Landlords must notify their tenants if they plan to sell their rental property.
This notice, often called a "Notice of Intent to Sell Rental Property," lets the tenant know of the impending sale and their rights under state and local landlord-tenant laws. In most cases, the tenant can continue renting from the new owner under the same terms and conditions unless otherwise stated in the lease agreement.
This blog post will provide an example of a Notice of Intent to Sell Rental Property and suggest resources for finding more information on this topic.
Key takeaways
- A Notice of Intent to Sell Rental Property is a formal document sent by a landlord to the tenant when a rental property is being sold.
- The lease agreement transfers from the seller to the new owner if the property is tenant-occupied.
- The renter is obligated to stay in the property until the lease ends unless the lease agreement states otherwise.
Can a landlord sell a home rented to a tenant?
Many landlords wonder if they can sell a property that is currently rented. Of course, the answer is yes, but there are a few best practices to follow to minimize disruptions for your tenants and maximize your chances of successfully selling the property.
First, it's essential to give your tenants as much notice as possible before listing the property for sale. Local and state landlord-tenant laws may require notifying the tenant, and if the lease states the tenant must leave when the property is sold, they will need time to make alternative living arrangements.
Next, be sure to work with a real estate agent who has experience selling rental properties, or use an online listing platform like Roofstock. There are unique challenges that come with selling an occupied property compared to a primary residence, and the marketing strategy will be different. For example, unlike listing only to local buyers, Roofstock gives you access to buyers worldwide looking for investment properties, and the fee is just 3% of the sales price or $2,500, whichever is greater.
Finally, remember that you are still responsible for maintaining the property and upholding your lease agreement until the sale is finalized. Although it may be tempting to skimp on repairs or neglect your tenants' needs to speed up the sale, doing so could jeopardize the deal, damage your reputation, and result in a lower selling price.
Following these simple guidelines can help you successfully sell a rented property with minimal headaches.
Pros and cons of selling an occupied rental property
There are several advantages to selling an occupied rental property, especially if the home is sold to another real estate investor.
On the plus side, selling an occupied rental property may result in a fast sale. There is generally strong demand for single-family rental (SFR) homes and smaller multifamily buildings in most real estate markets across the country. In addition, a real estate investor may also be able to sell a tenant-occupied property at an excellent price because other investors may place a premium on a rental home that is already occupied.
However, there are also several potential disadvantages to consider when selling an occupied rental property. For example, you may have to make repairs to the property to get it ready for sale. Also, if the home is being sold at a profit, a seller may be liable for taxes on depreciation recapture and capital gains tax. The good news is that these can be deferred by using a 1031 tax-deferred exchange to sell one investment property and purchase another.
Overall, there are advantages and disadvantages to selling an occupied rental property. You will need to weigh these factors carefully and speak with a certified public accountant (CPA) or financial advisor before deciding.
Can a tenant leave before the end of the lease?
Unless the lease states otherwise, a tenant is contractually obligated to stay for the remainder of the lease term.
The contractual obligations of a lease are binding and transferred from the seller to the buyer, and failure to adhere to those obligations can result in legal action. A landlord or real estate investor may choose to sell a property during the term of a lease, but the tenant is not obligated to vacate the premises early.
Before listing a tenant-occupied rental property for sale or purchasing a rental property with a tenant in place, investors should take care to review the terms of the lease before entering into a purchase and sale agreement.
Tenants' rights when a rental property is sold
When a property is sold, the new owner becomes the landlord. The tenant's rights to stay in the property and the lease terms remain the same unless the new landlord and tenant mutually agree to change them.
If the tenant has a fixed-term lease, they have the right to stay in the property until the end of their lease. The new landlord cannot raise the rent or change other lease terms during this time. The new landlord must honor the existing lease if the property is sold again.
If the tenant has a month-to-month tenancy, the new landlord can give proper notice to raise the rent or change other tenancy terms. The new landlord can also give proper notice to evict the tenant with cause or no cause, provided that the landlord-tenant laws allow it.
Local and state landlord-tenant laws may provide additional protections for tenants when a property is sold. For example, some states require that tenants be given advance notice of a sale, and others prohibit landlords from evicting tenants without cause after a sale.
Real estate investors should understand a tenant's rights under state law and their lease agreement to understand their obligations as a new landlord and ensure that the tenant is appropriately treated when a rental property changes hands.
How to write a notice of intent to sell rental property
A notice of intent to sell rental property is a formal document informing your tenants that you plan to sell the property.
As a standard business practice, this notice should be formatted as a formal letter, delivered to your tenants at least 90 days before the sale is scheduled to take place, and it should be sent to the tenant via certified mail with a return receipt requested.
The notice should include the date of the sale, the name and contact information of the landlord or property manager, and a statement that the tenants have the right to remain in the property until their lease expires.
Including all of these elements in the notice can help a landlord avoid any potential misunderstandings or legal complications down the road.
Where to find a Notice of Intent to Sell Rental Property template
When it comes to selling rental property, it's important to give your tenants plenty of notice. The best way to do this is with a Notice of Intent to Sell Rental Property. But where can you find a template for this notice?
There are a few different options. First, you can start by searching online. There are plenty of websites, such as LawDepot and Rocket Lawyer, which offer templates for various legal documents, including real estate notices.
Another option is to contact a local real estate attorney or property management company. These professionals should be able to provide you with a template or at least point you in the right direction.
Finally, you can always create your own template. This option gives you the most flexibility in terms of content and format. However, it's essential to ensure that your template is compliant with state and local laws. Otherwise, it could create problems down the line.
Helpful hints when selling a rental property
When selling a rental property, there are a few important things to consider.
First, it is crucial to understand that selling a rental property is different from selling a primary residence. When selling a rental property, it's essential to realize that you're not just selling a piece of real estate—you're also selling an investment. For starters, you'll need to find another real estate investor who is not only interested in the property but who is also financially qualified to purchase it. In addition, you'll need to provide potential buyers with information about the property's rental income and expenses.
There are also a few key considerations that a seller must think about, such as the potential capital gains tax implications and the need to make repairs to get the home ready to list. Additionally, it is important to consider the fact that a tenant will likely occupy the property at the time of sale.
There are a few different options for selling a rental property occupied by a tenant, such as working with a real estate agent who specializes in investment properties or listing the property for sale on an online marketplace like Roofstock.
Regardless of which option you choose, it is important to be clear and up-front with your tenants about your plans to sell the property so that they can be prepared for any potential disruptions during the sale process.
Finally, there are several potential advantages to selling a rental property, such as the potential to generate a significant financial return on investment and the ability to diversify your portfolio. Investors sometimes find they can sell the property for a higher price than if they were selling their primary residence or a rental property to an owner-occupant.
When done correctly, selling a rental property can be a great way to generate cash to reinvest in other properties or pay down debt.
Closing thoughts
So, should you sell an occupied rental property? It depends.
You need to weigh the pros and cons of selling an occupied rental property before making a decision. Factors such as how long the property has been rented, the current market conditions, and your own goals will all play a role in your final decision.
If you do decide to sell an occupied rental property, be sure to follow the proper steps by writing a Notice of Intent to Sell Rental Property and follow state and local laws carefully.
