CPL Real Estate Development: buying a property that already has a tenant

A large share of completed apartments on the market are let. Buying one means the rent starts immediately and means you step into an agreement negotiated by somebody else. Both halves need checking.

What you inherit

• The tenancy continues. A sale does not end it. The tenant stays on the existing terms until the contract's end, and you become the landlord under it.
• The rent is fixed until renewal, at whatever the previous owner agreed. If it is below market, you cannot simply correct it — increases at renewal are governed by the published index and are stepped.
• The security deposit should transfer to you. Confirm the amount and that it actually changes hands; this is commonly overlooked and it is your liability at the end of the tenancy.
• Post-dated cheques covering the remaining term are held by the seller. Establish how the outstanding ones are handled — this is a practical detail that causes real problems if left vague.
• Any side agreements the previous owner made, written or otherwise. Ask directly.

Why a below-market rent is a real discount

If the sitting tenant pays materially under market, you cannot recover the gap in one step. The index permits staged increases, so it takes renewal cycles. Price that in: a unit let cheaply for two more years is worth less than the same unit vacant, and the difference is calculable rather than a matter of negotiation.

If you want it empty

• To recover possession for sale or personal use, the prescribed notice applies — twelve months is the long-standing period, served properly.
• The notice runs from service, not from purchase, so establish whether the previous owner served one and when.
• A tenant paying rent and observing the contract is otherwise secure for the term, which is the system working as intended.
• Plan around it. If your model needs vacant possession, buy vacant or buy a year ahead of when you need it.

What to check

• The registered tenancy contract, its end date and its rent.
• The current market rent for that unit size in the building, from live listings — the gap is your position.
• Payment history. A tenant who pays late is a problem you are buying.
• The deposit and the outstanding cheques.
• Condition. A tenanted viewing is a short one; make it thorough anyway, and check the original handover inventory if it exists.
• Service charge history, the reserve fund and any arrears attached to the unit.

Who it suits

• Investors who want income immediately and are content with the sitting rent.
• Buyers who have priced a below-market tenancy properly rather than ignoring it.
• Not somebody who needs to move in soon.

Based on the Dubai tenancy framework and live rental listings. Confirm current notice periods and index rules before relying on them.