Selling rental property isn’t quite the same as selling your primary home. For one, there’s certain tax implications to selling a rental house you may not be aware of. And taxes on selling a rental house can be unavoidable. There’s also the question of maintaining a rental—which isn’t always easy when you’re not onsite 24 hours a day. But there’s an even stickier situation that comes about when it comes to selling a rental house with tenants.

We don’t just mean troublesome tenants. We mean the hardworking ones who are always on time with their rent and have never given you any sort of problem.

Rental properties can be as much of a burden as they are an additional source of income. But can you actually sell your rental property in Utah if your tenants are still living there?

Yes. Legally, you can. But there are a few things you need to consider first.

Your Rights If Your Landlord is Selling Rental Property With No Lease

When a property is sold, tenants often wonder whether they have any legal protections in place. While the absence of a lease agreement might seem like a cause for concern, Utah state law does provide tenants with certain rights that aim to safeguard their interests during such scenarios.

1. Notice Period: In Utah, tenants are entitled to a 15-day written notice from the landlord if they intend to sell the property. This gives tenants a reasonable window to make arrangements and consider their options.
2. Right to Stay: Even when a property changes ownership, tenants generally have the right to continue residing in the property until the lease term expires. In the absence of a lease, the tenants are protected by Utah’s laws that specify the notice period for eviction. This is typically a 30 day notice.
3. Security Deposits: Tenants should be aware that the security deposit they paid to the original landlord must be transferred to the new owner upon the property’s sale. This ensures that tenants’ rights are upheld and that their security deposit is still available for potential refunds or necessary deductions.
4. Lease Agreements and Changes: If you, as a tenant, have a valid lease agreement, the new owner is typically required to honor the terms of that lease until it expires. However, it’s important to note that the new owner might have different plans for the property, and they might not renew the lease once it ends.
5. Communication: Open communication between tenants, landlords, and potential buyers is crucial during this period. As a real estate investor, I understand the importance of addressing tenant concerns and ensuring a smooth transition for all parties involved.

Potential Collaboration with the Landlord

In some cases, your landlord might be working with a real estate investor to sell the property. This collaborative approach can bring benefits to all parties, including the tenants. As an experienced investor, my aim is to make this transition as seamless as possible, ensuring that tenants’ rights are respected and their needs are met.

During this process, I prioritize open communication and transparency. I understand that tenants may have concerns about the change in ownership and potential impacts on their living situation. Rest assured that my goal is to uphold your rights while also exploring opportunities to enhance the property’s value.

Tenant Rights In Utah

Tenant rights in Utah actually do permit owners to sell a rental property without a formal eviction process. Not only does it happen all the time, many tenants are actually quite understanding and cooperative about the situation. It may not be ideal for them; but assuming that you haven’t violated any of your responsibilities as a landlord under Utah law and allow them sufficient time to look elsewhere, you’ll find that most will be fairly reasonable to deal with. What happens to a tenant when a landlord is thinking of selling rental property with tenants in Utah? That is governed by the lease or by Utah law if no lease. In general,

• A 60 day notice must be given in writing informing the tenant of your decision to sell the property.
• A 14 day notice must be given prior to scheduling the first viewing.

Additionally:

• All tenants must be informed of the dates and times of viewings at least 24 hours in advance and in writing.
• A property cannot be listed for sale without the tenant’s agreed consent.
• Viewings cannot be scheduled on a Sunday, a holiday, before 8:00 am or after 8:00 pm.
• Listings cannot include photographs of a tenant’s personal property.
• Tenants are legally allowed to refuse a viewing if they do not agree with the date or time.

What If A Tenant Refuses To Agree?

Typically, the easiest and most stress-free way of selling a rental house with tenants is quite simple. Wait until the lease runs out. And assuming their lease is up within two months, that should solve the vast majority of your problems.

Rarely is a situation so simple. An example is verbal agreements. Under Utah law, a verbal contract is still a legally binding contract. And it’s rare that the need to sell unwanted property takes place within a mutually beneficial time frame.

If your tenant has signed a month-to-month lease or a lease with no date end, an early termination notice can be sent at least 15 days prior under Utah state law. Both types of leases are actually fairly common. But if the lease contains a fixed end date that’s not a convenient option for you, there are a couple things to keep in mind.

Always communicate with your tenant of your intention to sell a rental house. Admittedly as a landlord, you should already be in constant communication with your tenants to begin with. But outside of maintenance requests or suspicious activity you may have noticed, that’s not always realistic or even desirable.

Under Utah state law, you cannot force an eviction without due reason. Due reason can include:

• Disturbing other tenants or neighbors.
• Subletting without approval.
• The sale of drugs or illicit substances.
• Weapons violations.
• Gambling.
• Smoking if prohibited in a lease.
• Frequent noise violations interfering with neighbors.
• Prostitution.
• Default of payment and back payment.
• Criminal behavior.
• Threats of violence against other tenants or neighbors.
• Committing a felony.

Do I have to pay rent if my landlord is selling the house?

Yes, you are generally required to continue paying rent if your landlord is selling the house. This is especially true if you have an active lease agreement, as the terms of the lease remain valid until it expires.

The property’s change in ownership does not automatically release you from your rental obligations, and your rights as a tenant, as well as the property’s management, remain consistent during this period.

What happens when a new landlord takes over?

When a new landlord takes over a property you are renting, your existing lease agreement and rental terms typically remain in effect. This means that your responsibility to pay rent, follow the rules outlined in the lease, and adhere to your tenant obligations remains unchanged.

The transition of ownership doesn’t immediately affect your tenant rights or living arrangements. The new landlord assumes the role of the previous one, inheriting both the property and the lease terms.

Can a landlord break a lease to sell the property

Generally, a landlord cannot terminate a lease solely for the purpose of selling the property, as lease agreements are legally binding contracts that establish tenant rights and obligations. However, certain lease agreements might include early termination clauses or, in cases where both parties agree, a lease can be ended prematurely to facilitate a sale.

Common Solutions To Selling A Rental House With Tenants

Generally speaking, it’s always a good idea to include a sale termination provision in a lease because you never know when you will start thinking of selling a rental property with tenants. Not only is it common, it’s legally binding upon signature. However, this is frequently also subject to common terms, including much broader windows of notice and in many cases, direct payouts. But it’s a convenient option and one that many rental property owners we’ve spoken to have already allowed.

One common solution is what’s known as the “Cash for Keys” solution. This is where you’re essentially paying a tenant to vacate the premises. It’s not as far-fetched as you might think. Many tenants find it difficult to move at short notice because of an inability to pay for their first few months rent deposit immediately. And by helping them relocate, you’re actually helping to expedite the process. More often than not, you’ll find this to be a ‘win-win’ situation for the both of you.

It’s not unheard of for tenants to actually want to buy your home. Particularly if they’ve developed a certain attachment to it. Sometimes this is conducted as a lease-to-own agreement, where rent is structured as a downpayment—which would require renegotiating the terms of a lease. More frequently, it’s conducted through owner financing. Both come with a common disadvantage, however. Namely, that you’re frequently going to have to sell at a much lower asking price unless they actually have the sufficient capital to pay for fair market value.

Another solution is to sell your home with an active lease. This is much more common than you think. Frequently, homebuyers are also looking for rental property to purchase. And so long as they agree to the present terms of the lease, they’re more than happy to have tenants who are already attached—particularly if you can vouch for their reliability. And at Gary Buys Houses, we have a solution that can meet everyone’s needs. It’s called our “Sell Now, Move Later” program.  We’ll purchase your rental house, even with an active lease. Your tenants can stay as long as they need; and once the terms of the lease are up, we’ll be happy to renegotiate. We’ve been successfully purchasing rental homes all throughout Utah for over ten years, and we’ve found it’s a solution that ultimately benefits everyone.