Selling an Occupied Rental Property

A rental that still has tenants living in it is an investment for the owner and a home for the people who live there, and the lease sits between the two. State law and the lease's own terms decide what happens to a tenancy when the property is sold, and city rules can add protections of their own.

The paperwork matters in a sale: the lease, the rent record, security deposits, and any notices already given, each governed by rules that differ with the state and, in some places, with the city.

The lease file is the place to start: the signed lease and any renewals, the rent ledger, deposit records, and copies of notices sent or received.

What this involves

• Rules on security deposits vary by state, and deposits and rent paid in advance may have to be accounted for between the old and new owner when ownership changes.
• Certain cities and states give tenants advance notice or a first chance to buy when a rental is sold, so a check with a landlord-tenant attorney before anything is signed is worthwhile.
• Whether an inspector, an appraiser, or anyone else may enter an occupied unit, and what notice the tenant must receive first, varies by state, and in some places by lease or local rule.
• Whether the lease runs for a set term or from month to month decides how it can be ended, and the rules for ending either kind vary by state, with city ordinances adding limits of their own.
• Rent-stabilized and just-cause jurisdictions attach their rules to the unit itself, so those rules may stay with the unit through a sale whatever the owner's reason for selling; a landlord-tenant attorney can confirm what applies.
• Some leases contain terms about a sale, such as a right to end the lease, a first-refusal right, or a notice requirement, and those terms matter alongside state law.