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Selling a Property with Tenants

If you are a Landlord there may be a time when you need to consider selling a property with tenants. While the house sale process can be challenging at the best of times. It can be even more difficult if you have tenants currently renting the property. So, what are some of the rules about selling a property with tenants? Let’s take a look at a handful of regulations and concerns that you should always take into account.

Selling a Property with Tenants: The Basics

First and foremost, it’s generally your right as a landlord to sell the property, as you are the legal owner. Having said this, the regulations surrounding the sales in regards to the tenants themselves can be a bit tricky. There are a number of rights that the tenants of your property will have. As this article highlights, you as a landlord MUST give the tenants at least two months notice if you intend to evict them from the premises. However, this is where the process gets more complicated. What you need to understand are certain sections of what is known as the Protection from Eviction Act of 1977.

The Rights of the Tenants and the “Break Clause” Explained

Let’s imagine that you, as a landlord, are selling a property with tenants due to economic hardship. If your tenants are on the premises, you can’t simply place the property on the open market and hope for a quick sale. You need to be aware of Section 3C of the Protection from Eviction Act of 1977. It states that you as the landlord may not impede the “residential occupier’s right to remain in occupation of the premises”. This refers to the duration of the current tenancy contract you have with your tenants. Still, there is a condition to this rule. A separate inclusion to many contracts is known as a “break clause”.

Essentially, a “break clause” is a provision which allows the landlord (or the tenant) to terminate the lease early. This clause is actually intended to protect the tenant as well. For example, occupiers may choose to leave early for a number of reasons and without this clause, they would be in violation of the lease agreement. As the landlord, you will still be required to give notice. You have to allow your tenants a specific amount of time to retrieve their possessions, settle bills, etc. As legal experts point out, you will also be required to schedule any pre-sale alterations or maintenance tasks with as little disruption to the lifestyle of your tenants as possible.

Summing It Up

Essentially, you have four options as a landlord. If you had no break clause attached to the original rental agreement, your first option is to wait until the lease is terminated. Once terminated then the sale can take place. Or, you can advise the buyer (assuming that the sale is completed quickly) that the tenants must remain on the premises until their contract expires. You may be able to modify the contract to include a break clause before the sale. Your tenant will have to agree to this. Lastly and assuming that you do have a break clause included, you should immediately serve notice so that all parties are aware of the situation.

Let’s keep in mind that selling a house with tenants can still be very tricky. Property laws are notoriously confusing and this article is only meant to serve as a rough outline in regards to what you can expect. It is always best to consult with a legal professional. He or she can advise you of your rights to make sure that you do not violate any regulations.

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