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

  • Jim

    Good morning, Can I as a ( prop. mgr.) issue a notice to quit to a tenant because we are retiring the property from the rental market? Does that break lease laws? I’m in Boulder CO. Thank you.

    • Laura Agadoni

      Hi Jim,

      I’m not an attorney, but I know some general laws. Generally, unless your lease has an early termination clause, the tenants can live out the lease. You could try a cash for keys option to see if they will leave. Landlordology has advice on how to do this. And you can check with your state laws on Landlordology as well. Good luck! Laura

  • Leslie Young

    My husband and I are in a rental house where the lease will be up July 31, 2015. We have notified the owners that we are not renewing the lease and will vacate prior to July 31st. The owner is going to list the house for sale, immediately. I must say, I am not overly motivated to have the house pristine for showings; but that aside, I am not willing to have a realtor lock box, with the door key available to realtors at any time they desire. We are living in metropolitan South Florida, that has a lot of crime and a lot of dishonest people. Is it within my right to refuse a lock box on the house until we are out of the house? I do not mind if the realtor had the key and notified us that someone wanted to look at the house and provided the key to the showing agent. Am I being overly unreasonable?
    Thank you for your help.

  • Laura Agadoni

    Hi Leslie,

    I’m not an attorney, but here is some general advice. Look at your lease and see if it allows the landlord to show the property. Many leases have language that allows this. Landlords are typically required to give tenants notice before showing the property, usually 24 hours. And generally if the landlord can show the place, his or her agent can also show it, which means a lockbox can be put on. You still have the right, as long as you are a tenant in good standing, to quiet enjoyment, meaning agents can’t just come in without notifying you. Again, these are just generalities. Check your lease and consult an attorney for a sure answer to your particular situation. Good luck!

  • Widowed mom of 3

    Two years ago, my old house was on the market when a friend called me begging to rent it because they were losing theirs, but they could only afford significantly less than market value. Fast forward 2 years, I’m paying over $600/m out of my own budget to maintain the house in addition to what the monthly rent covers. Lease expires October 1. I want to put it on the market within the next month in conjunction with the end of their lease. They do not want me to sell it because they’d like to buy it in a few years, but meanwhile, my family is suffering big time because of this burden. I could lose my own house because of it. I’ve already informed them of the hardship it’s put on my family. I’m a widowed mother. What are my options in Illinois

  • Laura Agadoni

    Hi Widowed mom of 3,

    From looking here at the Landlordology list of state laws, if you want to terminate a yearly lease in Illinois, you need to give the tenant a 60-day notice. Of course, your lease might have other language that you would need to follow if it differs.

    It’s your house. If you need to sell it, you can sell it. If your current tenant/friend wants to buy it, you might want to consider that option through a seller financing arrangement. A real estate professional or a real estate lawyer can help you with that.

    Good luck!

  • Richard

    Hi my landlord just sold the house and did not inform anyone until they actually signed the paperwork, she just now informed us the this is our last month and next month rent will be negotiated with new owner. Would you have any advice to help me and my family out since we barely have a budget to get us from check to check let alone pay a couple grand to get new place

    • Laura Agadoni

      Hi Richard,

      From what you wrote, it sounds as if you could possibly stay there with the new owner. If so, make your case for what a great tenant you’ve been by proving you made timely rent payments and that you keep the place in good condition. I don’t know about this new landlord, but most landlords would love such a tenant. The new landlord might be agreeable to meet your terms or at least enter negotiations with you. Good luck!

      • Laura Agadoni

        Richard, one more point. I just assumed from your question that you were on a month-to-month, but if you still have time on a lease, the new owner needs to honor that lease.

  • Mitchell

    Thank you in advance for any assistance you are able to provide. My landlord is doing large projects (new roof, painting inside of house, etc. in order to sell the property. He has not given us notice and is doing this while we are paying rent. Is he be allowed to do this, or should he have to wait until we’ve left the property. Basically trying to have his cake and eat it too. Do I have any recourse? I live in Florida if that’s helpful. Thank you again, and I hope you are well.

    • Laura Agadoni

      Hi Mitchell,

      Do you know for sure he’s selling? He could just be making needed improvements. Most leases have language for how landlords should go about making repairs, typically by giving the tenant notice before the workers will arrive. If you anticipate he is selling, check your state law and your lease for how much notice he needs to give you. Although it’s often easier for both parties if the landlord gives notices and then waits until the place is vacant to make repairs, landlords usually don’t have to do it that way.

      • Mitchell

        Laura, thank you very much for your response. I’m positive that he is selling. He has been attempting to get my wife and I to buy it, to which we said that we weren’t interested in living here long term. I’ve lived with him for 8 years, between two properties and this is by far the most proactive he’s been. These are problems that he’s needed to be fix for four years (which he could have afforded, we know each other well) and they are being done all at once. He walked into “my home” at 8:30 this morning with no warning. I’m paying a decent amount of rent and feel like he’s attempting to sell while still collecting rent. Apropos to nothing…I have a traumatic brain injury. If it weren’t the case, I probably wouldn’t mind it all. Thank you

  • Terri

    My friends had a 1 year lease and are now month to month. The landlord sold the home and the tenants were given no notice to vacate. Tomorrow the new owner is literally kicking them out. The tenant is just out of the hospital with cancer and has no where to go on short notice. Even on month to month in Florida I believe they have to be given 15 days notice prior to the end of the rental period. This being the 28th of August I believe they would have to be given 15 days notice prior to the end of September. Can you please advise and quickly, my friend is so ill and thinks he is on the street as of tomorrow.
    Thank you

  • Laura Agadoni

    Hi Terri,

    You are right that in Florida, landlords need to give tenants on a month-to-month rental a 15-day notice to vacate. The exception is if the tenant didn’t pay rent or violated any rental agreement. I hope everything turns out OK.

  • Wanda

    We have been renting our house since Oct 2013 and our landlord put it up for sale 4/20/2015. We did not know about this until the sign went up in the yard. The house has major issues ie. bowed basement walls, sewage flooding, water comes in under the walls. Only 10 showings since it went up and no one stays more than 5 minutes to view it. We do not know from day to day if and when we might have to move. It has never been inspected by the bank or anyone else. If we should have to move, does our landlord have to help use financially to do so? We live in Ohio and don’t know the laws or rules. Landlord isn’t very forthcoming with us and doesn’t keep up to date on what’s going on.

    • Laura Agadoni

      Hi Wanda,

      In Ohio, if you’re on a month-to-month rental, your landlord needs to give you a 30-day notice to vacate. If you have a lease, you can stay until the lease term ends, unless your lease says otherwise. Those are the only issues you need to concern yourself with. It’s the landlord’s problem if his house isn’t up to par. Investors who want the land or who wish to fix and flip and who pay cash, for instance, don’t need an inspection or approval from a lender. The house might never sell, or it might sell tomorrow. Either way, you can stay until you get notice (as long as you are paying rent), but then you need to leave by the date stated on the notice. Your landlord is not obligated to pay your moving expenses. Good luck!

  • Linda

    We have had a family member as a tenant for years…..they are now sick and in nursing home. We want to sell the property. What is the law when no lease is in place to give notice to vacate the property, so it can be sold.

  • Laura Agadoni

    Hi Linda,

    I’m sorry to hear about your family member being sick. You would need to give notice according to the laws of your state. Each state varies. You can find that info here at Landlordology by clicking on State Laws and Regulations.

  • Mary Jo Matey

    My son has been renting from the same landlords for 3 years now… same home 2 years .. their 2 year lease is up the end of Oct. The landlord sold the home they are renting … and wanted them out in 30 days .. my son and his wife recently had a precious baby and financially they can not afford this move .. is there anything that can be done to get help with the moving expense from the landlords?? The sell of the home was completely unexpected !!!
    I will appreciate your advice

    thank u soo much
    Namate’

  • Laura Agadoni

    Hi Namate,
    You should first check to see whether 30 days notice from the landlord is all that is required in your state. It could be, but in some states, landlords need to give longer notice than that.

    Unfortunately for your son and his family, the landlord is not obligated to help with moving expenses. Your son could maybe try to raise money by having a garage sale or selling off some items online, or he could possibly get a loan to move (maybe from you?). If you decide to loan money, here is a safe way: http://www.thepennyhoarder.com/friends-family-want-borrow-money/

    There is also a government program if your son will be homeless that he can look into: http://portal.hud.gov/hudportal/HUD?src=/recovery/programs/homelessness

    Good luck!

  • nancy williams

    I am landlord in SC of tenant who started out on a yr lease and now rents mo to mo. She pays rent on time every month. However, she complains about something every month to my property manager so something is always being repaired. She has been in the home 4 yrs and inside of home was new including kitchens appliances, bathrooms when she moved in. Can I advertise my house for rent/sale without notifying tenant knowing that if I find tenant/buyer i have to give her a 30 days notice to vacate? Would like to get a tenant/buyer in my home who will take care of it. What is my obligation as i would prefer she not move out due to the insurance on an empty home I will have to pay not to mention small loan that the rent is paying off.

  • Laura Agadoni

    Hi Nancy,
    In SC, you need to give your tenant a 30-day notice to vacate. You don’t need to give the tenant a reason.
    You don’t say what the repairs she asks for are, but if they are legitimate repairs, it’s probably better that you know about them so you can get them fixed before the problems worsen. Your property manager should be able to tell you whether the complaints are legitimate.
    It’s your right to sell your property or rent to someone else, but there is no guarantee that you’ll get a new renter who will take care of your home, as you say. Good luck in whatever you decide!

  • Crystal Kelly

    My landlord recently sold his property that i have been renting from him for the pass 5 years. He let me know he was selling before he sold to give me time to look for another house but he also said he was looking for a buyer that would keep my family and i as tenants so we wouldny have to move. Well i get a knock at the door anf when i answered a man comes i. And says im the new owner and im here for rent. I asked him to come back later cause he was so rude and i wasnt sure if to give this man money cause i hadnt heard of him or my landlord didnt let me know he sold the property. When he returned he said im the new owner and i want to live in my house and wants me to leave. What can i do? Can he do this? San bernardino, Ca

  • Laura Agadoni

    Hi Crystal,
    I would call your landlord to find out exactly what happened. Also, you don’t say whether you have a lease or are on a month-to-month. California law varies on how much notice you get. You can check the law here: https://www.landlordology.com/california-landlord-tenant-laws/

    Although your landlord might have wanted to sell to someone who would have kept you as a tenant, the new owner doesn’t have to do that, but you still get proper notice to vacate. Good luck!

  • Reed Upthegrove

    My sister is selling her house and her adult son lives there. He does not pay rent and no lease agreement is in place. If she sells what are his rights? Also he has no legal right to the house, solely owned by her

  • Laura Agadoni

    Hi Reed,

    Your sister needs to tell her son that she’s selling the house and that he needs to get out. I’m not sure the state laws apply here. He might be considered a guest … I don’t know the law on this. But to be safe, have your sister give her son the required amount of notice to vacate as dictated by your sister’s state.

    Although I’m not a lawyer, I am a parent. I would think your sister’s son would be grateful for having the chance to save some money by living rent free so that he could afford to get his own place. :)

  • Julia

    My landlord sold the house I was renting, out from underneath me. she gave me 30 days to get out. I have four kids….30 days is not enough time for me to move out with my kids…I live in the state of California… The paper work doesn’t look like it was even filled out properly… Is this legal ? Is there a way I can get more time?

  • Laura Agadoni

    Hi Julia, Check here to see which applies to you. https://www.landlordology.com/california-landlord-tenant-laws/ You might be entitled to a 60-day notice. I’m not sure what paperwork you mean. I hope you find a nice place soon!

  • Ruben

    My landlord is selling his house and asked if we can move in 60 days, said the buyer a building company has no intent to rent the home. We have a lease that expires July 2016 and I do not see a termination option. Is there anything we can do to stay in our home until our lease expires?

  • Laura Agadoni

    Hi Ruben,

    I’m not an attorney, but I believe that if there is no early termination clause in your lease, you can stay until the lease ends. You said the landlord asked you to leave. He or she can always ask, and you can probably just say no in this case. Although, you could also try to work out some arrangement, such as asking your landlord to pay you a certain sum if you agree to leave in 60 days.

  • Tabatha

    Hello, hope you are well. I just have a quick question. We just went through the whole landlord selling our rental home situation, it was a nightmare as a widow of three children and taking care of my widowed, disabled mom as well. My mom told me there was a new law in Florida that if this happens the landlord had to give you your deposit, plus $2000. I’m not sure she heard right, bless her heart, but thought I would ask, as this has really taken a toll on our physical, mental, and especially our financial status. Thank you very much. Take care and have a great week.
    Sincerely, Tabatha

    • Laura Agadoni

      Hi Tabatha,
      I’m not a lawyer, but I would be very surprised that a law like that exists. I did a little research, and I did not find any law like that in Florida.

      Regarding your deposit, you are entitled to get that back unless the landlord notified you within 30 days of your moving out the reasons he was withholding any or all of it.

      Your mom might have heard of a landlord offering to pay a tenant $2,000 if that tenant would move out early. Landlords might offer that if they want to sell and the tenant still has months left on the lease, for example.

      I hope you were able to find a nice, new place to live!

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