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Selling a House That Is Leased

Selling a home is never an easy process. There is a great deal of stress involved, and depending upon the current market in the area, some homes for sale can sit empty for several months waiting for a prospective buyer. Many homeowners cannot afford to allow their home to sit vacant during a prolonged sale, so it makes financial sense to rent the property to defray the costs of owning the home.

Complications of a Lease Agreement

The problem is that most tenants want to execute at least a one-year lease agreement that gives them a measure of security and guarantees that they will have a place to live. This can become a complication if the real estate market should suddenly become active and home sales increase. Prior to leasing a vacant property, homeowners should familiarize themselves with what they can and cannot do when selling a house that is leased.

Lease Agreement

A lease agreement can contain a broad range of language and stipulations as long as both parties agree to the terms and sign the lease.

If a homeowner has the intention of selling the home if the market picks up, this should be disclosed in the terms of the lease agreement and the tenant must be made aware of the stipulation.

Generally, unless the lease agreement states that the homeowner has the right to sell and can remove the tenant upon close of escrow, the tenant's lease agreement remains in effect and they have the right to retain possession of the property until the expiration of the lease. The sale could still continue, but the fact that there is a lease on the property would need to be disclosed to the prospective buyers, and they in turn would have to honor the remainder of the lease.

Option of a Month-to-Month Lease Agreement

One way around this is to simply have a month-to-month lease agreement that can be terminated with a 30-day written notice. When the home sells, notice can be given at the start of escrow, which satisfies all the legal requirements of the lease. Even if language is written into a one-year lease agreement covering the possibility of a sale, there are specific steps that must be taken when notifying the tenants and initiating eviction procedures.

Importance of Clarity in the Terms of a Lease Agreement

Sometimes, a homeowner is fortunate enough to have understanding and flexible tenants who will help the process along, but more often than not, problems can arise during this process. It is important to be very thorough when writing the terms of the lease and ensure that the tenants fully understand that the home might be sold during their tenancy. Clear communication before and during the lease term will dramatically reduce any issues that might arise between the homeowner and the tenant during the sale.