If you want to sell a house with tenants, you must first understand the legal obligations and rights for both the landlord and tenant. Disregard for tenants’ rights can lead you into legal hot water.
Am I Allowed To Sell My Property During a Lease?
Yes, you can sell a property while leasing out to tenants. This may even make your property more attractive to buyers, as some will prefer to avoid the hassle and time it takes to fill a property after purchasing it. You’ll benefit by receiving income until the sale is executed.
What To Do If Buyers Prefer Vacant Units
If buyers do not want to take on your tenants, you will need to properly notify tenants and terminate their leases prior to the change in ownership. In different states and situations, this may be harder than others, due to:
- Tenant rights in your area.
- Whether there is a clause about property sale in your lease agreements.
- How amicable your relationships with tenants are.
Tenants Rights When a House Is Being Sold
Whether or not you plan to transfer the lease agreements to a new buyer, you must respect all tenant rights during the process. This includes:
- Giving proper notice of the sale per state regulations or as stated in your lease agreement.
- Giving tenants notice before property showings.
- Providing tenants with a relocation fee if necessary.
- Keeping up with all maintenance requests and property upkeep during the sale process.
- Offering tenants the first chance at buying the property if applicable in your state.
Know Your Local Laws
Follow three steps to verify legal requirements in your state like notice periods and tenant rights during the property sale. See “State Regulations for Selling a Leased Property” below for state-specific examples.
Step 1: Conduct Research
Use second-hand sources only as a jumping-off point, and follow the links within them to a primary source to verify. Trust resources directly from your state or local government or explore the actual statutes discussing eviction due to property sale.
Step 2: Consult With Experts
Consider connecting with a real estate attorney in your area who is knowledgeable of all applicable laws and regulations.
Step 3: Verify Local Rules and Procedures
Remember to look into local laws, too. Processes can differ from county to county, further complicating a property sale.
Tenants Don’t Have To Move Out
If you’re going to ask tenants to vacate due to a property sale, it’s important to note that tenants don’t actually have to move out in these cases. There are exceptions, like:
- If the lease agreement specifically includes a clause addressing terminating the lease due to a property sale.
- If there is other cause for eviction, like rent nonpayment, lease violations, or illegal activity on the property.
- In some states, if you, the new owner, or a close family member of either plan to move into the house yourselves.
Even if eviction is a legal option for your situation, it can be a lengthy and expensive process that hinders a property sale. It’s often better to work amicably with tenants during the entire sales process and change of ownership so everything runs smoothly.
Give Tenants Proper Notice
While states have different mandatory notice periods, a landlord should always give tenants ample notice prior to a property sale. Most states have a 30 to 60-day required window from when tenants receive a formal notice to vacate and when they have to leave.
Since tenant cooperation can play a huge role in a successful sale, letting your tenants know as far in advance as possible may help to win their favor in the process. You may even want to offer incentives to tenants for leaving, like a lease termination payout — also known as “cash for keys” — or a relocation fee. Paying even thousands of dollars to tenants upfront may be worth it to save a property sale.
Fulfill Security Deposit and Maintenance Responsibilities
Tenants have a right to receive their security deposit back even after the property changes hands. Make the proper arrangements to:
- Transfer the deposits to the new owner if they are taking on the tenants’ leases.
- Notify tenants how they can expect to receive their security deposits back.
- Let tenants know what will be deducted from their deposit and why after they vacate, if applicable.
The tenants’ right to live in a habitable property also means you cannot lapse on maintenance duties during the sale process. Although a property sale can be time-consuming, you must keep all aspects of the house in good, working condition. Otherwise, tenants may be able to:
- Withhold part of their rent payments.
- Break their leases.
- File a complaint in housing court.
Plan and Perform Showings Respectfully
Respect tenants’ time and personal space when it comes to showings. Most states require a 24- to 48-hour notice for you to enter the property, so make sure to let them know enough time in advance of a showing.
Tenants are not required to clean for showings or leave for you to perform them. If you work with their schedules, you have a better chance of them leaving for the showings. Maintaining a good relationship with tenants — or even offering incentives like paying for dinner or coffee while they leave the unit — can help make showings run smoothly.
State Regulations for Selling a Leased Property
When issuing a notice to vacate in the context of property sales, landlords must make sure to respect the specific notice time frames set forth by:
- State laws.
- Local laws.
- The lease agreement, if applicable.
Specific state or city regulations regarding notices to vacate when selling property include:
| State or City | Regulations |
|---|---|
| California | A verbal lease is binding when it lasts for less than a year, which may cause conflict when it comes to getting a tenant to vacate for a property sale. Landlords must give tenants 60 days' notice to vacate the property, even in a month-to-month tenancy (California Code of Procedure § 1161). |
| Washington (State) | A verbal rental agreement is considered a month-to-month tenancy, requiring a 20-day notice (Washington Revised Code § 59.18.200). |
| Seattle, Washington | Displaced tenants can apply for relocation assistance up to $4,917, which the landlord must pay half of. |
| Portland, Oregon | Tenants may receive up to $4,500 to relocate from a three-bedroom unit, all of which the landlord is responsible for paying. |
| Washington, D.C. | The Tenant Opportunity to Purchase Act (TOPA) requires landlords to give tenants a notice of intent to sell the property with all listing information. The tenant gets the first chance at buying the property before it hits the market. |
| All 50 States | A lease termination payout, or "cash for keys," is legal. However, a tenant is never required to take it if offered. |
How To Tell a Tenant Property is Being Sold
It’s imperative that you, as a landlord, effectively and respectfully communicate to your tenants the need to vacate due to sale. Otherwise, they may have legal remedies that may affect the sale.
You can expect some level of tenant pushback in these situations, as tenants may feel like you’re selling their home out from under them. Address common questions kindly by following the examples below.
| Tenant Concerns | Examples Responses |
|---|---|
| Will the same rules apply under new ownership? | Yes, if a new owner takes over your lease, they must accept the rules within it until it expires. At renewal time, they may decide to make changes to the lease that you'll have a chance to review before accepting. |
| What if I don't want to leave? | I understand that moving is a significant undertaking. I would be willing to discuss options for helping you deal with the inconvenience caused by the sale, like helping to pay for your relocation. |
| How much time will I have to move? | Our state requires that I give you a notice that is [number] days from when you'll have to leave. I will do my best to keep you updated throughout the sale process so you know what's coming and when. |
Preparing to Issue the Notice
Before issuing a notice to vacate, it’s best to give tenants as early notice as possible that you intend to sell the property. Start with a letter notifying tenants about your intended property sale and informing them about their rights regarding showings.
Letter To Notify Tenant About Property Sale Sample Template
[Date]
[Address]
Dear [tenant name],
This letter officially notifies you of my intent to sell the property at [address]. I intend to sell the property [unoccupied/occupied] so the next owner [will/will not] assume your lease.
I aim to answer any questions in this letter to make this change as easy as possible for you.
I will always notify you of upcoming showings to prospective buyers within a reasonable time frame. In our state, I am required to give you [number] hours of notice before showings, and I will do my best to exceed this when possible. To show my appreciation for your cooperation, I would be happy to reimburse you for coffee or dinner during a showing.
Please have your residence clean and presentable prior to any scheduled showings. It may also be a good idea to stow valuables before these, though I will never leave prospective buyers alone in your residence.
[If selling the rental property unoccupied, enter a paragraph explaining what that means and describing the notice to vacate process.]
I understand that a property sale outside your control can be a frustrating experience for tenants. I sincerely appreciate your cooperation and efforts throughout this process. Upon the sale of the rental property, I will [transfer the lease and security deposits to the new owner/deliver a notice to vacate with as much lead time as possible].
[Enter a paragraph about any incentives you may be offering for their cooperation, such as relocation fees or bonuses after the sale.]
Please let me know if you have any questions. You can reach me best by [method] at [times].
Sincerely,
[Your Name]
After Issuing the Notice
Once the sale has gone through, you can issue a notice to vacate. Rules on this process vary from state to state, but the typical period is 30 to 60 days, which allows the tenant ample time to pack, find a new place to live and move.
If a tenant refuses to comply or vacate the property, the first step may be to try and resolve the situation through compromise. Are you able to give the tenant a little more time or offer to pay for part of their relocation? If so, a solution like this may help you avoid the fees and time associated with taking a matter to court.
However, you can file for eviction if the tenant receives proper notice and state laws allow you to do so. In most states, you can file for eviction at your district court.
Respect Tenants During a Property Sale
In conclusion, landlords should work to:
- Notify tenants of a potential sale as soon as possible.
- Learn about tenant rights in their state before moving forward.
- Communicate politely and transparently with tenants.
- Arrange showings with respect to their tenants’ time and space.
- Give the legally required notice to vacate before tenants must move out.
- Try to compromise with tenants before taking any actions to court.
It’s a good idea to consult with a real estate attorney to ensure compliance and a smooth process. You can also make things easier by using a lease termination letter template if you’re ending a month-to-month lease.
