This is a topic that comes up quite often in conversations with our clients in San Diego. The main questions is if it is advisable to sell their home or condo when there is a tenant occupying the unit. There is typically confusion as what the law allows for when it comes to selling a tenant occupied property, conducting showings while respecting the tenants rights and what are the best practices for selling a property while a tenant is living in it.
In general terms it is legal for the owner to have the property for sale while there is a tenant living in their property unless there is a specific provision on the lease agreement that prohibits the sale. If a standard California rental agreement was utilized then the property owner should be ok to list the property for sale. However, the tenant has the right for privacy and enjoyment of the property and is not to be harassed or disturbed therefore it is very important to work with an agent that fully understands the scope of the law and what is and what is not allowed. In general terms if the tenant is treated with courtesy and respect the sale should go on smoothly and with no issues.
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When a property is sold with a tenant living in it then the lease agreement has to be honored by the new owner of the property. Unless you reach an agreement with the tenant to move out early by offering a financial incentive (like paying for their moving expenses or offering a few months of free rent) then the lease has to be fulfilled by the new buyer.
How about showing the property while the tenant is living in it?
In most states a landlord is allowed to put a property up for sale at any time but the tenant can request that all showings are given the same amount of notice to entrance as non-emergency entrance by landlord. In California the law states that a landlord can enter a rental to show the unit to prospective tenants, purchasers and or lenders.
The landlord or the landlord’s agent must give the tenant reasonable advance notice in writing before entering the unit, and can enter only during normal business hours which is generally 8 am to 5pm during weekdays. The notice must state the date, approximate time and purpose of entry.
The law considers 24 hours advance written notice to be reasonable in most situations.
If the notice is mailed to the tenant, mailing at lease six days before the intended entry is presumed to be reasonable, in most situations. The tenant can consent to a shorter notice and to entry at times other than during normal business hours.
Special rules apply if the purpose of entry is to show the tenant occupied property to a potential purchaser. In that case the landlord or landlord’s agent may give notice orally, either in person or by telephone. The law considers 24 hours advance notice to be reasonable in most situations. However, before notice can be given the landlord or the landlords agent must first have notified the tenants in writing that the property is up for sale and that the landlord or the landlord’s agent may contact the tenant orally to arrange to show it. This written notice must be given to the tenant within 120 days of the oral notice. The oral notice must state the date, approximate time and purpose of entry. The landlord of landlord’s agent can only enter during normal business hours unless the tenant consents to entry at a different time.
The landlord cannot abuse the right of access allowed by these rules, or use this right of access to harass or repeatedly disturb the tenant. Also the law prohibits a landlord from intentionally violating these access rules to attempt to influence the tenant to move from the rental.
In conclusion, if you are planning on selling your property it is advisable that you notify your tenant as soon as possible and in writing. Let them know of your intentions to sell the property and see if they might be open to moving out early if they have quite some time remaining in the lease. Very few buyers would be open to buying a property with a tenant living in it, unless an investor buyers comes thru, then having a tenant with a long term lease will negatively affect your opportunity to sell the property at the highest possible price.