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Landlords often make decisions about their rental property without consulting the tenants.
Sometimes, this does not matter, as it could be something minor. However, in other cases, the landlord must consider the tenant's rights before making a decision.
One example of this is when a landlord is selling the property.
When this occurs, the new owner can come in and make a number of changes to the lease agreement or even make a new one.
But, it is important to consider that the tenants have rights as well. In this guide, we will be going over the rights that a tenant has when the landlord is selling the rental property.
To begin, we're going to go over some of the reasons to sell a tenant-occupied property as well as some factors to consider.
Should You Sell A Tenant-Occupied Property?
Especially in seller-friendly markets, landlords may be tempted to sell the property when offered a good price. However, it may not be as good as it sounds.
Before making any transaction, there are tons of laws that need to be considered. Most of these landlord-tenant laws can be found online by simply searching for your state. If you want to find your state laws quickly, make sure to visit DoorLoop's Laws Page and find your state.
There are also many other factors to consider before making this decision. Below, we have listed some of the factors that should be considered before selling the property.
Type Of Property
The first thing to consider before selling is the type of property that you are selling. If the property is comprised of more than one occupied rental unit, it is probable that buyers would not mind having existing tenants.
Also, if the property is located in an area with a high number of renters, it is likely that buyers will not mind the tenants. This is because investors expect properties in the area to be occupied already.
After examining this, it is also important to study the price of the property compared to the current market. If buyers are especially enthusiastic in purchasing your property, you may be missing out on potential profits. This is because you may not be charging enough for rent and these investors will simply make more of a profit with the property.
It is also important to consider that some buyers will actually be interested in living in the property. In these cases, they will most likely turn away from paying a high mortgage bill until the lease expires.
Tenants Occupying The Property
Another factor that should always be considered before selling a property is the tenant. This means considering how the tenant has behaved, how they have treated the property, and the kind of lease or rental agreement that they have.
Firstly, if the tenant has been a troublesome one that does not take care of the property or is late to pay rent, they may hinder your chances of selling the property. On the other hand, a tenant who is responsive, takes care of the property, and pays rent on time may be used as an asset. Buyers will almost always stay with the current tenant if they have displayed good behavior and have paid rent on time.
Buyers may also focus on the kind of lease agreement that exists. If it is a month-to-month lease agreement, it is easy for the buyer to end the lease if they want to. They simply have to give proper notice after the property sale. On the other hand, if the tenant has a fixed-term lease, buyers will have to wait for the lease term to end.
The only way out of this is if the previous landlord included an early termination clause within the lease agreement. Then, the landlord will only have to give proper notice and the lease agreement will take care of everything else, like the security deposit.
State And Local Laws
As mentioned briefly before, one of the most important factors when it comes to selling an occupied property is the law. If you do not follow these laws, you are vulnerable to legal action by the tenants.
To be safe, it is always a good idea to seek the help of a legal advisor. They may help you in making sure that you are in full accordance with the law. This could include things like giving proper notice, paying a relocation fee, or any other legal requirements.
So, now that we know about some of the considerations before selling an occupied property, let's go over some of the tenant's rights that landlords should always keep in mind.
Tenant's Rights When Selling The Property
Before selling a property, there are some tenant rights that the landlord needs to know. By being aware of all the tenant's rights, the landlord can avoid serious legal trouble. Below, we have gone over some of the most important tenant rights when selling a property.
Proper Notice For Showings
One very important right tenants have is that they must be given proper notice before showing the property. Since the property is being shown before the lease ends, the landlord will have to coordinate with the tenant to show the property.
The reason for this is that the tenant is still entitled to private and quiet enjoyment of the property. If the landlord is showing the property, especially at inappropriate times or way too often, they can be violating the tenant's rights. The reasonable notice in most states is about a 24-48 hour window. Anything less than this could be a violation of the tenant's rights and lead to legal consequences.
Relocation Fee
Once a property sells, there is a chance that the tenant will have to relocate. In these instances, it is the right of the tenant to receive relocation assistance. This typically applies in certain states and for certain tenants that qualify as "low-income" tenants.
Landlords will usually want their tenants to leave the property to help attract potential buyers. As mentioned before, especially if the tenant is troublesome, some buyers will prefer a vacant property.
If there are no laws about relocation in your city or state, the landlord and tenant can make their own agreement. This very much depends on the personal relationship between the tenant and the landlord. Also, if it is not written in the laws, the landlord is not obligated to assist.
Occupy The Property After Sale
Since the tenant's agreement is tied to the property, they have the right to stay there after the property is sold. If no arrangements are made for the lease to terminate legally, the new landlord must honor the lease until it expires.
If the new landlord wants the tenant out, they can form a "cash for keys" agreement. This agreement is basically when a landlord offers a tenant money to vacate the property. Want a more in-depth explanation of cash-for-keys? Visit DoorLoop's full guide on cash-for-keys agreements.
Leave The Property As It Is
Usually, when a tenant is vacating a property, it is their responsibility to leave it in good condition. However, if a new owner is coming and they need to vacate the property, they can leave it as it is.
This is because there is nothing to motivate tenants to clean the property. It is actually an inconvenience to the tenant to have to clean the property even when they have to vacate. Sometimes, the property owner will offer money as an incentive to get the tenant to leave the property in good condition.
Security Deposit
Another important right that the tenant has is that they must still receive their security deposit. It is the original landlord's responsibility to instruct the tenant with how to collect the deposit when the time comes.
However, it is important to note that the new landlord can still deduct from it. This can be because of property damage or missing rent or anything else the deposit can be used for.
Original Lease
The tenant also has the right to the original lease agreement. Since this was the lease that they signed, the new owner is legally obligated to follow it. This includes any special exceptions laid out in the original agreement as well.
These exceptions can include any limits on occupancy, grace periods, payment methods, pets on the property, or anything else. This could be a dealbreaker for some buyers, depending on the terms themselves.
Conclusion
There are obviously a large number of rights that tenants are entitled to even after selling a property. It is essential that landlords take note of these rights and make sure that they do not violate any of them. If they do, they can be subject to heavy legal action from the tenant and can possibly lose the entire sale.
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