Can a Landlord Sell a House During a Lease in Texas?

Can Landlord Sell House While Renting In Houston, TX?

You can sell a house as a landlord while you are renting it out. The big thing here is that you need to disclose information to two different parties. You have to let the tenants with an active lease know that you are trying to sell the property, and you must also inform prospective buyers that there is an active lease in place that they would be overtaking. Failing to do so can result in legal action from either party. In the worst cases, you might get hit by both at the same time.

Ways to Sell a Rental House with Tenants in Texas

If you want to sell your rental house that has tenants in it in Houston, Texas, then there are several ways you might be able to go about this.

• Sell the Home to the Tenant: Many people who are renting do aspire to be homeowners. If a tenant has been in a home for some time, then they might have gotten attached to the home and the surrounding community. That might get to the point that they want to buy the house. Before you put in the energy and resources to make repairs, do upgrades, and go about listing the home, it might be worth a conversation with your tenants to see if they have any interest in buying the home.
• Wait for the End of the Lease: If you can afford to wait, then you might want to avoid selling until the lease is over. If you make this decision in advance, inform the tenants that you won't be renewing the lease when it's up. That way, they have time to make arrangements to move somewhere new. The lease likely states how much proper notice you must give them. Check the base document and any lease agreement addenda about this. You might soften the blow by offering to help with the move or volunteering to be a reference. That's a classy move when you have long-term tenants who have been renting for a while. Waiting for the home to become vacant is a good idea if you don't need to sell right away.
• Sell the Home with the Active Lease: Some of your potential home buyers might be landlords or people looking to be a landlord and make rental income. If you already have a tenant in place, that might be an attractive selling point. Having a stable long-term tenant that will keep renting the property helps you, especially if you provide documentation about the length of the lease and their strong payment history.
• Send a Lease Termination Notice: Be sure you review the entire lease before you do this so you know you have the right. If a tenant has violated or broken the lease, then you might have cause for termination. However, you can't do it just because you want to, and you'll often have rules to follow about the end date.
• Evict the Tenants: In an ideal world, all your tenants would be great people and you have good relationships. Reality is very different, however. If you can't find a way to deal with tenants that works out well for all parties involved, then you might need to file for eviction and then complete the entire process.

Landlords’ Rights When Selling a Rental Property

From rental property add-ons to lease termination, landlords in Houston, Texas have certain rights in some situations but restrictions and obligations in others. Many circumstances can be a complex mix of both.

The Landlord Right to Evict their Tenants

You might be able to evict your tenants from the home in certain circumstances. If they default on their payments and account, that can be one path to a successful eviction. If they fail to meet any other obligations as stated clearly in the lease agreement, then that, too, can be grounds for filing for eviction. You will have to follow the legal process that applies under the specific jurisdiction where the house is located. Filing for eviction is a legal process that costs money, and tenants have specific rights.

The Landlord's Right to Receive Rent

You need to inform tenants of your intention to sell the property that they are renting from you right now. However, that doesn't absolve them of the responsibility to keep paying you rent. They are legally and contractually obligated to continue doing so as long as they are tenants. Once the property sale happens and the ownership transfers, the tenants will start paying their rent to the new owners.

The Landlord Right to Show Prospective Buyers the Property

Most buyers want to see a property before deciding to buy it. That will usually also include a thorough inspection prior to making an offer or during the negotiations and contract process. Doing this with active tenants might seem problematic, but you have the right to do it as long as you give tenants advance notice of any showings.

The Landlord's Right to Decline Lease Renewal

Your tenants can't legally compel you to renew a lease when the agreement expires. Just wait for the lease to near its expiration date and give the tenants the mandatory warning period that you don't intend to renew. It's best if you can give them more than the minimum required notice. There's certainly simplicity in waiting to sell the house until it's empty.

Tenants' Rights When the House Is for Sale

Houston, Texas residents still have rights as tenants when the house they are renting is for sale. Their rental agreement and security deposit legally entitle them to certain rights. So long as they are compliant with the lease agreement, they have rights to possession, controlling access, and the lease as-is. In some cases, they might have the right to sue for a restraining order against certain parties. They always have a right to the legally mandated notice before lease terminations.

The Right to Possession

A tenant acquires the exclusive right to possession by agreeing to a lease and living up to that agreement, such as paying rent. If the owner or any agents come onto that property without consent, they’re trespassing. There are times when property managers in Missouri City don’t require consent, but they’re still required to give notice and their rights are limited so the tenant still has the upper hand. Under no circumstances can a property owner require a tenant to leave his or her home. Even if a Realtor wants to show the home or a property management firm needs to perform maintenance, the tenant has the right to sit in the living room and play his trombone, for instance, if he wishes.

The Right to Control Access

For the purposes of maintaining or selling the residence, the owner and any agents have the right to access with reasonable notice and during standard business hours. Reasonable notice generally means 24 or 48 hours. Standard business hours generally mean Monday – Friday, 9am – 5pm, but there has been a trend with judges viewing 9am – 5pm on Saturday and Sunday as standard business hours for real estate agents. When these conditions are met, a tenant can’t deny access to a landlord or agent. Under all other circumstances, the tenant has complete control over access and can simply say no.

The Right to Sue for a Restraining Order

Tenants also have the right to temporary and more permanent restraining orders in order to assert their right to control access. It’s not unusual for issues to arise between tenants and aggressive Realtors, and it’s possible for property managers in Missouri City to be indefinitely banned from setting foot on the property if such an order is awarded. The courts can also award a retroactive reduction in rent in order to offset the disruption and other difficulties the tenant has endured.

The Right to the Lease as Is

A lease is an agreement to transfer the right of possession from a property owner to a tenant. A lease is a legally binding agreement, and it exists as part of that property for the length of its term. In other words, when a person purchases property that currently has a lease, that person is also purchasing and obligated to that lease. The tenant has a right to the lease agreed to, which means that a new owner cannot simply make changes to the lease because he or she didn’t personally agree to the original contract. The new owner can, however, negotiate changes with the tenant.

The Right to a 30 Days’ Notice

If applicable, a renters rights when the house is for sale includes the right to a 30 days’ notice. This is a particularly important point when leases are on a month-to-month basis, which is common when an owner is selling or plans to sell. Generally, the property owner or property management company in Missouri City has to give 30 days’ notice from the end of the current month. In other words, if it’s currently mid-July, the tenant could rent during August as well and would have to be gone after August 31.

How to Sell Your House With Tenants Renting It

You can sell your rental house to either the current tenants or another property buyer so long as you honor the lease agreement the current tenants are under. The laws of Houston, Texas do stipulate landlord selling tenants’ rights in Texas that must honor them.

Review the Lease Agreement

The kind of lease that is in place will impact quite a few details. Some agreements might be fixed-term leases. Others are on a month-to-month basis.

Inform the Tenants of Your Desire to Sell

Selling your home with tenants in it isn't something you can just drop on them after the deal is done. You have to let them know in advance since showings, repairs, upgrades, and inspections are going to impact their life.

Do Renovations

Minor cosmetic issues need to be identified and fixed prior to listing so you can make the best impression during showings. You'll need to work with your tenant regarding contractors and listing agents handling all of this.

Have a Broker Help You Sell

The whole selling and listing process goes better with the right industry experts helping with everything from showings to arranging for the proper documents involved. The right real estate brokerage firm in Houston can help.

Selling House with Tenants in It: Ethical Considerations

If your Houston, Texas tenant plans on remaining in the home after it's sold, and based on the layout and size of the property, you could possibly market it two different ways at once. You can list it as a prospective investment property and a primary residence at the same time. Once a landlord sells a house, it is up to the new owner how they use it so long as they follow applicable rent laws for the tenants in place. As the seller, there are things you might do to make things better for everyone involved.

• Pick Showing Times Convenient for Tenants: Let your property agent who is marketing the home know that your tenant will need sufficient legal notice for showings prior to entry. Also, tell your agent about any times the tenant can't work with. Your listing agent should always contact tenants directly about shorter notices for special showings.
• Request the Tenant to Leave the Property During All Showings: Whether the buyer is an investor or someone looking for a place to live, they don't want to be followed by a resident during the showing. This can make things uncomfortable if the resident is frustrated about having to move. Buyers deserve the freedom to view the property without interruption or harassment. Though a tenant cannot be forced to leave, they cannot legally hinder a showing either.
• Make It Easy for Tenants to Keep the Property in Great Shape: Yard and cleaning services are good investments when your property is on the market. Tenants won't have any stake in the property being sold, especially if they're being forced to move. That means the sellers need to take a fair amount of responsibility in maintaining the property as being ready to show at all times.
• Help Your Tenant Move: If you already own multiple investment properties, see if you have any openings that might be appropriate for your tenant. You might also consult other property investors about places that they have available that the tenant might move to. You might even do a local rental search for them among contacts and resources in your network.
• Be Sure the Tenant Is Current on Rent: Delinquent tenants don't make great selling points. Consider eviction if it's a possibility. If not, offer to forgive delinquent rent in exchange for them moving out.

The Bottom Line

You can absolutely sell a Houston, Texas home that has tenants in it, but you need to communicate this with all parties involved. There are additional legal steps and some best practices to follow that take more work, but it is possible. If you want to find a new owner for your residential property, then it helps to have a property management company in Houston to help you both as a brokerage and a property manager. Contact us right away to see what we can do for you.