Selling a Rental With Tenants In It: What You Can and Cannot Do

The rule that governs almost everything here is short: the lease runs with the property. Selling the house does not end the tenancy. The buyer inherits your tenant, your lease and your obligations.

Fixed-term lease versus month to month

With a fixed-term lease, the tenant generally has the right to stay until it expires, at the agreed rent, regardless of the sale. With a month-to-month tenancy, either party can end it with statutory notice, commonly 30 or 60 days, and often longer where the tenant has been in place for a year or more or where local rules add protections. Check your state and your city; several cities impose just-cause eviction rules that a state-level summary will miss entirely.

Showings

You own it, but they live there. Nearly every state requires reasonable written notice before entry, commonly 24 hours, and entry at reasonable hours. A tenant who does not want the house sold can make it effectively unshowable while doing nothing unlawful: no lights, no tidying, present at every viewing, honest about the neighbours. This is the single biggest reason tenanted properties sell below their vacant value on the open market.

The three realistic routes

1. Sell to an investor with the tenant in place. Fastest and least disruptive. A paying tenant is an asset to that buyer, not a problem, and there are no showings to negotiate. You will not get an owner-occupier price.
2. Wait for the lease to end, then sell vacant. Highest price, and you carry the property empty in the meantime.
3. Cash for keys. Pay the tenant to leave early, in writing, with the money handed over only once the keys are and the property is empty. One or two months' rent is typical and it is almost always cheaper and faster than an eviction.

Do not try to evict them for the sale

Wanting to sell is not, on its own, cause to evict in most jurisdictions. An eviction attempted for an improper reason costs months, costs legal fees, and in tenant-protective states can expose you to significant damages. Cash for keys exists precisely because it is cheaper than being right slowly.

The details that get missed at closing

• Security deposits transfer. They are the tenant's money and must be credited to the buyer at closing, with the accounting documented. Getting this wrong creates real liability in states with strict deposit statutes.
• Prepaid rent is prorated the same way.
• Give the tenant written notice of the new owner and where to pay rent. Several states require it, and it prevents the month of chaos where nobody pays anyone.
• Hand over the actual lease and any addenda. A buyer inheriting an undocumented tenancy is inheriting a dispute.

If the tenant has stopped paying and the property is two hours away, the arithmetic usually favours selling now over winning an eviction in four months. We buy tenanted property with the tenant in place; that is most of what we do.