Selling an investment property – Avoiding legal pitfalls

Commercial Property Solicitors are regularly approached by landlords and investors asking about the legal steps involved in selling an investment property. Whether you are disposing of a buy-to-let flat, a mixed-use building, or a portfolio asset, the process carries specific legal considerations.

Background: why investors sell property

There are many reasons why an owner may decide to sell an investment property in the UK. Some include:

• Releasing equity for new investment opportunities.
• Responding to changes in rental yield or demand.
• Managing inheritance planning and family wealth.
• Exiting the market due to regulatory changes or tax pressures.

Whatever the reason, selling an investment property requires careful planning to avoid delays and disputes. Unlike selling a primary residence, landlords and investors must consider tenant rights, capital gains tax, and the expectations of commercial buyers or lenders.

Key legal issues when selling an investment property

Our solicitors highlight the most common pitfalls faced by landlords and investors:

1. Tenancy agreements and occupiers

If the property is currently let, the type of tenancy agreement is crucial. An Assured Shorthold Tenancy (AST), a commercial lease, or a licence will affect how attractive the property is to buyers. For example:

• ASTs: Buyers may inherit tenants, so clarity on rent, deposit protection and compliance with landlord obligations is vital.
• Commercial leases: Break clauses, rent reviews and repairing obligations can significantly impact value.
• Vacant possession: If selling with vacant possession, notice periods and compliance with statutory eviction rules must be followed.

2. Tax considerations

You may need to consider the following:

• Capital gains tax. 
• Reliefs may apply (such as Business Asset Disposal Relief for furnished holiday lets).
• Corporation tax.
• Other taxes – therefore it’s advisable to take tax advice from a tax specialist at an early stage.

Tax efficiency is often a key driver in structuring an investment property sale UK.

3. Property due diligence

Conveyancing for an investment property involves more complex checks than a standard residential sale. Expect a buyer’s solicitor to ask for:

• Evidence of planning permissions and building regulation compliance.
• Service charge accounts and management company information (for flats).
• Health and safety certificates (e.g. gas, electrical, EPCs and asbestos reports).

Failing to prepare these documents can delay or even derail the sale.

4. Finance and charges

If the property is mortgaged, the lender’s consent will be required to release their charge on completion. In some cases, especially for landlords with portfolios, there may be cross-collateralisation (where multiple properties secure one loan). Untangling this can require specialist legal input.

5. Restrictions and covenants

Many properties are subject to covenants or restrictions registered on the Land Registry title. Examples include prohibitions on certain uses, obligations to contribute to shared services, or restrictions on further development. Buyers will expect clarity and, in some cases, indemnity insurance solutions.

Step-by-step process for selling an investment property

To help landlords and investors prepare, here is a simplified step-by-step guide:

1. Initial review: Consult a solicitor to review your title deeds, leases, and mortgage position.
2. Prepare documents: Assemble tenancy agreements, compliance certificates, and financial records.
3. Tax planning: Obtain advice on capital gains tax and reliefs.
4. Marketing: Work with an agent to market the property, either with tenants in place or with vacant possession.
5. Buyer due diligence: Respond promptly to legal enquiries and provide disclosure packs.
6. Exchange and completion: Agree terms, exchange contracts, and complete once mortgage consents and legal checks are satisfied.

Case scenario: selling a tenanted flat

A landlord wished to sell a buy-to-let flat in Norwich. The tenant had been in occupation for over five years under an assured shorthold tenancy. The buyer wanted vacant possession, but the landlord was unaware of the correct notice procedures under the Housing Act 1988. Without guidance, they risked serving invalid notice and delaying the transaction. By seeking legal advice, this provided them the correct Section 21 process, ensuring compliance with deposit protection requirements, enabling a smooth sale and helping them avoid potential litigation.

Expert insights from solicitors

Based on our experience helping landlords with selling an investment property, here are some top tips:

• Start preparing documents well in advance of marketing.
• Resolve any tenant disputes before sale – buyers are wary of ongoing litigation.
• Factor in the costs of early mortgage repayment charges.
• Budget for both legal fees and tax liabilities to avoid surprises.
• Communicate openly with your agent and solicitor to keep the process moving.

Our Commercial Property Solicitors provide comprehensive advice in all legal aspects of buying and selling investment property – including helping our clients prepare sale contracts, negotiating and agreeing terms and undertaking the necessary searches on the buyer or seller. Contact us for more information.

Benefits and challenges of selling an investment property

FAQs

What is selling an investment property?

Selling an investment property is the process of disposing of a property purchased for rental income or capital appreciation. In England and Wales, it requires legal conveyancing, tenant considerations, and tax planning.

Can I sell a buy-to-let with tenants in place?

Yes. Many landlords sell with tenants in place, which can appeal to investors. However, the tenancy agreement must be valid, and deposit protections must be in order.

What happens to the mortgage when I sell?

The mortgage must be redeemed from the sale proceeds. If the property is part of a larger loan, additional lender consent may be needed.

How long does it take to sell an investment property?

On average, selling an investment property takes between 8–16 weeks, but this can be longer where tenants, leasehold documents, or lender consents complicate the process.

This article was produced on the 30th December 2025 for information purposes only and should not be construed or relied upon as specific legal advice.