Selling a Home With Tenants

What a sale does — and does not — change

A sale transfers ownership; it does not by itself end a lease or a month-to-month tenancy. The buyer steps into your position as landlord under the same rental agreement, and the tenants’ deposit and terms carry over. The Department of Real Estate’s California Tenants guide (a guide to residential tenants’ and landlords’ rights and responsibilities) covers this and much else; it is the reference to read alongside this page.

Showing an occupied home: the notice rules

California Civil Code section 1954 governs a landlord’s entry. You may enter to exhibit the unit to prospective purchasers, but only with reasonable written notice — twenty-four hours is presumed reasonable — and during normal business hours unless the tenant agrees otherwise. There is a specific provision for sales: once you have told the tenant in writing, within the past 120 days, that the property is for sale and that you may contact them orally to arrange showings, notice for those showings may be given orally, and at each entry you must leave written evidence of the entry inside the unit. Work with the tenants’ schedule, keep showings to a minimum, and put every notice in writing where you can. Cooperative tenants are worth more than any staging.

Ending a tenancy is not part of the sale

Whether and how a tenancy can be ended — including notice periods, just-cause requirements under California’s Tenant Protection Act and any local rent or eviction ordinance, and relocation assistance — depends on the tenancy, the property and the city. This guide does not advise on it. If your plan requires the tenants to leave, speak with a California attorney who handles landlord–tenant matters before you list, and never rely on a buyer or an agent for that answer.

The three ways occupied homes are usually sold

1. With the tenants in place

The buyer purchases a rental with income from day one. This suits investor buyers and, frequently, direct buyers; it narrows the pool of owner-occupant buyers, who usually cannot move in. Showings are fewer, the tenants stay, and the lease transfers.

2. After the lease ends

If a fixed-term lease is ending soon and the tenants intend to leave, waiting can open the home to owner-occupant buyers and allow preparation. It costs time and, often, a vacant period with no rent.

3. After a negotiated move-out

Some owners and tenants reach a written agreement for the tenants to leave by a date in exchange for consideration. Whether this is possible or advisable, and what it must contain, is legal advice — have an attorney draft or review it.

Disclosure and the rental agreement

The buyer will want the rental agreement, the deposit records, the rent history and any notices exchanged. California’s residential disclosure requirements still apply, and you must tell the buyer what you know about the property’s condition even if you have not lived there for years.

How the routes compare for an occupied home

A prepared listing to owner-occupants generally needs the home vacant; an as-is listing or a listing aimed at investors can proceed with tenants in place; a direct offer usually can too, and avoids months of showings in someone else’s home. The comparison applies as it does to any property, with one extra line: how much disruption you are asking of the people who live there.

When you want this applied to your own home, ask about selling or call Alika at (909) 373-7214. A conversation is not a listing agreement and commits you to nothing.

Real-estate guidance only. Nothing here is legal, tax, lending or insurance advice; those questions belong with a California attorney, a tax professional, your lender or your insurer, and this guide says so where they arise.