Tenants’ Rights When Selling an Occupied Rental Property

Written on August 12, 2016 by , updated on December 9, 2016

Selling an Occupied UnitThere are many reasons why you might sell a rental property.

Some of the most common reasons are:

  • Cash: You want to cash-in on your property’s equity.
  • Cut your losses: The property isn’t performing as well you like, and you just want out.
  • Accidental landlord: You inherited the rental property and have no interest in being a landlord.
  • You’re moving: You’re relocating, don’t wish to be a long-distance landlord, and/or plan to buy something closer to you.
  • 1031 exchange: You want to trade it in for something else.
  • The end is near: You’re retiring or just want to get out of the landlord business altogether.

Whatever the reason, it is your property, so you can sell it any time you wish. However, when you have tenants, the process involves some extra steps depending on the type of lease or agreement they possess.

The two most common types of rental situations are:

  1. Month-to-month agreements
  2. Fixed-term leases

Handling Month-to-Month Agreements

If your tenant is renting on a month-to-month basis, all you need to do is give your tenant proper notice. This involves mailing or delivering a letter to your tenant 30 days before you’d like them out, usually in respective to the rent due date.

The required notice period varies from state to state, so be sure to look up your state’s policy here.

You don’t need a reason to terminate a month-to-month agreement, hence why it is called a “no cause” termination. It’s one of the main benefits of having a month-to-month agreement. You don’t have to tell the tenant why they need to vacate unless you want to.

Here’s a sample of what to do:

  1. Send a letter with the date on it letting your tenant know that their tenancy will terminate in XX days from the date of the notice or next rent due date (depending on your state).
  2. Inform your tenant to remove all possessions and return your keys to you on or before the last day mentioned in the notice.
  3. If they don’t move out, start the eviction process immediately.

Related: Lease vs. Rental Agreement: Which to Choose?

Handling Fixed-Term Leases

Fixed-term leases require a more delicate touch and don’t normally terminate just because a property changes ownership.

Here are five options for handling a tenant with a fixed-term lease:

1. Wait Until the Lease Has Expired

If you have a tenant in good standing who is renting the property under a lease situation, the easiest method for you is to wait to sell the property until the lease is up and your tenant has moved out.

However, if your tenant has violated any lease terms, you can terminate the lease more quickly with proper notice. Valid reasons for a lease termination include, but are not limited to:

  • Failing to pay rent
  • Violating the lease, including:
    • Engaging in illegal activities on the property
    • Violating a no-pet clause
    • Subleasing if prohibited
    • Causing serious property damage
    • Being a nuisance to others
    • Falsifying information on the rental application

2. Sell the Property with an Active Lease

This option limits your prospects because you would need to sell to someone who understands that a tenant is living in the property and is OK with that. You are basically limiting yourself to investors.

It’s important that the new owner honors the tenant’s lease and lets the tenant live in the property until the lease is up.

In almost every state, the lease and security deposit must be transferred with the property, and the new owner becomes the new landlord. A fixed-term lease does not automatically terminate when a property is sold.

Here’s a podcast episode where Lucas addresses the question:

3. Pay your Tenant to Vacate

If you want to sell right away and your tenant still has several months left on the lease, you can try to negotiate a settlement to get your tenant out early.

This tactic is called “cash-for-keys,” but how do you know how much to offer?

Here are some ways to arrive at a figure:

  • Make up the difference: Look to see what comparable properties to yours are renting for in the area. If rent elsewhere is more than what you’ve been charging, offer to pay the difference between what your tenant will likely have to pay and what they have been paying you, times the amount of months left on the lease.
  • Moving costs: You might want to offer some money to help your tenant move for the inconvenience of moving earlier than expected.
  • Pay their security deposit: You might want to offer half of what your tenant would need to move into a new place, which is usually first month’s rent and a security deposit.
  • Whatever you can afford: The bottom line on how much to offer depends on how much you want your tenant out early — and how much you can afford.

Keep in mind, however, that the tenant is under no obligation to agree to your terms. In that case, you’ll need to wait until the end of the lease to sell the property.

Related: “Cash for Keys” will Motivate Bad Tenants to Move Out Quickly

4. Sell the Property to your Tenant

Offer to sell the property to your tenant. You could allow them to get financing on their own, or offer a seller financing arrangement, which is a type of transaction where you are the lender and allow your tenant to make payments to you (on a short-term basis) to buy the property.

Seller financing is especially attractive to offer to long-term tenants in good standing.

Keep in mind that you typically need to own the property free and clear or get approval from your mortgage lender to conduct a seller-financing deal.

5. Execute an Early Termination Clause in the Lease

There is a case where tenants, even those in good standing, don’t get to live out the entire lease. Some leases have an early termination clause to handle a variety of situations.

These clauses usually say that the lease terminates in 30/60/90 days, for example, after closing on the sale of the property. The “trigger” can be anything you want, as long as it is reasonable, and both parties agree to it in the lease.

photo credit: Life in Rescue via (license)
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694 CommentsLeave a Comment

  • M.C. Thompson

    My tenants have only paid partial rent since June, which I cannot refuse, because they deposit it directly into a bank account. I have regularly written about the accumulating back rent each month. They owe $2000 today.

    Their lease is up in 30 days (9/30), but they say they cannot move out for 60 days. A clause in the lease says that if I don’t give them notice of renewal or non-renewal 60 days ahead, they get a month-to-month lease. I need them out in 30 days, so I can prep the house to sell, empty. For many reasons, I must put it on the market by 10/1.

    Does their failure to pay the full rent for the last 3 months terminate the lease immediately, and revoke their right to a month-to-month lease, after the current lease expires?

    • Laura Agadoni

      Hi M.C.,
      Short answer: Because you accepted partial rent, you cannot now use “failure to pay rent” as an eviction reason. I recommend you read this: https://www.landlordology.com/dont-give-out-your-bank-account-number/

      What you can do now is to prep the house for sale with them in it. Give notice each time you will come over to do something. Or, if you really want them out, offer to pay them to leave. Or, contact a lawyer to determine if you have any better options.

      • M.C. Thompson

        Hi Laura – your link leads to an error message: “You do not have permission to preview drafts.”

        Okay – if rent is due today and it doesn’t get paid today, and the lease says I can start the dispossessory process the day after they fail to pay the rent, how do I go about refusing partial rent if they’re directly depositing the money? Can I tell them I’m no longer accepting partial rent, then send them a return check if they try depositing only part of the rent?

        • Laura Agadoni

          Oops, sorry about that. I was updating a couple of things, and I sent you the wrong link. It works now. Your question is addressed in the post under what you should do.

          Good luck!

      • M.C. Thompson

        Thanks for fixing the link, Laura. It’s a great article. I appreciate your insight.

  • Simone

    Hello,
    My landlord sold the home and already gave us a move out date in 90 days, however if I want to move out before that do I have to give notice being that the home is already sold and move out date is in place…
    Please advise thank you

  • Keysha

    My landlord sold her house. And the new landlord said we can stay but now he wants us to leave so his family can move in. My lease was up in july 2016. My landlord never renewed my lease because she was selling the house. She moved out August 2016. The new landlord gave me 60 days to move. But because he just told me this last minute i can’t afford to move. Is there anything i can do. And can he give me my deposit now so i use it to move…

    • Laura Agadoni

      Hi Keysha,
      There is really nothing you can do at this point if they gave you a 60-day notice but to move out at the end of the 60 days. You can always ask about getting your deposit back early.

  • magaly rodriguez

    The house we used to rent seens yesterday was sold while we were renting it we were never given legal documentation stating that the property was being sold..the landlord that we rented from gave us fake 60days notice and a ..3days pay or quit put they were just a print out from the internet.he keept harassing my family n i….so i went to the cops n they confirm me that the documents were fake…but now seen the house has new owners they want their property…our landlord keep harrasing my family n self by constantly going to our home n saying hurry hurry because the new owners want there house…now im homeless because they got my family of 7out…what can i do

    • Laura Agadoni

      Hi Magaly,
      I’m sorry that you had to move, but I don’t know what you mean by a “fake” 60-day notice. The owner of the house has a right to sell it. And the owner of the house has a right to give their tenants proper notice to vacate. Just because you rent a house doesn’t mean you get to rent it as long as you like. If you have a lease, you get to stay throughout the lease period, so when you find a new place to rent, sign a lease.

  • Cary

    Hi,
    I sold a cottage and let the buyer store the cottage on my property. It was suppose to be a couple months at a $100 a month. It’s been 4 months now and he’s 2 months behind. I would like to write up something concerning the rent being paid on time and me not being liable for his property. Advise appreciated! Thank you

  • Ashley

    New owners bought the house I live in (6 years), they arent on file as owning the home per the township. Bought it on foreclosure in January. August, they cashed Jan, May, June, &July checks. They couldn’t cash Feb, March, April, due to Chase bank policy of expiring the check they sent after 90 days. they sent a notice to quit july 31 for a sep 30 move out for all 3 families. I have been deducting money from rent for repairs theyve failed to do & utilities for the illegal apt downstairs I pay for. They sent an arrears letter this week for 15k in rent, although they’ve cashed several checks & letters regarding the issues here. No check bounced, checked w/my bank. Do I owe them those months? Can I ask for proof that new owner is moving in

  • Jason Cameron

    I am renting a 1-acre property and a small portion has been excluded due to a garage and fifth wheel being stored my landlord is forcibly telling me he is coming to stay the weekend in his fifth wheel because it is his property I have a renter and not comfortable with him staying on the property all weekend do I have tenants rights to say no the portion of property was excluded from rent but never included in the agreement for him to be staying for weekends

  • Laura Agadoni

    Hi Jason,
    This is an unusual situation and one that should have been covered in the lease. Since it isn’t addressed in the lease, you and your landlord need to work something out. This could be cause for you to leave, but if you want to continue to rent the place, you might agree to let him stay this time and then make other arrangements for the future.

  • T.L.

    I have been in a rental property for a month, the previous landlord was in the process of selling her property I of course had no idea until deposit and first month rent was paid. The repairs that the previous landlord agreed to make has not been done. I did not complete an application nor do I have a copy of my lease. The new landlord is asking me to complete application and go through the approval process. What are my rights at a tenant?

    • Laura Agadoni

      Hi T.L.,
      If you don’t have a signed lease, you are a month-to-month tenant. At this point, the ball is in your court. If you want to stay and rent the place, fill out the application and sign the lease. If you don’t want the place now in the condition it’s in, don’t sign the lease and give your notice to move. If you want to stay but only if the repairs are made, let them know you will sign a lease if the repairs are made to your satisfaction.

  • Blesilda

    Hi! My landlord was selling the house before we move in..we dont have any lease agreement and security deposit when we moved in.they told us that they will give us a 3 months to leave the house when somebody buy..now the change there mind they want us to leave in a month even when nobody buy the house.and telling us to pay the 1 month stay..we are struggling financially we have two kids and my husband has no job..i wanna know whats my right. Do we have to pay the 1 month period stay?. Thanks.

  • Josh

    I have a 12 mth lease that just began this week. The new buyer came and told me Inwould have to move out asap because he is using a VA loan and has to occupy my unit. It is a two unit duplex. My landlord told me he cannot force us to move out. He states since it is a VA loan federal trumps state laws. We have a newborn and moving to a rental after selling our home was hard enough. My contract does not say anything about the sale of property and my lease being released. Do I have any options?

    • Laura Agadoni

      Hi Josh,
      I’ve never heard of that! I would assume that if you have a lease, that’s that. No one can kick you out as long as you’re a tenant in good standing. I’m not an attorney, however. Check with one or with legal aid to make sure.

      • Josh

        Ok thanks a bunch. Yea we are just scared of this whole move again in less than a week scenario. I don’t know what to do because the buyer is actually one of our old landlords from years back. We signed our contract 8-17 he put an offer to buy on 8-29 but he says he told landlord he needed one unit and she never should have let us move in. He is blaming her smh. I am seeking legal help come Monday.

  • Myesha

    My apartments sold the complex and I received a notice saying I had 90 days to move. Am I entiled to pay rent still?

  • Alan Pyun

    what if the landlord sold the property and nobody seem to know who the new owners and haven’t heard anything or received nothing from anyone for over 3 months about a lease or anything i live in Wisconsin. I’ve contacted the old landlord and the reality company but know one seem know anything not sure who else to contact.

  • LeAnn Johnson

    Hey,
    My lease ends in February, I currently pay rent through a property management group. The owner of the property has decided that he wants to sell the property and placed a “For Sale” sign in front of the property. The owner did not notify the property managers or me before putting the property on the market. Every week the owner’s listing agent texts a request to do a showing and ask that we clean and vacate the property. This is a huge inconvenience for my family and I. Today, they asked to come and when I declined the listing agent became irate. Do I have the right to say, no? Also, I requested that communication be between the property management and me, instead of the listing agent contacting me.

    • Laura Agadoni

      Hi LeAnn,
      The property owner has the right to show the place before a sale, and that includes letting their real estate agent show the property. It sounds as if they are giving you proper notice before they come, and a showing once a week isn’t excessive. Daily showings probably would be. You do need to give access to let them show the property. You do not, however, need to clean or vacate the place before a showing.

  • Rhonda

    Hello. My landlord allowed me to renew my lease. 2 months later, he announced on a Saturday that he had retired and would be moving on Thursday. He stated that he would rent out the upstairs unit but later changed his mind and sold the property. Do I have to honor my lease (1/2017). If given notice, could I legally move out early? I think the new owner is going to be interesting. I am prepared to move. I do not want any legal problems.

    • Laura Agadoni

      Hi Rhonda,
      You can always move if you don’t like your living conditions. Now, whether you will be on the hook for paying rent until they find a new tenant or will be charged a fee for breaking your lease depends on the landlord and on your lease. Just as a landlord needs to honor a lease, so does a tenant.

  • Clint Downs

    Hi,
    I am in Florida and I am currently renting a house from an individual. I am now at my 2 year mark in a signed 3 year lease. I did not want to sign a 3 year lease but they insisted. Landlord put property up for sale and is showing it which is fine. Lease states in the military clause that if property is placed up for sale the lease may be terminated upon written notice from the landlord. Can he legally terminate my lease or can I legally stay here till my lease term is up.

    Thanks

    Clint

  • Milagro Rivas

    My landlord sold the apartment now. The ne owner want me out they want. Took me to court and in the paperwork shows that he put there is no written lease he put. It was a oral lease but we have a writing lease now. I told him why he did that he said because the lease that i have it was a typo lease what can i do

  • Tony Ilica

    Hi, I live in FL. I have a “rent to own” agreement with someone that expires in March 12 2017. In this agreement there is a clause that says that they are responsable for home insurance . We didn’t receive any down payment and no deposit for rent ( they said that we are “friends”). How can we cancel the agreement? They will not have money for buying the house. Thanks

  • Taj Moniq

    Hello,

    My landlord advised me over 60 days ago that she is selling the home and might have to potentially moved. I have been living in the home for over 5 years and have not been in a lease since the 1st year. Since being informed of the move, I have had to allow for potential agents and buyers walk-thru’s as well as maintenance workers and painters to service the home. I recently found a place to live and moved out of the home. When I informed my landlord of this she told me that I needed to give her a 30 day notice and that she was going to accrue rent for 30 days since the date of the notice that I gave her that I moved out. Am I required to give 30 day notice with no lease if the reason that I am moving is because she is selling?

  • Taj Moniq

    Hello,

    My landlord advised me over 60 days ago that she is selling the home and I will have to move. I have been living in the home for over 5 years and have not been in a lease since the 1st year. Since being informed of the move, I have had to allow for potential agents and buyers to walk through as well as maintenance workers and painters to service the home. I recently found a place to live and moved out . When I informed my landlord of this she told me that I needed to give her a 30 day notice and that she was going to accrue rent for 30 days from the date of the notice that I gave her. Am I required to give 30 day notice with no lease if the reason that I am moving is because she is selling?