Tips for Sending Notice of Intent to Sell to Your Current Tenants

Whether you want to switch business ventures or your investments aren’t paying off, sometimes it’s worth it to sell your rental property. But what if you are still housing tenants? Luckily, there are ways for landlords to sell a property, even if tenants are living there. So if you’re wondering how to give notice of intent to sell your rental property to current tenants, just keep reading. 

Main Takeaways

• Landlords can sell an occupied rental property, but the sale does not necessarily end an existing lease.
• Before selling, landlords should review the lease and applicable laws to understand tenant notice, property access, security deposit, and other requirements.
• Clear communication about the sale and upcoming showings can help tenants understand what to expect throughout the process.

Can You Sell a Rental That Is Occupied?

Yes, you can sell a rental property that is occupied. However, selling a rental property does not necessarily end an existing lease. Depending on the lease terms and applicable state or local laws, the new owner may take over the landlord’s rights and responsibilities. Landlords should also follow local requirements for handling or transferring the tenant’s security deposit.

That said, as a property management company in Philadelphia, we’ve seen both the benefits and disadvantages of selling an occupied rental property. For instance, some investors are willing to pay more for a rental property with tenants already in place. However, selling an occupied rental can take a while since you’re primarily marketing toward investors.

Additionally, some tenants may become upset when they learn the rental is for sale. However, as hard as it is to tell your tenants, some landlords find it more beneficial to sell a rental property when things aren’t going as planned. If you want to know why some investors choose to sell their rentals, let’s go over some of the most common reasons. 

Common Reasons to Sell a Rental

Landlords decide to sell rental properties for several reasons, like financial decisions or major life changes. Although there are several benefits to having rental properties, sometimes rental owners have to cut their losses and sell while there’s an opportunity. For instance, here are some common reasons landlords sell a property. 

• You Don’t Want to Be a Landlord
• It Needs Expensive and Large-Scale Repairs
• Keeping Reliable Tenants Is Challenging
• Property Value is High or Low
• The Neighborhood Has Changed

You Don’t Want to Be a Landlord

Not everyone is cut out to be a landlord. In fact, many property owners can quickly become overwhelmed with the endless responsibilities and tasks required to manage a rental property. Additionally, some people become “accidental landlords” by inheriting a property without intending to be a long-term landlord. 

Therefore, selling a property is a viable option for those who don’t want to commit the time and effort to manage a rental property. However, if you do want to make your rental business work, Philadelphia property management can help manage your rentals. 

It Needs Expensive and Large-Scale Repairs

If your property expenses outweigh your profits, it can be a troublesome situation for landlords. For instance, if your rental needs new flooring, a new roof, and other major repairs throughout, it can cost thousands of dollars. Unfortunately, your rental income can only cover so much of the repairs. Therefore, sometimes selling the property is financially smarter for your ROI. 

Keeping Reliable Tenants Is Challenging

Rental businesses and landlords thrive on consistent rental income. Finding tenants who consistently pay rent on time and follow the terms of the lease can be challenging. Additionally, when serious lease violations occur, the eviction process can be expensive and time-consuming. As such, landlords who have difficulty keeping good tenants may consider selling instead of risking vacancies.  

Property Value is High or Low

Not every reason for selling a home is bad. For instance, if your property has increased in value, maybe you’ve decided it’s time to cash in. However, your property could also decrease in value. If this is the case, you may want to sell the property and keep the profits or invest elsewhere. If you’re going to explore the current market conditions to determine whether or not to sell your home, check out this free online home value estimator. 

The Neighborhood Has Changed

Location is one of the most important factors in a rental property. The neighborhood and community can set the tone for prospective tenants, rental rates, taxes, and appreciation rates. As such, if the neighborhood was once a great investment location but it’s started to decline rapidly, it could be time to sell and get out. Staying on top of market trends is crucial for investors to keep rental locations successful. 

How Do You Give Notice of Intent to Sell?

If you’ve decided it’s time to sell your property, there are several things you must do–especially if tenants currently live there. 

Selling a vacant property is relatively easy and straightforward. However, when tenants live there with a lease in place, the process gets tricky. That said, it’s crucial to brush up on tenant-landlord laws and requirements in your state before starting the selling process. 

First, review the lease and applicable landlord-tenant laws before listing an occupied rental property for sale. A lease may contain provisions addressing a property sale or early termination, but landlords cannot assume that selling the property automatically gives them the right to terminate an existing lease. 

That said, if your lease doesn’t include a termination clause, here’s what you need to do to sell your rental property with current tenants.

4 Essentials for Giving Tenants Notice of Intent to Sell

Before you give notice of intent to sell, keep in mind that your tenants may react differently than you expect. For instance, your tenants may be worried that they have to move, uncomfortable with property showings, or worried about finding a new landlord or property manager. As such, landlords must approach the situation calmly and respectfully by following these steps: 

1. Be Honest and Transparent- Talk with your tenant as soon as possible to let them know what’s going on with the property. It’s important to keep communication open and honest during this time. 
2. Explain the Lease and Security Deposit- Your tenant may be worried about what happens to their lease and security deposit after the sale, so explain how both will be handled based on the lease and applicable state or local laws.
3. Review the Lease Terms and Laws- Review the lease and applicable laws to determine how much notice must be given before entering the property for a showing. Additionally, try to work with tenants to find dates and times that work best for your schedules. 
4. Offer Incentives- If your tenant is willing to cooperate with the property sale, consider offering an incentive, like a gift card or free property cleaning. Or, if your tenant’s lease is about to expire before the sale, offer to help them find a new place to live.  

What Information to Include in Your Notice

If you’re providing tenants with written notice of the sale, there are several details that can be helpful to include. Your letter to notify a tenant should contain concise, easy-to-understand terms that give them the selling details. Here are some topics you don’t want to forget to include: 

• Provide identifying information, like your name, the date, tenant(s) names, and the property address. 
• Explain that the property is being sold and provide any information the tenant needs to know about how the sale may affect their tenancy.
• Let your tenant know how much notice will be given before a property showing, according to state landlord-tenant laws. 
• Tell tenants that prospective buyers will be accompanied by a real estate agent or licensed real estate professional. 
• Thank tenants in advance for their cooperation with reasonable property showings and provide clear information about what they can expect during the process.
• Include any incentives you’re offering in your letter as well.

Tenant Rights When a Rental Is Being Sold

If you’re selling a rental property with tenants currently living there, landlords and tenants need to know their rights. In fact, ignoring tenant rights can lead to delays in property sales and potential fines for violating landlord-tenant laws. So to avoid financial mishaps, here’s what landlords and tenants need to know. 

• Know the Law
• Stay If You Want and If You Can
• Notice of Entry for Showings

Know the Law

If you’re feeling weary about your landlord selling the property, make sure to review your lease agreement and local laws regarding renter-occupied property sales. While landlords are responsible for providing any notices required by the lease or applicable law, renters can also learn more about the process and their rights through research.

Stay If You Want and If You Can

Just because a rental property is being sold doesn’t necessarily mean tenants have to move out. What happens to the tenancy depends on the lease terms and applicable state and local laws.