When a landlord wants to sell a house before their tenant’s lease is up, a deal can come together like clockwork… or feel like a bad break up for everyone involved.
“If it’s a strained relationship, the tenant is not going to be overly motivated to assist the owner,” explains Jennifer Wemert, a top Orlando area real estate agent who specializes in investment properties and has 3,000 transactions under her belt. “But if it’s been a cordial relationship, it can be great and a tenant can be very useful.”
Owners can’t let their landlord responsibilities slide in the whirlwind process of selling the property, either. Tenant rights when a house is for sale vary state by state, but a violation could cause delays for the seller or worse, trigger legal recourse from the wronged tenant.
For a best case scenario, all parties should at the very least be on the same page about the rules. Depending on the existing rapport and communication dynamics, this may be easier said than done. Through chats with real estate investors, agents, and a thorough look at state laws, we’ve compiled 15 rights that tenants may hold when a house hits the market and how property owners can respect them.*
1. Right to 24-48 hours notice before showings
Homeowners have a hard enough time getting a house they live in ready for showings, so just imagine the extra wrinkle of communication that’s necessary to prepare a tenant for incoming visitors.
Beyond being polite and giving them a chance to tidy up the space, a heads up to enter the property is legally required.
While laws vary state by state, nearly half of all states require 24-48 hours notice for a landlord to enter a property, which includes showings. If not a 24-48 hour window, the law stipulates “reasonable notice,” which should be established between tenant and landlord before scheduling showings.
The notice also applies in the case of appointments for the home inspection, home appraisal, scheduled repair work, or any other visits to the property while it’s on the market.
In addition to the advance notice, owners need mindful of the appointment timing.
“The landlord must also show the property during ‘reasonable hours,’” explains Benjamin Ross, a real estate investor and landlord with nearly two decades of experience. “Showing your home at 10 p.m. is not reasonable, and the landlord could be violating tenant rights.”
There may be some flexibility around what’s deemed “reasonable;” landlords should communicate with tenants to determine which times of day and which days of the week work best for both parties.
2. Right to receive notice to vacate the property
If a tenant has a month-to-month lease with the landlord, an owner will often need to provide between 30-60 days notice to vacate the property, depending on which state they live in. “For example, California is a tenant-friendly state,” Ross explains. “Even under a month to month contract, the landlord must give the tenant 60 days notice.”
With the exception of California, nearly every other state only requires a 30 day notice to vacate.
3. Right to negotiate a relocation fee
“The landlord may also be required to pay a ‘relocation’ fee to the tenant under certain circumstances,” Ross says. Cities with relocation ordinances often apply to low-income tenants. For example, in Seattle, tenants can apply for relocation assistance if they qualify as low-income tenants.
In the event that a tenant qualifies, the landlord must pay some or all of the assistance. The one-time fee in Seattle can be up to $3,000, and the city may pay up to half of the cost. Other cities have different policies with higher assistance amounts based on the size of the property. In Portland, Oregon, a tenant could receive up to $4,500 to relocate from a 3-bedroom unit, and the landlord is required to pay all of it.
4. Right to a lease termination payout
Often called “cash for keys,” landlords can offer tenants a payout on the lease if they want them to vacate sooner than their lease stipulates. If the lease doesn’t include an early termination clause, offering money to move out early might be the easiest way to get a tenant to leave the property sooner than they anticipated.
5. Right to occupy the property after it changes hands
“Tenant rights are superior to property rights,” Ross says. The tenant’s agreement is tied to the property, not the owner. That means if the property sells while occupied, the tenant has the right to live there until the lease expires. The buyer has to honor the length of the original lease created between the seller and tenant.
6. Right to leave the property in whatever state they please
For most tenants, there’s not much incentive to tidy their property before a buyer comes through. If anything, it’s an inconvenience, and many tenants aren’t motivated, which leads to a longer time on the market and more work for the owner.
To sweeten the deal, landlords can offer tenants an incentive for their assistance. “You could also attach them to the success of the sale,” says Wemert. “So, if I sell for more than $X, I’m willing to give you a bonus to the tenant for cooperating.”
7. Right to the original lease terms
Unless the tenant agrees to renegotiate, they have the right to live on the property with the original terms they signed to. That means if the original lease allowed certain exceptions, the new landlord will have to permit them as well as long as the lease is still in place.
This could include terms such as pets on the property, limits on occupancy, and acceptable payment methods. Depending on the terms of the lease and the tenant’s relationship to the property, this could be a turnoff for some buyers.
In some states, buyers can force the existing tenants to move out if the buyer, or a direct family member, plans to occupy the property as a primary residence using an owner move-in (OMI) eviction notice.
8. Right to the security deposit
The tenant has a right to their security deposit when they move out, even if the property has changed hands. This means the seller must notify the tenant of the property’s new owner, as well as how they can collect the deposit when the time comes.
9. Right to a well-maintained property
Selling a property can be a full-time job, but owners can’t lapse on their landlord duties. Tenants have the right to inhabit a livable property, meaning the utilities need to be working, the property needs to be in good condition, and repairs must be addressed even when the sale takes place. If a landlord fails to maintain the property, a tenant can file an action in housing court.
10. Right to 30-day window to vacate after the property sells
If the original lease includes a “lease termination due to sale clause,” the landlord has the right to end the lease early if the property sells. However, the tenant typically has 30 days to vacate the property in the event of a sale.
11. Right to occupy the property during showings
Tenants are neither legally obligated to leave the property during showings, nor required to keep the space clean to the seller’s standards before a showing. This can lead to tension between seller and tenant, explains Ross.
“Tenants become very emotional, as, for them, this is their home, someone is trying to take away, and they feel justified by doing whatever is necessary to prevent the sale of their home,” he says.
To keep tensions from escalating, landlords can make the process as easy as possible for tenants: offer free cleaning services before showings, find the tenant a new home, or give a gift card to a neighborhood coffee shop for the tenant to visit during showings.
12. Right to file suit in small claims court
With the stress of a sale, things can fall apart between landlord and tenant. “Many times, tenants will discourage potential buyers from buying,” says Ross. In retaliation, a landlord might be tempted to retaliate in some way, whether it be an unforeseen rent hike or decreasing services around the property, such as laundry or security.
If a tenant feels they’ve experienced retaliation from a landlord, they have the right to file a suit in small claims court. A tenant can sue for the return of their deposit, and up to $12,000 in some states.
13. Right to break the lease based on neglect
The landlord may count on a tenant to pay rent while the property is on the market, but if the landlord neglects their duties, the tenant has the right to break the lease. It may be within a tenant’s right to break the lease and move out without repercussions if they feel their rights have been neglected during the sale.
14. Right to occupy after a foreclosure
If the property is a foreclosure, the tenant doesn’t have to leave immediately in the event of a sale. It varies by state, but if tenants have a long-term lease, they can stay until it ends. Alternatively, if the lease is month to month, they must be sent an eviction notice, and on average have 90 days notice before they have to leave.
15. Right of first refusal (to buy the property)
Depending on local laws, “the tenant may have the first opportunity to buy the house,” explains Ernie Rafailides, a Maryland licensed attorney with over 30 years of experience.
For example, in Washington, D.C., the Tenant Opportunity to Purchase Act (TOPA) stipulates that landlords must send tenants a letter of intent to sell and also include listing information on the property. The tenant has between 7-30 days to decide if they’ll buy the property, and even after the property hits the market, the tenant has the right to match buyers’ offers. The “right of first refusal” process and timeline follows standard guidelines laid out by local laws.
Right of first refusal laws vary city by city and aren’t super common, but if violating this rule does apply to you it can lead to legal recourse from the tenant. Work with your real estate agent to determine if you need to offer first right of refusal.
Tenants’ rights when a house goes up for sale
Violating a tenant’s rights in a property sale can lead to legal consequences as well as an emotional headache for both seller and tenant. Selling a tenant-occupied property, as such, calls for a certain amount of sensitivity. For you, this might just be an investment property, but for someone else, this place is home.
As you navigate this delicate situation, it will be beneficial to partner with a neutral real estate agent experienced in selling tenant-occupied properties who can bring years of experience to the table and help ease communications for everyone involved.
*Laws regarding tenant rights vary by locale. Information in this blog post is meant to be used as a helpful guide, not legal advice. If you need legal help with your particular lease or situation, please consult a skilled lawyer in your area.
Header Image Source: (Dmitrij Paskevic/ Unsplash)