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

Selling a rental property can be complex, especially when residents are involved. But there are plenty of ways to notify your resident 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. In some legal and compliance situations, we'll also use the term "tenant". 

What is a notice of sale of property letter?

A notice of sale of property letter is a formal communication informing a resident that the property they're renting 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 lease terms and local laws. If the resident 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

Real estate investors might have a variety of reasons for selling a rental property. We’ll break down some of the most common scenarios below:

• Potential for significant financial return: In many cases, the property has appreciated significantly, and selling now could provide a substantial profit for the owner, who wants to capitalize as soon as possible.
• Eliminating property management responsibilities: Perhaps managing the property has become too time-consuming or challenging, so selling is the best option to free up time and energy.
• Freeing up capital for other investments: Maybe the owner is looking to reinvest in a different type of real estate, another location, or other markets entirely.
• Changing financial priorities: Financial needs, such as funding retirement or other investments, may be 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 may mean finding and establishing another source of income. 
• Potential legal challenges: Selling an occupied rental property may involve complex laws and regulations and logistics. If not handled properly, this could lead to complications down the line, including legal action from the tenant.
• Reputation: For professional property managers, reputation is everything. If the sales process isn't handled smoothly, it may sour the reputation with the resident, causing them to leave a negative review.

Rights of tenants when the property owner sells the property

Tenant rights must be respected when throughout the entire process of selling a property. Knowing these rights and planning accordingly can help you avoid legal trouble in the future.

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 for leased properties: Depending on your state or city, there may be detailed regulations about how to handle a rental property sale. For instance, some areas require the purchaser to honor the current lease terms and allow the resident to remain in the home. 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. 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. Property owners should not shut off utilities during the sale process. Additionally, if you plan to conduct maintenance or repairs, you will still need to notify the tenant as required by local laws.
3. Property showings: Although giving notice for property showings isn’t always legally required, it’s good practice to inform residents 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.
4. Security deposits: If the tenant moves out before the sale, their security deposit must be handled appropriately. In many cases, the deposit should be transferred to the new owner, who will hold it until the tenant vacates the property. In other cases, the security deposit may be returned, and the new owner will be responsible for collecting a new security deposit. 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 security deposit belongs to the tenant and must be transferred to the new owner to be held until the tenant moves out.

What should the sale of property letter include?

When notifying your resident of a property sale, the letter should cover several essential points. To help, we’ve put together a breakdown of what should be included.

Basic information

Start with your name or your property management company name, the date, the tenant name(s), and the property address. Include your contact information for any questions the tenant might have. We recommend addressing the letter to all residents who are listed on the lease.

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 be going on the market, and that they may need to cooperate with upcoming property showings.

Showing information

Include information on how much notice you’ll provide before a property showing. If state laws require specific notice periods, cite them to reassure the resident that their rights are being respected. Clarify that any showings will be conducted by licensed real estate professionals, and be considerate of the resident's schedule.

Responsibilities before the sale

If the resident 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 resident to keep the property in great condition. In all cases, be polite and professional, and make sure the resident 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 resident and foster goodwill.

Relocation support

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

Opportunity to purchase

If your property management company offers any kind of home buying assistance, you may consider selling the property directly to the resident. If you're open to the possibility of selling to the resident, include that in your letter and let them know who they should contact for more details. This is especially valuable if your management company also operates a real estate brokerage and you're representing the seller in the sale.

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. Feel free to 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.