Financial Matters Post-Completion
What do I need to do after buying a tenanted property?
Several financial matters need to be attended to as soon as the purchase of a tenanted property has been completed.
The first thing to attend to is insurance. Usually the seller will have insured the property between exchange and completion. The main reason for this is that the landlord’s covenants in a lease typically require the seller to maintain insurance.
Once completion of the sale has taken place, the seller will generally cancel its insurance policy and pay any refund either to the buyer (to hold for the benefit of the tenant who originally reimbursed the premium) or direct to the tenant. The approach the seller takes will depend upon the wording of the lease.
The new owner then needs to arrange his own insurance. The premium can be recouped from the tenant but the tenant first needs to receive the refund of the seller’s insurance premium so that the tenant is not being charged twice for the same period of insurance.
Contact the tenant regarding payment of rent
Another important financial matter is to obtain a “rent authority letter” from the seller. This is a letter addressed to the tenant confirming the sale of the property and instructing the tenant to pay future payments of rent to the new owner. The rent authority letter can be sent to the tenant with a covering letter introducing the new owner and providing other useful information such as bank details and contact numbers.
Transfer rent deposit
If a rent deposit has been transferred to the new owner, this will need to be placed in a bank account in accordance with the terms of the rent deposit deed.