A Complete Guide to Selling a House With Tenants

Selling a house with tenants can be a complex process, especially if you’re navigating the legal and practical aspects for the first time. Whether your property is underperforming, outside your ideal market, or no longer aligns with your investment goals, understanding the ins and outs of selling a tenanted property is crucial. This guide will walk you through the steps, legalities, and best practices to ensure a smooth transaction for you, your tenants, and potential buyers.

Is It Legal to Sell a House With Tenants?

Yes, selling a house with tenants is legal, and it’s a common scenario, particularly in real estate markets where rental properties are a significant part of the market. In Ontario, and specifically in cities like Windsor, the existing lease agreement will transfer to the new owner. This means that the tenants have the right to remain in the property under the terms of the lease, even after the sale is complete.

While you are not legally required to inform your tenants about your decision to sell, it’s generally a good idea. Notifying your tenants early can help avoid misunderstandings and foster a cooperative relationship, making the selling process smoother.

Step-by-Step Process for Selling a House With Tenants

1. Communicate With Your Tenants

The first step in selling a house with tenants is to communicate your intentions clearly. While it might be tempting to avoid an uncomfortable conversation, being upfront can actually make things easier. Tenants who feel informed and respected are more likely to cooperate with showings and inspections, which can significantly affect how quickly and smoothly the sale proceeds.

Start by sending a formal notice of your intent to sell. This not only opens the lines of communication but also gives your tenants time to prepare for the changes ahead. Be ready to answer any questions they may have and address their concerns, especially about how the sale might affect their living situation.

2. Market the Property

Once you’ve informed your tenants, it’s time to put the property on the market. When listing a house with tenants, transparency is key. Clearly state in the listing that the property is tenanted, and include details such as the lease’s expiration date and the rental income potential. This information can be attractive to investors looking for rental properties with an existing revenue stream.

Coordinate with your tenants to update the property’s photos for the listing. Since the tenants are living in the house, scheduling showings requires careful planning. In Ontario, you are legally required to provide at least 24 hours’ notice before any showings. Discuss a potential schedule with your tenants early on to ensure they are comfortable with the arrangements.

Alternatively if you need to sell your tenanted home quickly connecting with a cash buyer who may be your best option. Tenanted homes can be a challenge to sell traditionally as the tenants may not keep the house tidy or looking its best. Getting a cash offer could be the easiest way for you to sell your property!

3. Close the Deal

When you reach the point of finalizing the sale, the existing lease agreement will be transferred to the new owner. This means that all the terms of the lease will remain in effect until the lease expires, unless both the tenant and the new owner agree to end the lease early.

In some cases, the new owner may plan to continue renting the property. In others, they might intend to occupy the property themselves once the lease ends. Regardless of the new owner’s plans, it’s crucial to ensure that the lease transfer is handled correctly as part of the sale process.

Do Tenants Have to Move Out?

One of the most common questions landlords have when selling a house with tenants is whether the tenants must move out. The answer depends on several factors:

Voluntary Move-Out

If you prefer to sell the property without tenants, you may be able to negotiate a voluntary move-out with your tenants. This often involves offering a financial incentive, commonly referred to as “cash for keys,” where you offer a sum of money in exchange for the tenants agreeing to leave the property before the lease expires. This arrangement must be mutually agreed upon and cannot be presented as a forced eviction.

Month-to-Month Leases

If your tenants are on a month-to-month lease, the situation is slightly different. If the new owner or a close family member plans to move into the property, the tenants can be given 60 days’ notice to vacate, starting from the first of the month. However, this notice can only be given if the new owner genuinely intends to occupy the property. If the new owner gives notice and then rents the property to someone else, the former tenant may file a complaint for bad-faith eviction with the Landlord and Tenant Board.

Long-Term Leases

If the tenants are under a long-term lease, they cannot be required to move out before the lease expires. The new owner must honour the existing lease until its natural conclusion. This is an important consideration for both sellers and buyers, as it affects the timing and strategy of the sale.

Best Practices for Selling a House With Tenants

Maintain Open Communication

Open and honest communication is crucial when selling a house with tenants. Keep your tenants informed about the sale process, and make sure they understand their rights and what to expect. This can help reduce anxiety and prevent misunderstandings that could complicate the sale.

Respect Tenants’ Rights

Respect your tenants’ rights throughout the process. This includes providing proper notice for showings and ensuring their privacy is respected. Remember, tenants are not required to leave during showings, but they are responsible for maintaining the property’s condition.

Consider the Timing

If you’re finding it difficult to sell the property with tenants in place, you might consider waiting until the lease expires before putting the property on the market. Selling a vacant property can sometimes attract a wider range of buyers, particularly those looking for a primary residence.

Work With an Experienced Real Estate Agent

Selling a house with tenants involves unique challenges, so it’s beneficial to work with a real estate agent experienced in this area. They can help you navigate the complexities of the sale, from marketing the property to managing tenant relationships.

Conclusion

Selling a house with tenants doesn’t have to be a daunting task. By understanding the legalities, maintaining open communication, and planning strategically, you can successfully sell your property while respecting your tenants’ rights. Whether you choose to sell with tenants in place or wait until the property is vacant, the key is to approach the process thoughtfully and carefully, ensuring a smooth transition for all parties involved.

This comprehensive guide should give you the confidence to move forward with selling a house with tenants, whether you’re an experienced landlord or navigating the process for the first time.