Thanks for your comments Ummester.   Yes, agree prudent thing would be only to agree on vacant possession when we are sure that tenants will move out in time.  However we do not have this timeframe.  The purchaser is waiting for our answer as to the terms of the exchange of contracts.  Our agent is saying we should only give notice to vacate after contracts have exchanged, so that we do not lose too much on rent and having the property vacant for a long period before we settle. 

However, at the moment, it seems it may be better to lose out on a couple of weeks of rent rather than risk not being able to deliver vacant possession at time of settlement and therefore be subject to any risk of penalty/need to pay compensation to the purchaser….

Are our worries legitimate? or should we just "hope for the best" that tenant will move out in time and just agree to give vacant possession to the purchaser?

any comments would be great!