Tenants’ Rights When a Landlord Sells a Property

By Emily Koelsch 

With changing economic and market conditions, some Landlords are deciding to sell their rental property with Tenants in place. There are various reasons to do this – for example, wanting to take advantage of strong markets, needing cash for other opportunities, or no longer wanting to be a Landlord. 

There are some distinct advantages and disadvantages to selling a property with Tenants in place. If you decide to buy or sell a property with Tenants, you must know and respect your Tenants’ rights. 

To help you do that, here’s an overview of those Tenant rights and tips for making the process go smoothly. 

Notice Requirements When Selling a Property With Tenants in Place

Tenants have a right to receive an official Notice of Sale of Property. This Notice should be detailed and include specifics about when you’re putting the property on the market, the notice Tenants will receive before showings, and any other Tenant rights or responsibilities. 

When drafting this Notice, look at your Lease Agreement and state laws. Some states have specific timelines for when Landlords must give notice. Additionally, good Lease Agreements include language about Notice of Sale and Notice of Showings. 

Here are some tips for drafting this Notice: 

1. Review your Lease and make sure you comply with all terms; 
2. Review state and local laws to ensure compliance with all requirements;  
3. Include as much detail as possible; 
4. Tell Tenants how much Notice you must give before showings; 
5. Discuss the Tenants’ rights and responsibilities; 
6. Encourage Tenants to contact you with any questions or concerns. 

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The Lease Agreement Is Enforced Even if Ownership Changes

One of the most essential things for Landlords and Tenants to understand is that a fixed-term Lease Agreement remains in effect even if ownership changes. The Lease isn’t tied to the Landlord; instead, it remains with the property and is in full effect until the end of the Lease period. 

Here are some Lease-related tips when selling a property. 

• Tenants are understandably anxious when they hear that their home is being sold. To ease their concerns, let them know that their Lease terms won’t change. 
• A strong Lease Agreement can make your home more attractive to investors. Investors are bound by the terms of the Lease. They’ll be more comfortable with a thorough, state-specific Lease Agreement. 
• To protect your Tenant, put everything in writing. For example, if the Lease doesn’t include a Pet Addendum or address pets, the new owner could tell your Tenants their pets are not allowed. Add any needed Addendums to your Lease before selling the property. 
• At the end of the Lease term, Tenants are entitled to their security deposit. At the time of the sale, Landlords should transfer the deposit and any accrued interest to the new owner.  

Effectively Marketing & Selling a Property With Tenants in Place 

Even with proper Notice and a good Lease, it can be tricky to sell an occupied rental property. The process is stressful for Tenants and presents uncertainty for buyers. Thankfully, there are some ways to make the process go smoothly. 

With that in mind, here are some tips to help you market and sell an occupied rental.

• Make sure Tenants are current on rent. If Tenants are behind, it makes your property less attractive to investors.
• Offer incentives to encourage Tenants to be cooperative during the selling process. Tenants can help by keeping the property clean, leaving during showings, and staying current on rent. To encourage cooperation, consider offering incentives like gift cards to local restaurants, a night at a hotel during an open house, or a rent discount while the house is on the market. 
• Communicate well with Tenants throughout the entire process. Good communication includes coordinating showings around their schedule. Ask your Tenants when it’s convenient to show the property and, whenever possible, schedule showings during these times. 
• Even if you don’t plan to sell a property, your Lease should always include language about a Landlord’s right to sell a property. 
• Tenants are not required to clean or prepare the property for showings. To ensure it’s in good condition, offer to have it professionally cleaned. 

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