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

  • Mauricio Tromp

    Hello I me and my family moved Into a condo on November 18 we have a fixed lease we moved in and then thievery next day we get a knock on the door saying the condo is in foreclosure. We were told by a realtor that the closing date will be in June but then it got moved to august 3th and the owner says we have to move out because the new owners are moving in by then we live in Florida Brevard county and according to statute 83.561 we are supposed to receive a 30 day written notice with a certificaTe of title from the new purchasers and we have not received any sort of notice of any kind is this legal for them to do this ?

  • Beth Russell

    I recently came off the deed to our family home to have my father and sister evict me 4 possession Distributing narcotics and weapons not one bit of it is true I just received 4 days ago I noticed by the Constable that I have 6 days to be out or they will take over the home and put my possessions into a storage out of town . I have no money to move what do I do

  • sara lee

    hi my landlord sold the property i have a month to month lease the new owner wanted me to move before the 19 of august and its the 10 i cant afford to move right now what do i do i live in Pennsylvania

    • Laura Agadoni

      Hi Sara Lee,
      Month-to-month tenants in Pennsylvania get 15 days’ notice. After you get that, you need to leave on or before the 15th day. Otherwise, you will probably be evicted. If that happens, it will be more difficult for you to find another place to rent.

  • Jessica

    Hello,

    I currently reside in a house and we have a year and a half remaining on our lease agreement. Today we had a landlord visit that had a few other people at it that we were not expecting. Looking online, I saw that the property has sold. We didn’t even know it was on the market. Now we are panicking wondering if we will be kicked out. There is no special clause in our lease. What should we do? Do we have any rights here?

  • Anonymous

    Hello,

    I have been on a fixed Texas lease for the last 4 years. My lease is due to expire in 3 months. My landlord wants to sell his house and has been bringing in contractor after contractor to get the home ready to put up for sale, sometimes on less than 24 hours notice. Can he legally bring in a realtor and others into my home before the lease is up? There is no clause in my lease stating that I must allow realtors and contractors into my home before the lease is expired. Also, the realtor wants me to follow her “staging” recommendations and the landlord is forcing me to abide, Is this legal?

    • Laura Agadoni

      Hi Anonymous,
      The landlord has the right to come over to get the house ready for sale and to bring over his real estate agent and contractor. He should give you notice before he comes over, and he can’t come over excessively because you have the right to privacy. Speak with your landlord to come to some sort of arrangement you both can live with. Regarding you staging the place, no, you do not need to do that. You might, however, wish to ask for rent abatement or something if they expect you to go out of your way to help them sell. Up to you.

  • Iesha

    I am in the process of purchasing a apartment building. The building is currently in foreclosure because the owner is 7 months behind in the mortgage. There are some tenants in the building and I was told that we will not have a list of the tenants that are current on their rent nor will their security deposits will be given to us. My question is will I be responsible for the security deposits even if they were not given to me? I’m in the state of Illinois.

    • Laura Agadoni

      Hi Lesha,
      Yes, you will be responsible for returning the full security deposit when the tenant moves out or providing an itemized list of deductions if you will not be returning the full deposit.

  • Christopher Wilson

    My landlord wants to sell the house to me that we have been renting. He wants to sell it for 169,000 at the lowest the area normally calls for about 120,000 he says its higher because he has a 2nd mortgage on the house that he used to buy another property. Should I really have to pay for his 2nd mortgage or is that like just giving him free money and buying his other property for him. I feel like I should only have to pay for the what the house is worth and what the property the house is on is worth.

    • Laura Agadoni

      Hi Christopher,
      This is where negotiation comes in. He can ask whatever he likes. You can then make him a counter offer of what you think is fair. Good luck!

  • Alison

    Hi, My landlord is putting her place on the market tomorrow. The realtor took pictures of the place, but I don’t want my personal items to show up on a website! Is it reasonable to ask to see the pictures and have veto power over them? Also, the agent wants to come in with only 2 hours notice and without getting my approval. I’ve told him yes to the 2hr notification period (which I thought was very accommodating), but that they cannot go in without my approval. What is standard/ reasonable here? Thank you.

    • Laura Agadoni

      Hi Alison,
      Your landlord doesn’t need your approval to enter. They need to give you notice is all. I suggest you ask for more notice than 2 hours if that isn’t going to be suitable for you. Landlords (or their representatives) have the right to enter when showing a property after giving proper notice and as long as they aren’t entering excessively. You can ask to see the photos, but they don’t have to show them to you first. You can also request they not take pictures of your personal items. The only way to ensure that doesn’t happen is to hide (with a sheet maybe) or remove items you don’t want photographed.

  • sue

    I am renting a guest house on a property that was just sold in Montana. I have three more months on my years lease. I want to break the lease because now there is no laundry, internet , tv or garage priveledges as was orginally stated in my lease. How much time do I have legally to offer my notice to vacate? What are my rights now beacuase everything has changed!

    • Laura Agadoni

      Hi Sue,
      You’ll need to check your state law to determine whether you can break your lease without penalty. Landlords generally don’t have to by law provide laundry, Internet, TV, or a garage. But if those things were all part of your lease agreement, you might have a case. I’m not an attorney, so I can’t give you legal advice.

  • Katie

    The house I rented is being sold. I’ve been letting the realtor show the house 2 times a day. She wants to show it more. I put my foot down and said no more than 2 which is more than I think is reasonable to begin with. I live in Illinois, how often are they legally allowed to show the house? She is texting/harassing me saying I have to show it more frequently. I didn’t pay $1800 to have strangers walking through 3-4 times a day. Thank you for your help!

    • Laura Agadoni

      Hi Katie,
      There is no law regarding how often landlords or agents can show a house. But you have the right to privacy, which means showings can’t be excessive. Usually, a workable agreement is showing the property maybe 3 or 4 times a week. Ask them to please group the showings, if possible, because even daily showings are excessive. I’m not an attorney, so this is not legal advice.

  • KARINA HUCKABAY

    I received a 60 day to vacate, property has been sold. Former Landlord wants notice , I don’t see why when they gave us a notice already. She is way to involved still when she is no longer the owner. I am aware new owner has to give us our deposit . Basically we are out Agust 20th the rent is supposed to be prorated? what if they disagree and try to keep deposit? I don;t trust them I have been screwed on a deposit when another landlord went into forclosure. I am just wondering what is my best recourse to not pay rent in Ausgust? since, they have are security? What if they try to blame things on us to fix their new house when we lived there 3 years?

    • Laura Agadoni

      Hi Karina,
      You don’t need to give notice to your former landlord. You need to pay rent for August. Whether the new landlord prorates your August rent depends on what sort of written agreement you have with them. You get your security deposit back or an itemized list of why they are keeping all or part of it. You can check your state law on security deposits here: https://www.landlordology.com/state-laws/ If they unlawfully keep your security deposit, you can sue them.

  • Tiffany Tarrant

    I live in Los Angeles, CA. My owner is selling property. It is a RSO property. I live with my mother is is not disabled at 58 both names on rental agreement. Are we eligible tenants for relocation assistance we have lived here for 8years?

  • California Resident

    Hi, I have a fixed 1yr lease, that doesn’t expire until dec. My owner is no selling the home and my landlord has threatened to shut off my water due to my not being able to answer when her agent calls. I’m a sales associate at a major electronic and appliance store. I’m a single mother and don’t want random strangers in my home, seeing my valuables. Also I fear being robbed due to the type of crimes in the county I live in. I go out my way to never have company due to these fears. I am a domestic violence survivor. Do I have rights in this matter? Can they threaten and bully me into doing what they want? She left msgs stating what she will do and her exact reason for doing so. Also they refuse to treat their rodant issue since I’ve moved in

    • Laura Agadoni

      Hi California Resident,
      Your landlord cannot shut off your water. But they or their representative can show the place to potential buyers after giving you notice of when they will enter. You can try to work out an arrangement with your landlord that you both can live with. But you cannot refuse entry after having been given proper notice. If you do, they can come in anyway. If you take measures to keep them out, your landlord could evict you.
      Regarding rodents: Your landlord needs to take care of that. You could possibly break the lease if you have rodents, have told your landlord, and they refuse to do anything about it. I’m not a lawyer, so this is not legal advice.

  • Christy

    I would like to know once the old owner/landlord sells his apartment to the new owner, does the new landlord get to college back pay or late rent from the tents?

    • Laura Agadoni

      Hi Christy,
      I’m not an attorney. What I believe the answer to be is that the new landlord cannot collect past due rent, but the old landlord could sue you for it.

  • Melissa

    Currently renting a home, fixed lease for 1 year. Rental Agent informed us that the owner wants to sell the property. Later, the agent contacted us about an exit strategy, to move out of the rental home. We could move as fast was we wanted; and the deposit would be returned. Looking at the move in detail, this is going to cost us and the owner was not offering any help for the move. So we asked for assistance, and the rental agent said the owner declined to help. We have been approved for a new rental and signed the paperwork. The agent is aware of the pending move because the new property management agency requested our information. The agent sends us another email reminding to stay or pay to lease expires. What can we do?

    • Laura Agadoni

      Hi Melissa,
      At this point in the negotiations, you will need to stay until the lease expires. But that’s what you originally wanted anyway when you signed the lease, right? So let them know you will stay per the lease agreement. If you say that, they may be willing to open negotiations again because, if they are selling, they probably want you out. But they don’t want to pay you extra to move out, so they are playing hardball. Say you will stay and if they want to break the lease, they need to pay you X dollars to do so. If not, you can just stay until your lease ends, and then move to the other rental.

  • carol

    Hi

    I have currently tenants in my home but due to personal reasons i have to give them notice which must be 90 days do i have to include include my reasons why i no longer can rent out my house

  • Jennifer

    I own a condo in southern California. I’ve had tenants on a one year lease which expires at the end of August. My property manager sent them notice to vacate more than 30 days before the end of the lease. I plan on putting the condo on sale. I was just told by the property manager that the tenants aren’t planning to move by the end of their lease. What are my options?

  • Angela

    Hi my land Lord is selling the building and I am 100$ behind in rent will the new buyers hold this against me I do I have to pay rent if he selling the building or can I save to move I live in Chicago il

    • Lucas Hall

      Generally speaking, if you have a habitable home, then you have have to pay rent. It doesn’t matter if ownership is changing.

  • Bill

    Hi I’m in L.A. Ca. Rent house month to month lease ran out been here 2 1/2 yrs wife is on disability we have pets we pay extra rent for so because of the disability I have to be home if house is worked on or shown because of dogs or if things need to be moved so I miss work! Got 60 day notice and offer of $250 off rent Sept and Oct for cooperation didn’t think we had to worry about Aug because it was out of nowhere and we paid full rent for Aug! Get a phone msg Monday painters here for 2-3 hrs Tues for touch up I didn’t say anything because it sounded like a couple hrs. Well its been a total nightmare full construction zone all week with no end in site had to take off work for dogs and they flooded the front room any recourse?

  • Alfredo Espinoza

    Hi i just sign a 1 year leased about 4 days ago to rent a house but aparently the owner had his home in escrow to where he memtion the new buyers where past the date line of 75 days or something a like here in California. But the buyers now is saying they where not imformed of it being taken of the market from the owner side and is claiming that its there home and he did not have rights to rent it out now. As new tenents what are my rights and what can i do for me and my family? Home owner has visit us in person and ask us to hold back from entirely moving in not sure what to do here we worked our butts to clean up this new home that we just rented out from him.

  • Jack Hurley

    In Texas- I am saling my home that i have been leasing but the lease is up and ive given notice to tenants that they need to be out this month and i am needing to enter home and get my furniture out and other belongings that has been kept there during the lease do i have rights to go in and retrieve my things if ive given the tenants 24hr notice if they havnt moved out yet?

  • Dayana Adams

    I’m in NY I live in this house for 15 years I found out they sold the house because 2 man came and approach my neighbor wife as she was opening the door to tell her they are the new owners they want the rent and also want everyone to move out they stated that the previous landlady say she send us a notice letter and gave us a month free witch is a lie, the checks we send her this month was return to us so we haven’t pay what should we do is really hard to find places everything is so expensive besides I didn’t even got my deposit back and now someone just show up trying to collect should we just save our money until he kicks us out in court ?

    • Laura Agadoni

      Hi Dayana,
      You are entitled to a 30-day notice. Contact your landlord, and let them know you didn’t receive one. They should send this certified mail to avoid this sort of confusion. Once you get proper notice, you must move by the move-out date. You are entitled to your security deposit back as long as there are no damages. Do not attempt to live anywhere rent free and make the landlord evict you. If you do that, you will have a hard time finding another place to rent.

  • Prince

    Hi. My parents were leasing a house and the lease contract was for 2 years period with an option of renewing the lease for 3 years and registers the lease agains the title deeds but during the end of the first 2 years period the house was sold and the buyer wanted us to be out of the house wanted us to move out of the house. Is it possible for us to continue with the lease for an additional 3 years? Please help.

  • Shelly

    Our landlord is trying to sell this house we are renting and sending people out here to look at it. The first person they warned me about (less than a day) and an agent came with. Today they sent out a guy to look with no agent and I was here alone. We have always paid rent. There is no eviction notice. We asked the agent what they were going to do with us if someone buys the house. She said ” I don’t know we haven’t discussed that” I’m scared we are going to end up homeless here. Is any of this legal? I tried calling lawyers but was told by the only one I could get a hold of that it cost $150 for a consultation and that does not even guarantee he would take the case. there is no listing for this house on any website. They are just telling people as they walk in that they can buy it. They told us 4 months ago they were going to put a for sale sign in the yard and never did. So we didn’t think they were going to sell.

    • Laura Agadoni

      Hi Shelly,
      If you have a lease, you can stay until the lease term ends (unless there is a clause letting the landlord end your tenancy early). If you are a month-to-month tenant, the landlord just needs to give you notice per the laws of your state: https://www.landlordology.com/state-laws/ The landlord needs to give you notice before they bring someone over to show the place, usually 24 hours notice. And showings can’t be excessive.

  • Annon

    Hi There,

    Please advise , I recently sold a property with Tenants, Who will be responsible for the deposits? The new owner or me?

    • Laura Agadoni

      Hi Anon,
      Check your paperwork to see whether the security deposit was included as a payment in escrow to the buyer. That’s typically what happens. If the buyer didn’t get the security deposit from you when they bought the place, they may contact you for it when the tenant moves out and wants this money back. But the tenant only needs to deal with the new owner at this point.