Can a landlord break a lease to sell the property? (2024)

Last updated on October 18, 2021

When you sign a lease with a tenant you are giving the tenant a temporary right to use your property, usually measured by a fixed period of 12 months. This right is known as a “leasehold estate.”

Although the tenant doesn’t have rights to the real property, such as being able to sell it, they normally have the right to stay in the property until the end of the lease. But there are exceptions to every rule, which means under certain circ*mstances you may be able to break a lease with the renter if you want to sell.

Can a landlord break a lease?... It depends

Sometimes selling a house is easier when it’s vacant, especially if you are marketing your property to a homeowner and not another investor. Whether or not a landlord can break a lease to sell the property depends on the terms and conditions of the rental agreement, and how cooperative the tenant is.

Yes

You could have a clause in your lease that allows you to break the lease with enough notice, usually 30 or 60 days. This gives the tenant enough time to look for a new place to rent, or you may be able to refer the tenant to another investor that owns rental property.

If you do put in a clause that allows you to break the lease early, don’t try to sneak it past the tenant. Be sure to point the early termination clause out to the tenant, explain how the process works, and make sure that they understand that they will have to leave once you give them an early termination notice.

If you don’t have an early termination clause in the lease, you can’t make the tenant leave simply because you decide to sell. A lease agreement contains elements of contract law and property law, and the fixed term of the lease applies to both you and the tenant. As long as the tenant is paying the rent on time and taking care of the property, you can’t ask the tenant to leave without cause.

Maybe

However, if the tenant is late on the rent or not taking good care of the property, you may have a window of opportunity to break the lease if you decide to sell. This is called terminating the lease “with cause.”

For example, if the tenant is constantly late paying the rent, has a pet without permission, or is breaking the law, you could begin an eviction and terminate the lease early. Before you take this route, read your state landlord-tenant laws and speak with your local property manager or real estate attorney to make sure you don’t accidentally break any state or municipal rules.

3 options for selling with a tenant in place

So what happens if you can’t terminate the lease early “with cause” and there’s no early termination clause in your rental agreement? The good news is that you’re not necessarily stuck with the tenant.

1.Cash for keys

Cash for keys is an incentive you can offer the tenant to move out early, especially if you can evict the tenant “with cause.” Good tenants who have been paying their rent on time and taking good care of your property may be more than willing to cooperate with you in exchange for some extra cash to cover their moving costs and a deposit on the next place they rent.

Offering a tenant a little bit of cash in exchange for the keys can also be a good strategy to use instead of evicting the tenant if they’re violating the lease. Paying a bad tenant to go away can be much cheaper than an eviction. A recent blog post on BiggerPockets estimates that the actual cost of evicting a tenant can be between $4,000 and $7,000.

If the tenant agrees to your cash for keys offer, be sure to use a written cash for keys agreement. Also, have your property manager there on moving day, and treat the property as vacant after the tenant leaves. On the off chance that the tenant takes your cash and doesn’t move out, the cash for keys agreement they signed will allow you to evict the tenant “with cause.”

2. Month-to-month lease

Selling a rental home isn’t a spur-of-the-moment decision, which means you’ve probably been thinking of selling for some time. Even if you haven’t quite made up your mind, consider putting your tenant on a month-to-month lease when their current lease comes to an end. If you decide not to sell you can always offer the tenant a new long-term rental agreement.

By renting to your tenant month-to-month you’ll still have the rental income coming in each month, and are also leaving your options open. If you decide to sell to another investor you can see if they want to keep the existing tenant. On the other hand, if you think a prospective buyer looking for their own home is your best bet for a sale, you can end the month-to-month lease.

The legal resource website Nolo.com lists state rules on written notice required to change or terminate a month-to-month tenancy. In most states, you can terminate a monthly rental agreement with just 30 days’ notice, but remember that your tenant can too.

3. Sell on Roofstock with a tenant in place

Instead of jumping through the hoops of trying to break a lease to sell your property, why not just sell with the tenant in place? Remote real estate investors around the world are looking for good single-family and small multifamily homes that are already rented and generating solid cash flow.

In fact, some rental property investors may be willing to pay a premium for your property depending on the net income your home is generating and the condition of the property. To sell on Roofstock with a tenant in place you can:

Check out the Roofstock marketplace to see what rental property similar to yours is selling for.
Submit a listing on Roofstock to receive a free price estimate, go through the Roofstock Certification process, launch your listing, then receive offers and close completely online.

Tenants Rights When Selling a Property FAQ

If you do decide to sell your property with the tenant in place, be sure to respect the tenant’s rights. Here are some of the most frequently asked questions about selling a property that’s currently rented:

Q: How much proper notice is required before showing?

You must give the tenant a 24-hour notice (or whatever your state’s landlord-tenant laws require) before entering the premises and showing the property.

Wrapping up

As a landlord, you have the right to sell your property, but you may not be able to break the lease. While there are a variety of ways to get a tenant to leave, that may not always be the best choice. Instead of spending time and money trying to break a lease, consider selling your home as a turnkey rental property with the tenant already in place.

I am a seasoned real estate professional with extensive experience in property management, leasing, and real estate transactions. Having worked in the industry for many years, I possess in-depth knowledge of landlord-tenant relationships, lease agreements, and the legal aspects surrounding property ownership.

Now, let's delve into the concepts discussed in the article you provided, offering insights and additional information:

Leasehold Estate:

When a landlord signs a lease with a tenant, they grant the tenant a temporary right to use the property, known as a "leasehold estate." This right typically lasts for a fixed period, often 12 months. During this time, the tenant has the right to stay in the property, but they do not have rights to sell it.

Breaking a Lease to Sell:

The ability of a landlord to break a lease and sell the property depends on the terms and conditions outlined in the rental agreement. If there is a clause allowing early termination with sufficient notice (usually 30 or 60 days), the landlord may have the option to break the lease.

No Early Termination Clause:

If the lease lacks an early termination clause, the landlord cannot make the tenant leave simply because they decide to sell. Lease agreements involve contract and property law, and the fixed term applies to both parties.

Terminating Lease "With Cause":

Under certain circ*mstances, such as non-payment of rent or property damage, a landlord may have the opportunity to terminate the lease "with cause." However, it's crucial to understand state landlord-tenant laws and consult with legal professionals before taking this route.

Options for Selling with a Tenant in Place:

Cash for Keys:
- Offering an incentive for the tenant to move out early, especially if there are grounds for eviction.
- Cost-effective alternative to eviction, potentially saving thousands of dollars.
Month-to-Month Lease:
- Providing flexibility by putting the tenant on a month-to-month lease.
- Allows the landlord to keep receiving rental income while keeping options open for selling.
Sell on Roofstock with a Tenant:
- Selling the property with the tenant in place to remote real estate investors.
- Exploring the Roofstock marketplace for potential buyers.

Tenant's Rights When Selling:

Notice for Showing:
- Landlords must give a 24-hour notice (or as per state laws) before showing the property.
Showing Frequency:
- There's no limit to how often the property can be shown, usually during reasonable hours with proper notice.
Tenant's Presence During Showings:
- The tenant has the right to be present during showings, but showings don't have to be scheduled to accommodate the tenant.
Rent Obligations During Sale:
- The tenant is still obligated to pay rent and adhere to lease terms during the property sale.
Lease and Security Deposit Transfer:
- The existing lease and security deposit transfer to the new owner upon sale.
Breaking Lease During Sale:
- Generally, a tenant cannot break the lease solely due to the property being sold, unless the landlord is violating the lease.

In conclusion, selling a property with a tenant in place requires careful consideration of lease terms, legal obligations, and potential strategies to ensure a smooth process for both parties involved.