectic mix of job titles bestowed on me over the years, all getting a suspicious look from tenants when the “council inspector” is wearing a polka dot baseball cap, New Balance trainers and a T-Shirt with Bob Dylan and Joan Baez kissing.
The point is, you can ‘blag it’ for the first 3 access requests but then, as interest ramps up and it looks like there’ll be investor buyers looking for access and a sale imminently on the cards, you must chat with the tenants and show your hand.
Tip 2 – only let buyers attend the HMO if they have demonstrated proof of funds (or ‘POF’ to those who don’t know that this acronym is better known as ‘Plenty of Fish’)
My clients have taken the route of saying to their tenants, “we’ve chosen a specialist HMO agency based miles away to deal with the sale as they only sell tenanted HMOs to investors looking to keep you happy and settled”, as this is a line I’ve been promoting for years. It dispels the tenant’s fears of immediate ejection and reassures them that the status quo is the USP.
Who finds it harder?
Clearly, self-managing landlords have a harder task in reassuring their tenants that there’ll be a status quo.
Tip 3 – if the new buyer is also going to be self-managing (and they are not a serial killer or carry eyes like Steve Buscemi on acid), do a soft-launch and introduce them to the tenants and put a face to the name. If not, the new tenants will think they are getting Fergus Wilson instead of you, Mary Poppins.
The transition and conversations over selling are easier if it’s being completed by a hands-on managing agent but there’s still a tactile approach required.
Don’t spook the tenants, don’t leave it for someone else to tell them or for the tenants to find out themselves.
Prepare yourself to accept that you can’t sell an HMO without the tenants knowing and find the right balance between disclosing too much, too early and losing their support when it comes to surveys and end buyer visits and not telling them at all.
Don’t waste your 5 chips.
