How to Write a Letter Notifying Your Tenant of Sale of Property

Selling a rental property can be complex, especially when tenants are involved. But there are plenty of ways to notify your tenant of the sale in a clear, respectful, and legally compliant manner that also reduces their anxiety or concerns. 

In today’s blog, we’ll provide a practical walkthrough to help you draft this important letter, including:

• What a notice of sale of property letter is

• Rights of tenants when the property owner sells the property

• What the sale of property letter should include

• Sample letter to notify tenant of sale of property

Note on language: Here at Second Nature, we prefer the term “resident” rather than “tenant,” as that emphasizes the human element over the transactional. But because legacy property management systems and documentation often make exclusive reference to “tenants,” we’ll favor that term in today’s post.  

What is a Notice of Sale of Property Letter?

A notice of sale of property letter is a formal type of communication that informs a tenant that their rental property is being sold. It outlines the upcoming changes that will occur, reassures tenants about their rights, and details how the sale will affect their tenancy.

You might wonder if selling a rental property is even possible with tenants in place. Yes, it is. 

However, the process requires careful consideration of the lease terms and local laws. If the tenant is on a fixed-term lease, they often have the right to remain until the lease expires. If the lease is month-to-month, the new owner may have more flexibility. But in all cases, understanding and following legal guidelines is crucial as they may vary based on your location.

Why You May Want to Sell a Rental Property

Property owners might have a variety of reasons why they’re planning on selling the rental property. We’ll break down some of the most common scenarios below:

• Potential for significant financial return: The property has appreciated significantly recently, and selling now could provide a substantial profit for the owner, and they want to capitalize on that as soon as possible.
• Eliminates the property management responsibilities: Managing the property has become too time-consuming or challenging, so selling is the best option to free up the owner’s time.
• Freeing up capital for other investments: They’re looking to reinvest in a different type of real estate, another location, or explore other markets entirely.
• Change of priorities due to finances: Financial needs, such as funding their retirement or other investments, are driving the decision.

While selling a rental property has plenty of advantages, it also has its drawbacks. Here is a look at some disadvantages of selling a rental property:

• Loss of steady income: Monthly rent means money coming in at the same time every month. Removing that means another means of income needs to be secured. 
• Potential legal challenges: There are many complex laws and regulations to consider, as well as logistics, so if not handled properly - this could lead to major issues down the line, including legal action from the tenant.
• Reputation: If not handled smoothly and above board, this can cause disruptions for tenants, which could lead to potential damage to a property manager or the property management company’s reputation. 
  
  

Rights of Tenants When the Property Owner Sells the Property

Tenants have rights that must be respected when a property is sold. Knowing these rights and planning accordingly can help you avoid legal disputes. 

Please note that this guide does not constitute official legal advice, and it’s crucial to consult local laws or legal counsel for specific details.

Some common laws and regulations you should be aware of include:

1. Local laws and lease terms: Depending on your state or city, there may be detailed regulations about how to handle a property sale. For instance, some areas require you to honor the current lease terms, even with a new owner. In certain states, tenants with month-to-month leases might need to be given a specific amount of notice before being asked to move out.
2. Tenants may not have to move: In some jurisdictions, tenant rights specify that they have the right to stay in the property, even after it’s sold. For instance, under California law, “tenants who have a rental agreement have the right to remain through the end of the rental agreement under the same terms and conditions. The new owner may be able to end a periodic tenancy (for example, a month-to-month tenancy), but only if allowed by law and after giving the tenant the required advance notice.” In other words, a buyer could inherit the lease, and this is especially true for tenants with long-term leases. Some local laws also require that tenants be allowed to stay until the end of their lease term. Always verify this with a legal expert.
3. Utilities and maintenance: As the owner, you must continue providing a habitable property by providing utilities like water and electricity until the tenant moves out. Shutting off utilities during the sale process is illegal, and under criminal law, owners could be charged if they turn these off. For instance, New York Real Property Law § 235 provides protections for tenants, including prohibiting landlords from willfully interrupting utilities – and violations can be considered criminal acts under New York Penal Law. Additionally, if you plan to conduct maintenance or repairs, you need to notify the tenant as required by local laws.
4. Property showings: Although giving notice for property showings isn’t always legally required, it’s good practice to inform tenants well in advance. Most state laws require you to provide reasonable notice before entering the property, usually 24 to 48 hours, though this can vary. Make sure you refer to your state’s tenant laws before scheduling any showings. As a matter of courtesy, prospective buyers should be accompanied by licensed real estate professionals, but in the event that this is not possible, it makes sense to keep open communication channels with the tenant and to maintain high standards for prospective buyers.
5. Security deposits: If the tenant moves out before the sale, their security deposit must be handled appropriately. The deposit should be transferred to the new owner, who will hold it until the tenant vacates the property. Be sure to review your state’s laws to avoid any disputes over this process. As a point of accounting interest, note that on balance sheets, a refundable security deposit appears as a liability – the tenant security deposit belongs to the tenant and must be transferred to the new owner to be held until the tenant moves out.
6. Lease terms: If the property is sold while the tenant is still living there, in most cases the new owner takes over the existing lease terms. However, this can vary based on state laws and the specifics of the lease agreement. For instance, under Florida law, new owners can provide a 90-day written notice of lease termination if they intend to occupy the property as a primary residence.

What Should the Sale of Property Letter Include?

When notifying your tenant of a property sale, the letter should cover essential points. 

Luckily, we’ve provided a breakdown of what should be included.

Basic information

Start with your name (or the property management company’s name), the date, the tenant’s name, and the property address. Include your contact information for any questions the tenant might have.

Details about the sale

Inform the tenant that the property is being sold. Be transparent about the process, including whether the lease and deposit will transfer to the new owner. Let them know that the property will go on the market, and they may need to cooperate with showings.

Showing information

Mention how much notice you’ll provide before a property showing. If state laws require specific notice periods (such as at least a one-day notice), cite them to reassure the tenant that their rights are being respected. Clarify that any showings will be conducted by licensed real estate professionals, and be considerate of the tenant’s schedule.

Responsibilities before the sale

If the tenant has any responsibilities, such as keeping the property tidy for showings, outline them in this section. You may want to consider offering a cleaning service to make it easy for the tenant to keep the property in great condition. In all cases, be polite and professional, and make sure the tenant understands what is expected of them.

Incentives (if applicable)

If you’re offering any incentives, such as paying for a hotel stay during showings, assisting with moving expenses, or providing a rent discount, mention them here. While not mandatory, these gestures can ease the transition for your tenant and foster goodwill.

Relocation support

If you manage other properties, you may wish to let the tenant know of any available openings, but this is completely optional and just a common courtesy you can provide to help ease the transition.

Thank you section

Close the letter by thanking the tenant for their cooperation during this process. Acknowledge the inconvenience this may cause and express your appreciation for their help in making the process as smooth as possible.

Letter to Notify Tenant of Sale of Property Template

Here’s a sample notice letter template you can use to inform your tenant of the sale, and customize to fit your needs:

[Your Name/Property Management Company]
[Date]
[Tenant’s Name]
[Property Address]

Dear [Tenant’s Name],

I hope this letter finds you well. I am writing to inform you that the property you are currently renting at [Property Address] is being put up for sale. This means there will be some changes in the near future, but I want to assure you that your rights as a tenant will be respected throughout this process.

Your current lease will be transferred to the new owner, and all terms will remain in effect. You will be notified in advance of any showings, and we will work to make the process as smooth as possible for you.

If you have any questions or concerns, please don’t hesitate to contact me directly at [Your Contact Information].

Thank you for your cooperation during this time. We appreciate your help in keeping the property presentable for potential buyers and making this transition as seamless as possible.

Sincerely,
[Your Name]

Learn more: How to Write a Notice to Vacate Letter to Tenants [with free template])

Final Thoughts

Selling a rental property involves careful planning, especially when tenants are involved. A well-crafted letter can help ease the transition and ensure a smooth process for everyone. Remember to stay informed about your local laws and consult legal experts when necessary.

If you're looking for ways to enhance the resident experience during this transition, consider improving tenant satisfaction with services like the Resident Benefits Package. Learn more about these packages from Second Nature today.