What Landlords Need To Know About Selling A Tenant Occupied-Property
The Month-To-Month Tenant
Let’s start with a best-case scenario: the month-to-month lease. Depending on the city and state you live in, this is typically the most flexible rental situation because the renter only needs about 30 to 60 days’ notice before they need to move out. It is important that you provide adequate notice to your tenant and abide by the terms of the rental agreement detailing the day their lease will end. Although you as the landlord do have the ability to end a month-to-month lease without explanation and are not required to tell your tenant that your home is on the market, I strongly advise keeping them in the loop on your plans to sell. Keeping the tenant informed will most likely make them more inclined to assist you in the selling process and will be far easier on them than being forced out of their living space with little or no notice at the last minute.
Here is how I recommend proceeding:
1. First, send a letter to your tenant advising them on the exact date their lease will end.
2. Inform the tenant that they must be completely moved out and return the keys on or before the date specified in the letter.
3. Make the tenant aware that if they do not move out, the eviction process will, unfortunately, be the next step.
The Fixed-Term Lease
A fixed-term lease can make the selling process a little bit lengthier than you might like. Assuming your tenant pays rent on time and doesn’t violate any terms of the lease agreement, he or she has the right to live on the property until the lease expires — unless there is an early termination clause. Unless you are in extenuating circumstances, I advise waiting until your tenant’s lease has expired before selling your property.
The Difficult Tenant
If you find yourself in the unfortunate situation of having a challenging tenant, I recommend waiting until the lease has ended to put your home on the market, as he or she could make the sales process very difficult. An uncooperative tenant might leave the home messy when prospective buyers come by to see it, or they might refuse to leave the home during open houses, making the situation uncomfortable for everyone involved. However, if they go beyond merely being difficult and go as far as violating any lease terms, you may have the ability to terminate the lease before it ends. The lease can be terminated if your tenant commits any of the following:
• Fails to pay rent altogether (or continuously pays rent significantly late).
• Engages in illegal activities on your property.
• Causes major damage to your property.
• Includes false information on their application.
• Becomes a nuisance to neighbors.
• Violates a non-pet clause, if applicable.
Rent Concession
Whether you have an easy-going or challenging tenant, I advise offering a discount on rent (such as offering a full or half month free). In return, work out a deal with the tenant so that they agree to keep the house clean for open houses, take any pets out of the house when prospective buyers visit and accommodate last-minute showing requests (within reason).
What if my tenant doesn’t want to leave?
There are a few options available to you and your tenant if they feel attached to the property:
1. Sell your home to your tenant: Your tenant could turn out to be the ideal buyer. They know the home well and are already completely moved in. If your tenant is unable to obtain a mortgage, seller financing could be a feasible option. If you decide to go that route, you would act as both the seller and the lender, thereby letting your tenant make payments to you. Although this might not be the most ideal situation, it will spare you from having to go through the lengthy process of finding a buyer and waiting for your tenant’s lease to end.
2. Pay your tenant to leave: If you are under a time constraint and need to sell your property as quickly as possible, it might be necessary to pay your tenant to vacate. This can include paying for the cost of movers, paying their security deposit for their new apartment or paying for a month’s rent in their new space.
3. Sell to an investor: Finding an investor can be challenging, but if you do find someone who is willing to purchase the property while your tenant’s lease is still active, the investor must allow the tenant to remain in the home until their lease expires. In nearly every state, the security deposit and fixed-term lease are transferred with the property when it is sold, making the investor the new landlord.
If you’re selling a tenant-occupied property, you’ll want to be sure you take everything into consideration as your tenants can make selling either super easy or a nightmare for you. Sometimes offering perks — whether it’s financial concessions or even baked goods — can go a long way in them working to help you get your home sold.
Source: forbes.com
Accessibility