Can a landlord break a lease to sell a property? A landlord gives a tenant the temporary right to use their property when they sign a lease. This is usually measured by a 12-month fixed period, and the right is referred to as leasehold estate.
Nonetheless, a tenant does not have rights to the real property, such as selling it but has the right to occupy the property until the end of the lease.
There are exceptions, however. In this case, a landlord may be able to break the lease under certain circumstances to sell the property.
Can a landlord break a lease to sell a property?
A landlord can break a lease to sell a property but it generally depends. Selling your property could be easier if it is vacant, especially if you market it to a homeowner and not an investor.
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The terms and conditions of the rental agreement and the cooperativeness of a tenant determine whether a landlord can break a lease to sell the property or not.
When a landlord can break the lease to sell a property
A clause in your lease may allow you to break the lease with enough notice, typically 30 or 60 days, giving the tenant enough time to find a new apartment. Alternatively, a landlord could be able to refer the tenant to a different investor that owns rental property.
If the lease has a clause that allows a landlord to break the lease early, refer the tenant to the early termination clause, and explain the process to them.
Ensure that the tenant understands they have to leave the apartment after you serve them an early termination notice.
When a landlord cannot terminate a lease early to sell property
A landlord cannot break a lease to sell a property if there is no early termination clause in the lease.
Your lease agreement comprises elements of property and contract laws and the fixed lease term that applies to the landlord and the tenant.
Thus, a timely rent-paying tenant who also keeps the property in good condition and does not violate the lease cannot be evicted by the landlord without cause, just to sell the property.
When a landlord may be able to break the lease without a clause
If a tenant is late on the rent, does not take care of the property, or violates the lease, a landlord can leverage it to break the lease to sell the property. This is known as terminating the lease “with cause”.
An example of a lease violation is hiding a pet such as a cat, dog, rat, etc., in a no-pet apartment. The earlier the landlord begins the eviction proceeding, the earlier the lease gets terminated.
Ensure to read your state’s landlord-tenant laws and speak with your local real estate attorney or property manager to make sure you do not accidentally break your state or municipal rules.
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What happens to a lease after selling the property?
Generally, selling or transferring a property does not end a lease on that property. If the lease follows the property, the new owner may not be able to evict the tenant.
A lease follows the sold property if:
- The new owner is a creditor of the landlord.
- The new owner assumed the lease in the act of sale.
- A written lease was recorded in the conveyance (public) records of the parish of the home.
- The new owner ratifies an unrecorded lease, accepting rent or allowing the tenant to remain on the property.
How a landlord can sell a property if they can’t break a lease with cause
If a landlord cannot terminate the lease early with cause, and early termination was not included in the rental agreement, a landlord can do the following:
Cash for keys
A landlord can offer cash for keys as an incentive to a tenant to move out early, especially if the tenant cannot be evicted. Some tenants may be willing to accept the offer of extra cash to cover the cost of moving and a deposit for the new place.
Offering cash for keys is a good strategy to get a tenant to leave instead of eviction if they violate the lease. Moreover, the tenant will not have an eviction in their rental history.
Make sure to put the agreement in writing if the tenant agrees and takes the cash offer. The property manager should be present on that moving date, and the property should be treated as vacant after the tenant moves.
If a tenant accepts the cash offer but does not move out, a landlord can leverage the cash for keys agreement they signed to evict the tenant “with cause”.
A landlord can put a tenant on a month-to-month lease after the current lease ends. This arrangement allows a landlord or tenant to alter or terminate a lease.
In this case, the landlord can break the lease to get the tenant to move out and sell the property. A landlord must give proper notice to end the lease, typically at least 30 days in advance.
Sell the property with the lease
Instead of breaking a lease to sell a property, a landlord can sell it with the tenant in place. Besides, real estate investors all over the world regularly look for good single-family or small multifamily homes already rented and generating good cash flow.
Some rental property investors are willing to pay a premium for the property, depending on property condition and the net income it generates.
Even a tenant can buy their rental home from a landlord if they want to.