Selling a rental property/house isn’t quite the same as selling your primary home. For one, there’s certain tax implications to selling a rental house you may not be aware of. And taxes on selling a rental house can be unavoidable. There’s also the question of maintaining a rental—which isn’t always easy when you’re not onsite 24 hours a day. But there’s an even stickier situation that comes about when it comes to selling a rental house with tenants.
We don’t just mean troublesome tenants. We mean the hardworking ones who are always on time with their rent and have never given you any sort of problem.
Rental properties can be as much of a burden as they are an additional source of income. But can you actually sell your rental property in Utah if your tenants are still living there?
Yes. Legally, you can. But there are a few things you need to consider first.
Tenant Rights In Utah
Tenant rights in Utah actually do permit owners to sell a rental property without a formal eviction process. Not only does it happen all the time, many tenants are actually quite understanding and cooperative about the situation. It may not be ideal for them; but assuming that you haven’t violated any of your responsibilities as a landlord under Utah law and allow them sufficient time to look elsewhere, you’ll find that most will be fairly reasonable to deal with. What happens to a tenant when a landlord decides to sell a rental property in Utah is governed by the lease or by Utah law if no lease. In general,
- A 60 day notice must be given in writing informing the tenant of your decision to sell the property.
- A 14 day notice must be given prior to scheduling the first viewing.
- All tenants must be informed of the dates and times of viewings at least 24 hours in advance and in writing.
- A property cannot be listed for sale without the tenant’s agreed consent.
- Viewings cannot be scheduled on a Sunday, a holiday, before 8:00 am or after 8:00 pm.
- Listings cannot include photographs of a tenant’s personal property.
- Tenants are legally allowed to refuse a viewing if they do not agree with the date or time.
What If A Tenant Refuses To Agree?
Typically, the easiest and most stress-free way of selling a rental house with tenants is quite simple. Wait until the lease runs out. And assuming their lease is up within two months, that should solve the vast majority of your problems.
Rarely is a situation so simple. An example is verbal agreements. Under Utah law, a verbal contract is still a legally binding contract. And it’s rare that the need to sell unwanted property takes place within a mutually beneficial time frame.
If your tenant has signed a month-to-month lease or a lease with no date end, an early termination notice can be sent at least 15 days prior under Utah state law. Both types of leases are actually fairly common. But if the lease contains a fixed end date that’s not a convenient option for you, there are a couple things to keep in mind.
Always communicate with your tenant of your intention to sell a rental house. Admittedly as a landlord, you should already be in constant communication with your tenants to begin with. But outside of maintenance requests or suspicious activity you may have noticed, that’s not always realistic or even desirable.
Under Utah state law, you cannot force an eviction without due reason. Due reason can include:
- Disturbing other tenants or neighbors.
- Subletting without approval.
- The sale of drugs or illicit substances.
- Weapons violations.
- Smoking if prohibited in a lease.
- Frequent noise violations interfering with neighbors.
- Default of payment and back payment.
- Criminal behavior.
- Threats of violence against other tenants or neighbors.
- Committing a felony.
Common Solutions To Selling A Rental House With Tenants
Generally speaking, it’s always a good idea to include a sale termination provision in a lease. Not only is it common, it’s legally binding upon signature. However, this is frequently also subject to common terms, including much broader windows of notice and in many cases, direct payouts. But it’s a convenient option and one that many rental property owners we’ve spoken to have already allowed.
One common solution is what’s known as the “Cash for Keys” solution. This is where you’re essentially paying a tenant to vacate the premises. It’s not as far-fetched as you might think. Many tenants find it difficult to move at short notice because of an inability to pay for their first few months rent deposit immediately. And by helping them relocate, you’re actually helping to expedite the process. More often than not, you’ll find this to be a ‘win-win’ situation for the both of you.
It’s not unheard of for tenants to actually want to buy your home. Particularly if they’ve developed a certain attachment to it. Sometimes this is conducted as a lease-to-own agreement, where rent is structured as a downpayment—which would require renegotiating the terms of a lease. More frequently, it’s conducted through owner financing. Both come with a common disadvantage, however. Namely, that you’re frequently going to have to sell at a much lower asking price unless they actually have the sufficient capital to pay for fair market value.
Another solution is to sell your home with an active lease. This is much more common than you think. Frequently, homebuyers are also looking for rental property to purchase. And so long as they agree to the present terms of the lease, they’re more than happy to have tenants who are already attached—particularly if you can vouch for their reliability. And at Gary Buys Houses, we have a solution that can meet everyone’s needs. It’s called our “Sell Now, Move Later” program. We’ll purchase your rental house, even with an active lease. Your tenants can stay as long as they need; and once the terms of the lease are up, we’ll be happy to renegotiate. We’ve been successfully purchasing rental homes all throughout Utah for over ten years, and we’ve found it’s a solution that ultimately benefits everyone.