Tips On How To Put Up A Tenant Occupied Property For Sale
Earning sweet, sweet rental income but circumstances forcing you to put up tenant occupied property for sale? Been there, done that as a cash home buyer – it's easier to navigate than you think!
In this article, we'll answer that and give some tips on what to do if your tenant has a monthly lease, fixed-term lease, or just wants to stay in.
Is It Possible To Put Up A Tenant Occupied Property For Sale?
Yep! You can put up a tenant occupied property for sale UNTIL the lease agreement expires while respecting your tenant’s rights. However, you will have to handle the sale ethically that’s fair to you and your tenants.
If you’re wondering what happens to a lease when you sell it to a potential buyer, the lease agreement transfers ownership to the buyer, who is now the new owner.
They must then honor the existing lease terms and cannot make changes nor ask the tenants to pack their bags until it ends.
After that, it’s up to the new owner and current tenants to decide on new terms– whether they want to renew the lease or ask the tenants to vacate the home.
Should you decide on the latter, here’s how to properly sell rental properties with tenants still occupying them:
Tenant With A Month-to-Month Lease Period (Monthly Lease)
A month-to-month lease offers you the most flexibility since you have the right to end a tenancy agreement without any cause, provided that you give them reasonable notice as your lease requires.
However, it’s best to keep your tenant in the loop as a sign of good faith, as well as to make the transition process for your potential buyers go more smoothly.
Remember, your tenants are probably comfortable with their current living situation, and they’re more likely to make a fuss about it if you decide not to tell them.
Since we’re in Illinois, landlords must follow certain deadlines before their tenants hand over the keys to them. Let’s say you’re selling a tenant-occupied single family home in Chicago.
According to the local Department of Housing, landlords must give their tenants a specific amount of notice for a periodic tenancy, non-renewal of rental agreements, or rent increases:
- Less than six months: You must present a 30-day written notice required by state law when putting up a tenant occupied property for sale.
- More than six months but less than three years: you will have to present a 60-day written notice.
- More than three years: You’ll have to present them a 4-month written notice.
If you fail to give proper notice on time – the headaches begin here – the tenant can stay 30-120 days longer than the notice states. This depends on how long they've been in the rental property. This is true even if the notice says they should leave earlier.
However, the original lease terms still apply, and the rent stays the same as the last full payment.
Tenant With A Fixed-Term Lease Period (Long-Term Lease)
Compared to a monthly lease, a fixed-term lease takes longer and can be quite challenging. This is because unless your lease includes an “early termination clause”, your tenants have every right to be there until it’s up.
However, If your tenant violates the rental agreement – say, by not paying rent – they will lose their rights and you can file an Eviction Notice for Nonpayment.
They can only dispute the eviction process if they pay all back rent owed, pay any court filing fees incurred by you when pursuing the case, and do not live in the same building as you if you own less than six rental properties.
What If The Tenant Wishes To Stay?
If they’re the opposite, the next best thing you can do is to negotiate with your tenant. Here, you’ll modify the lease and negotiate with them to move out earlier than intended.
Should they accept, property owners can draft a lease amendment or lease addendum for the modified lease termination date. This document is a binding agreement between you and the tenant that modifies the terms and conditions of an existing lease agreement.
After that, they’ll have plenty of time to pack their things while you have the time to prepare the property for prospective buyers, get a real estate agent for the open houses and listings, and coordinate any necessary repairs or improvements.
Final Thoughts
Remember, these are just tips from a seasoned real estate investor like myself and should not be considered legal advice.
There's no substitute for consulting a real estate attorney to properly handle an investment property with tenants living in it.
If you're looking for more tips on putting tenant occupied homes for sale or looking for a cash home buyer to take it off your hands, don't hesitate to contact us today. I'll be happy to assist you.