Selling a Property With A Tenant

You have decided to sell your home despite the fact there are people renting it. Is that legal in California? Yes, it is and it is your right to make that decision.

It’s not all that complicated either – a lot of it is common sense… and there is a good portion of it that is common courtesy as well. If you follow this, there is an excellent chance that everyone will wind up happy.

Here is a complete guide to selling property with tenants living in it.

Be Sure To Look Over Your Lease First

Take a look at the lease that you had the tenants sign. The date should be on the very first page. That will be a big guide to what you need to do next in terms of how much in advance you will need to tell them about the impending sale of the house. If you live in a rent-controlled city, this is also important since you need to give a “just cause” for ending the lease.

If it turns out that your tenants are now living month-to-month rather than on a full year lease, then that decreases the amount of time you have to give them notice – usually it’s 60 days, but it can be less with the month-to-month. This can be cut down to 30 days if you are deep into the sale process – that is, the part with the contract signing and you have opened escrow and your buyer will live in the house for at least 12 months after the lease ends.

On the other hand, if they are on a much longer lease, then you are going to need to find a way to work something out with them on a number of fronts before you are able to sell your house. Otherwise, you’re looking at some very avoidable headaches and some bruised feelings.

What Does The Buyer Do With The Tenants?

Now here is a chance that things could possibly get messy if you do not handle things correctly. While it probably will not derail the sale of your house, it can leave a wake of disgruntled tenants and a buyer who will not be in the best frame of mind when they get the house.

There are several things that you do… like one choice is that you could wait until the tenant’s lease is up and have them move out, with proper notification, thus giving you time to clean up and have an empty house to show prospective buyers. There is the option of telling buyers that there will be tenants living there at the time of the sale – that will give them a chance to get into the mindset of becoming a landlord. You could also let the buyer discuss the sale with the tenants and have them work something out.

It’s Important To Notify The Tenants Properly

Before you do that, you need to let the tenants know that you are selling the house. Preferably you would do it face to face so that they can see that you are taking their feelings into consideration, but you can do it the way that you both are most comfortable. You should send them a letter after that so that you have a paper trail to prove that you followed California law in terms of giving them proper notice of the fact that you are selling your home.

What About Showing The House and Open Houses?

Here is a great chance for you to put yourself into your tenant’s shoes. Whether they have seen the signs of an impending sale or the news took them completely by surprise, they are going to be having their lives uprooted by this. It wouldn’t be nice to raise their ire by not giving them ample time to prepare for any real estate agent visits or any open houses – you need to give them 120 days written notice before any showings.

After you have done the written part, California law says you need to orally notify them 24 hours in advance about any visits. As far as open houses, which legally can run from 8 a.m to 5 p.m., go… it might be nice to give them a gift card for a certain restaurant or some money so they won’t feel like they have to pay out of pocket to stay out of sight during the open house. If they decide they would rather stay home, then the majority of real estate agents work around that by alerting potential buyers that the tenants will be there.

What Can You Do To Make the Experience Easier For The Tenants?

Besides giving them the gift cards as incentive for staying out of the house at certain times, another option is to pay them some money to help them with their moving costs – this is called “cash for keys”. The California housing market is very tight in some areas and your tenants will be more than grateful for any assistance you can give them in this area. Again, try to look at this entire situation from their viewpoint and try to imagine if the roles were reversed.

However, your tenants may be resisting despite your best efforts to do everything correctly. This leaves you the option of evicting them before the sale, but you will have to go to court to do this, which is possibly something that you can’t afford either time-wise or money-wise. If you feel like you are getting close to doing this, then you need to talk to a real estate attorney.

How Can You Protect Yourself

The sale process is a nerve-wracking one even when it’s an empty house. You need to coordinate with your real estate agent so that you have a contract that will protect your interests. You will need to build in time to allow for the notice periods, especially if the buyer will not do the sale if the tenants are not leaving by a specified date.

This is all pretty straight-forward, even with California being a tenant-friendly state, and if you are able to make the inconveniences minimal for both the tenants and the buyer, the sale should hopefully go quite well for everyone involved. Then that will be one less concern as you move forward with the sale.

Once the sale is in the rearview mirror, you can settle into your new place and know that you did a good job. That will be the best feeling of all.

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