Can You Sell an Occupied House with Tenants?
The short answer is yes! Selling a rental property can be a complex process for Los Angeles investors, but it can be even more challenging when there are tenants living in the property. As a landlord, you have the responsibility to ensure that your tenants’ rights are protected while also trying to sell your property in Los Angeles. Remember, while it is your property, it is also someone’s home. Tenants have a right to a peaceful and private use of their home. In this blog, we will discuss how to sell a rental property in Los Angeles that is currently occupied. Learn how to notify your tenants, prepare your property for sale, and close the deal.
How To Sell an Occupied House with Tenants
Selling a house with tenants, in Los Angeles, can be a challenging process; and can be even more challenging selling an apartment with tenants in Los Angeles. It requires careful planning, communication, and cooperation to ensure that the rights of both the landlord and the tenants are protected. What’s the difference between selling a house you live in compared to selling a property occupied with tenants? When you are selling a property that only you live in, you only have to accomodate for your own time, space, and future plans. With a rental property, you have to consider the time of one or more tenants.
1. Notify Your Tenants of Intention to Sell Property
The first step in selling a rental property with tenants is to notify them of your intention to sell the property. This means providing a written notice to your tenants that includes the date you plan to list the property for sale and the date range you plan to show the property to potential buyers. In most states, this notice must be delivered 24 hours in advance.
In California, a landlord must deliver a written notice of intent to sell the property 120 days before showings can begin. Then, landlords can give tenants a 24-hour written or oral notice before a showing. Below is the latest on methods of communication in California.
- Text Messages: Under California law, a text message does not generally suffice as a formal eviction notice. Landlords are required to provide written notice, typically in the form of a formal letter or document, to fulfill legal requirements for eviction or termination of tenancy.
- Email: Under California law, although an advance email or text message from your tenant may be sufficient to put you on notice, it will not be sufficient in an eviction.
The best way to deliver written notice to tenants is the age old way, either by mail or personal delivery.
- Decide if you’ll deliver the Notice or if you’ll have someone else do it.
- Give your tenant the Notice. Hand the Notice to the tenant. Remember to keep a copy or photo of the notice.
- Write down the details of when, where, and how the Notice was delivered.
Ultimately, it’s essential to be transparent and open with your tenants throughout the selling process. You must inform them of any developments as they occur, such as new offers or a closing date. Keeping your tenants informed can help alleviate their concerns and make the home sellingprocess go smoothly.
2. Prepare Your Property for Sale
Once you have notified your tenants, it’s time to start preparing your rental property for sale. This can include cleaning, repairs, and staging your property. You want to ensure that your property is presented in the best possible light to potential buyers. In addition, because it is a rental property, you’ll want to provide the following documents.
Property Repairs or Upgrades
Get the rental property ready for a walk-through by a buyer, broker, inspector, or appraiser
- Repair any non-working electrical, leaky plumbing, or gas
- Declutter public space, requesting tenants to put away belongings
- Look for and repair signs of a leaky roof
- Replace rotted wood or fasica board
- Mow lawns and trim trees
If your tenants are still living in the Los Angeles rental property, it’s vital to respect their privacy and their living space. In the state of California, keep in mind that a landlord may only enter a tenant’s unit without prior notice under the following circumstances:
- There is an emergency that requires the landlord to enter (i.e. fire or flood);
- The landlord obtains a court order;
- The tenant has abandoned or surrendered the unit; or
- The tenant consents. Cal. Civ. Code § 1954.
A landlord may enter a tenant’s unit with prior written notice under the following circumstances:
- To conduct necessary or agreed upon repairs;
- To show the unit to mortgagees;
- To show the unit to workers or contractors;
- To show the unit to prospective tenants or purchasers; or
- For a pre-move out walk-through to evaluate damage at the tenant’s request. Cal. Civ. Code § 1954.
As a best practice, you should work with your tenant to schedule times for cleaning, repairs, and staging that work for their schedules. You should also be mindful of any changes that may impact their living arrangements, such as scheduling showings during their work hours or interrupting their daily routines. If you empathize with your tenants, you’ll realize that they want notice because you or strangers will enter their living space (that they pay rent to live in) and they need to schedule a time that works in order to be present, especially since they have personal belongings in there.
Property Documents
Gather, organize, and be ready to deliver these documents to the broker or prospective buyer.
- Rent Roll
- Income Statement (12 Months)
- Utility Bills (Water, Gas, Electricity)
- Mortgage Statement
- Property Tax Statement
- Insurance Policy
If there are any special circumstances with the property, be prepared to document and explain that to the potential seller.
- Low gross rent collection for some months due to (e.g. successful eviction, make ready period, delinquent tenant)
- Operating expenses are abnormally high in certain months in your property Income Statement
- Insurance policy payouts for the Los Angeles rental property, due to disaster
3. Work with Your Tenants
When selling a rental property in Los Angeles with tenants, it’s crucial to work with them throughout the process. This means being flexible and accommodating when necessary. For example, if your tenants are not comfortable with strangers coming into their homes, you may need to limit the number of showings or schedule them at times when your tenants are not at home.
You should also be prepared to answer any questions or concerns your tenants may have about the selling process. They may be worried about their security deposit, the terms of their lease, or their future housing arrangements. It’s important to address these concerns promptly and honestly to maintain a good relationship with your tenants.
Common Tenant Concerns That Arise, When Notified That The Property Will Be Sold
- Will the new owner take the property off the rental market?
- Will the new owner be difficult to deal with?
- Will the new owner make repairs on time?
- Will the new owner raise my rent?
- Will the new owner evict me?
Different Types of Leases
If you’re a landlord looking to sell your occupied rental property in Los Angeles, you have a few options available to you depending on the type of lease your tenants are holding.
Tenants with Fixed Term-Leases
A fixed-term lease is a lease agreement that has a specific end date, usually six months or a year from the start of the lease. If you’re a landlord with tenants on a fixed-term lease, you have two options when it comes to selling your property.
1. Wait Until the Lease is Up to Sell
One option is to wait until the lease is up to sell the property. This is the simplest and most straightforward option, as it allows you to sell the property without disrupting your tenants’ lives. You’ll also need to make sure that you’re following the terms of your lease agreement, which may have specific provisions regarding the sale of the property.
Can a current landlord break a lease to sell the property California?
However, California tenants protected by a local rent ordinance – such as Los Angeles tenants – are put at ease knowing their landlords cannot terminate their tenancy because the building is being offered for sale
If you’re selling a house with tenants in California, you’ll be guided by a range of important laws, regulations, and requirements. The process of selling a property that comes with a renter is much more complex however, and any misstep on your part can derail your plans for a smooth sale.
Can the the new owner evict tenants after purchasing property in California?
If the new owner chooses to evict existing tenants, the new owner must give tenants at least 90 days’ notice before starting eviction proceedings, unless the tenants are the former owners, in which case a 3-day notice is required. Tenants in some California cities may still have a right to stay in their buildings.
2. List with Tenants in Place
Another option is to list the property with tenants in place. This can be a more challenging option, as it requires you to work with your tenants to ensure that the property is presentable and that showings are scheduled at convenient times. However, it can also be a more attractive option for potential buyers, as it allows them to see the property as it is currently being used.
Is It Adventageous to Sell a Rental Property With Tenants In Place? It is common for rental properties in Los Angeles to be listed for sale with tenants in place. The right rental property buyers know that good tenants who are consistently paying rate are valuable to long-term property investors. In the sales process, furnishing rent rolls and 12-month income statement can prove to long-term investors and their mortgage lenders, that the buyers/borrower’s new rental property can meet the monthly debt obligations.
If you choose to list the property with tenants in place, it’s important to communicate with your tenants throughout the process and to be respectful of their privacy and living space. You’ll need to give your tenants ample notice before you put the property on the market. And most states require landlords to give tenants at least 24 hours notice before showing the property to potential buyers.
One thing to keep in mind is that if you do choose to sell the property with tenants in place, you may need to offer an incentive to your tenants to ensure their cooperation. For example, you could offer a rent reduction or a cash bonus for keeping the property clean and tidy during the selling process.
3. Sell Directly to a Cash Home Buyer
If you’re looking to sell your Los Angeles property quickly and don’t want to deal with the hassle of listing the property or waiting for the lease to end, you could consider selling directly to a cash home buyer in Los Angeles, CA like Fair Sale Homes. Cash home buyers are investors who specialize in buying properties quickly and can offer you a cash payment for your property. This can be an attractive option for landlords who want to sell their property quickly and don’t want to deal with the hassle of listing the property or working with tenants.
However, it’s important to keep in mind that you may not get the same price for your property when selling to a cash home buyer as you would if you listed it on the open market. Cash home buyers may pay less, but buy purchasing as-is, you can save money on commissions, repairs, and holding costs.
In Los Angeles, not all cash home buyers are the same. Some cash home buyers will put in an offer with terms that request the property to be delivered vacant by the close of the sale. Others will take on the property with tenants, even if the tenants have not been paying rent. Regardless of that situation, if you’d like to receive an all cash offer, please provide your information and Fair Sale Homes will reach out shortly with a response.
Tenants with Month to Month Leases
A month-to-month lease is a lease agreement that automatically renews each month. If you’re a landlord with tenants on a month-to-month lease, you have a few options when it comes to selling your property.
1. Renegotiate
One option is to renegotiate the lease agreement with your tenants. For example, you could offer your tenants a new lease agreement with a longer term, such as six months or a year. This would give you more time to sell the property without disrupting your tenants’ lives. It would also give your tenants more security, as they would have a longer-term lease agreement.
2. Terminate
Another option is to terminate the lease agreement with your tenants. This can be a more challenging option, as it requires you to give your tenants notice that you’re terminating the lease agreement. Most states require landlords to give tenants at least 30 days’ notice before terminating a month-to-month lease.
What do You do if Your Tenants Don’t Want to Leave?
As a Los Angeles landlord, you may find yourself in a situation where you want to sell your rental property, but your tenants don’t want to leave. This can be stressful, but there are options available to help homeowners in this situation.
Sell to an Investor
One option available to you is to sell the property to a Los Angeles investor like Fair Sale Homes. Long-term investors who plan to simply buy and hold are interested in purchasing rental properties because the asset is already generating income and has established tenants in place. These buy and hold investors may also be willing to pay a fair price for the property because they see the potential for future income by making value-add property improvements and increasing rents to market levels.
Common Questions From Rental Property Investor Who Plan to Buy and Hold
- How much monthly rent is currently scheduled for collection?
- Do any tenants have balances owed to the current owner?
- Does the owner have a mortgage balance on the property?
- Is the owner open to seller financing to earn income?
- Does the owner have an assumable loan?
One potential downside to selling to an investor who is a developer in Los Angeles is that they may not be interested in keeping your tenants in place. After closing on the sale, they may plan to do an extensive property renovation and either live there or lease it out to a new tenant . If that’s the case, you’ll need to give your tenants notice that their lease will not be renewed and that they will need to find a new place to live.
Common Questions From Rental Property Investors Who Plan to Flip
- Will the property be delivered with one, many, or all rental units vacant?
- How many tenants have already turned down relocation assistance offers?
- What are known deferred maintenance items (ie. roof, plumbing, etc.)?
- If any, what building and code enforcement violations have been cited?
Proper communication will make the sale easier for all parties involved. In the case that the tenants plan to continue to pay rent and not vacate the property, then you as the seller will need to be upfront with the investor and leave the decision up to them. The seller either needs to close on the sale with the tenants in place and expect take on the responsibility of the tenants, or simply, decide to cancel escrow and exit the sale process.
Paying Your Tenant to Leave
If your tenant doesn’t want to purchase the property and you’re unable to find an investor who is interested in keeping your tenants in place, you may need to consider paying your tenant to leave. This can be a difficult decision, but it may be necessary if you want to sell the property quickly and without any legal complications.
In Los Angeles, this is commonly referred to as Relocation Assistance. Every year, the Los Angeles Housing Department office publishes a table detailing the minimum amount a tenant is owed if they agree to vacate the property. Keep in mind these are minimum required amounts and most tenants usually ask for more due to their research and sophisticated knowledge on how much other tenants have been paid to relocate.
If you choose to pay your tenant to leave, you should first consult with a real estate attorney to ensure that the transaction is legal and that all necessary paperwork and disclosures are completed. You should also negotiate a fair price with your tenant and have them sign a release of liability agreement to protect yourself from any legal action in the future. Keep in mind that the legal and professional fees associated with relocated the tenant are your reponsibility as the owner.
What to Do If Your Tenants Are Causing Trouble
It is one thing not to want to leave but quite another to cause trouble for the property owner. As a landlord, you’ll know that one of the most challenging situations you may face is dealing with difficult tenants. These tenants may have been problematic in the past, but can present a whole new set of challenges if you inform them of your intent to sell. If you are trying to sell rental property that is in Los Andgeles, it’s important to clarify for yourself what a troubling tenant is. A tenant who is simply difficult to deal with is different from a tenant who is giving you one of the reasons to have “just cause” to send them an evication notice and start the process of eviction.
- Non-payment of rent
- Violating a term of the rental agreement
- Causing a nuisance
- Damaging the property
- Using the property for an unlawful purpose
- Failing to sign a new lease with similar provisions after written demand from the landlord
- Refusing the landlord lawful access to the property
- When the person in possession of the property at the end of the lease is someone not approved by the landlord
In these situations, you may want to enlist some outside help. You can work with an agent who understands difficult tenants, hire a property manager to help with your tenant, reach out to a real estate lawyer for advice, or enlist the help of Fair Sale Homes to buy the house quickly.
Dealing with difficult tenants when you want to sell your rental property in Los Angeles can be a challenging situation. However, there are options available to you, including hiring a property manager, working with a real estate agent and attorney, selling to an investor, and paying your tenant to leave. Before making any decisions, it’s important to consult with professionals who can help you navigate legal issues and ensure that you’re making a legal and informed decision. By following these tips, you can ensure that the selling process goes as smoothly as possible while also protecting the rights of both the landlord and the tenants.
If You Need Help Selling Your Tenant Occupied Home in Los Angeles – Contact Us Today!
Selling an occupied house with tenants in Los Angeles can be a complicated process, but it’s not impossible. Whether you choose to list immediately or once their lease is up, it’s important to communicate with your tenants throughout the process and to be respectful of their privacy and living space. By following these tips, you can ensure that the selling process goes as smoothly as possible while also protecting the rights of both the landlord and the tenants. If you need help selling your Los Angeles rental, Fair Sale Homes can help! (626) 863-7006