Ever wondered if you can sell a rental property that's already occupied by tenants? As a landlord, this situation might seem far from ideal, but with the right approach, it can be done successfully.

Selling a tenant-occupied property comes with its own set of unique challenges, from practical issues to legal considerations.

In this guide, crafted by Rockbridge Real Estate, you'll find expert advice on how to navigate the process of selling a rented property.
We'll show you how to manage the sale while complying with relevant laws and keeping tenant disruptions to a minimum.

Let Rockbridge Real Estate provide you with the insights needed for a smooth and effective sale.

Is It Possible for Landlords to Sell a Tenant-Occupied Rental Property?

It is! In fact, having an existing tenant can give you a certain leverage, as the property is already generating an income. That said, tenants have a legal right to occupy their rented premises for a certain duration of time.

As the property owner, you cannot simply wish them away by asking or forcing them to leave. This can complicate the selling process for you. Some buyers can view this as a legal headache, which they would want to avoid as much as possible.

Coordinating property showings to prospective buyers can be challenging. This is because you’ll need to notify the tenant each time you need to enter the property. And if you have an uncooperative tenant, the stress can be twofold for you.

The following are some important considerations to keep in mind when selling a property occupied by a tenant.

Tenancy Agreement

A lease or a rental agreement is legally binding. Once you and the tenant have entered it, both parties automatically obtain certain rights and responsibilities.

The tenant, for instance, obtains the right to occupy the property for the entire lease duration. If the lease is short-term, such as month-to-month, all you’ll need is to wait for its expiry in just a month or less.

You’ll need to notify the tenant beforehand. In the state of Missouri, you must give the tenant a notice of at least 30 days. If the lease is long-term, such as one year, then look at how much time is left for the lease to expire.

While this can be attractive to some buyers, especially rental investors, it can, however, be unattractive to buyers looking to live in the home themselves.

Tenant Eviction

Simply wanting to sell the property isn’t a valid reason to evict the tenant from the property.

To successfully evict the tenant, you’ll need a valid reason and follow the state’s eviction laws from start to finish. In Missouri, valid reasons for tenant eviction include the following:

  • Failing to pay rent when it falls due
  • Violating a term of the lease, such as making illegal property alterations
  • Engaging in criminal or illegal acts on the rented premises

In the absence of such reasons, any actions on the landlord’s part to carry out an eviction would be illegal. You cannot try to lock out the tenant, remove their personal belongings, or shut off utilities.

Entry Notice Requirements

When carrying out property showings to prospective buyers, you must abide by the MO landlord entry requirements. Just because you own the property doesn’t mean you can just access the property anytime you wish.

While Missouri law doesn’t have any landlord entry notice requirements, most landlords do give their tenants reasonable notice before entry. Usually, a 24-hour advance notice suffices. This can help prevent tenant harassment complaints.

Security Deposits

When the property’s ownership changes hands, you must comply with certain security deposit rules. As per Missouri Revised Statutes § 535.300, a landlord has two options when selling a property.

One option is to return the deposit to the tenant, less any allowable deductions. The other option is to transfer all the tenant’s security deposit to the incoming landlord, minus any allowable deductions.

After doing so, the new landlord will automatically take up all responsibilities regarding the handling and return of the tenant’s deposit.

Tenant Rights

The sale of a rental property doesn’t revoke any rights a tenant enjoys under the lease. Even after a new landlord takes over, the tenant will still have a right to:

  • Live in a habitable property that meets the state’s safety, health, and building codes.
  • Right to live on their rented premises without any retaliation for exercising a legal right, such as reporting maintenance issues.
  • A reasonable notice before the landlord’s entry.
  • Continue living on the property until the landlord has followed the proper eviction laws to remove them from the unit.

What Can You Do to Sell a Property Occupied by a Tenant?

The following are some of the things you can do to sell a property occupied by a tenant:

  • Consider Selling It to the Tenant: It’s possible that the tenant has fallen in love with the property and can’t imagine living elsewhere. After all, moving isn’t exactly a stress-free process.

  • Offer the Tenant a Financial Incentive: A financial incentive can sometimes be persuasive, especially when dealing with a difficult tenant. This can go towards meeting their moving costs and even the first month’s rent.

  • Wait Until the Lease Expires: Selling after a lease is over is perhaps the most ideal time. This will make it easier for everyone involved.

Hire a Property Management Company

Property managers will usually be knowledgeable about the prevailing market conditions. They will advise you not only on how best to terminate the lease but also when and for how much to sell the property for optimum ROI.

Conclusion

Selling a renter-occupied rental property can be challenging. Fortunately, it’s still possible, especially if you involve a professional in the process. Having a property manager by your side can save you a great deal of stress, time, and even potential mistakes.

At Rockbridge Real Estate, we provide a full range of real estate services to all types of people. Get in touch to learn more!