Selling Your California Rental? 6 Tips to Navigate the State’s Tenant-Friendly Laws

1. Give tenants ample warning of your intent to sell

Before listing your rental unit, make sure you understand California’s rules about notifying tenants of important things. This includes letting them know when you plan to put the property up for sale, schedule showings, enter the unit, or potentially end their tenancy.

The rules depend on the type of rental agreement you have. The notice requirements for a month-to-month or week-to-week arrangement may be different from those for a fixed-term lease. How long the tenant has lived in the property can also affect how much notice you need to give.

Under Civil Code Section 1954, landlords may arrange showings with oral notice, but they must first notify tenants in writing that the property is for sale and that they may receive oral notice of upcoming visits. This written notice must be provided within 120 days of the oral notice, and 24 hours’ notice is generally considered reasonable.

As a landlord, you should also familiarize yourself with Assembly Bill 1482, which enacted the Tenant Protection Act of 2019. It generally requires landlords to have a legally recognized reason, or ‘just cause,’ to terminate a tenancy after a tenant has continuously and lawfully occupied the property for at least 12 months. Some properties are exempt, and certain local laws provide additional protections.

To avoid legal troubles, consult a trusted legal advisor regarding when and how to notify your tenants that you are selling the rental property. Read the Guide to Residential Tenants’ and Landlords’ Rights and Responsibilities before making any major decisions.

2. Know how to handle month-to-month renters

Many states require landlords whose renters have a month-to-month lease to provide only 30 days’ notice to vacate the property they’re selling. But California is more generous when it comes to giving month-to-month renters time to figure out their future living arrangements.

In the Golden State, if a tenant has rented a home for at least a year and pays rent month to month, the landlord must give them 60 days’ written notice before asking them to move out.

Still, there’s an exception: the landlord may give just 30 days’ notice if the home is being sold to an individual buyer and the sale is already in escrow (meaning the buyer and seller have agreed to the sale and are working to complete it). Other California laws may still protect the tenant from being asked to leave, even in this situation.

3. Play fair with fixed-term tenants

In California, renters with a fixed-term lease have the right to stay put until it expires. This is true even if you sell the property before the lease is up. “A fixed-term lease protects the tenant from eviction by the current or subsequent owner,” explains Brian Kram, a Marin County real estate attorney who specializes in California tenant and landlord law.

If you’re selling to an investor, your tenant simply pays rent to the new owner until the lease ends. At that point, they can work out new terms.

However, when your buyer plans to live in the tenant-occupied home, the situation gets trickier. While you can’t legally force a tenant to leave, you can try to motivate them with money (aka “cash for keys”).

“It’s really about feeling out the tenant and having a conversation,” says Justin Bonney, a top Los Angeles-based real estate agent who’s helped clients maneuver the challenges of selling tenant-occupied rental homes, as well as other types of houses for sale in Los Angeles.

“The average varies, but between $4,000-$6,000 seems to be the sweet spot to help cover expenses like moving trucks and security deposits.”

4. Follow the rules and respect tenants when showing your property

Having strangers parade through the place they call home can be stressful for tenants. Be sure to abide by the law when arranging showings to avoid straining relationships and jeopardizing your odds of scheduling viewings on time.

• Give a 24-hour notice before showing your rental to potential buyers: You deliver this message by email, phone, or in person. All showings must be at reasonable hours. Late evenings or crack-of-dawn weekend visits probably won’t fly with most folks. And while you can ask your tenants to leave the premises for a viewing or open house, they’re entitled to deny your request.
• Express your gratitude: Consider giving your renters a gift certificate to a local coffee shop or restaurant to express your appreciation when asking them to disrupt their day for a showing. Small gestures like these can help build good relationships and encourage tenants to keep the home clean for potential buyers.
• Leave a note: If you or your agent shows your property while your tenant is out, California law says you must leave a written note letting them know you were in their home.

5. Weigh your options when dealing with difficult tenants

Let’s say you’ve been dealing with unreasonable tenants who haven’t paid rent for months. You’ve been patient, treated them fairly, and provided them with proper written notice of your plans to sell. Their lease is up, and they’ve had plenty of time to look for another place. You’ve even offered cash to motivate them to pack up and leave. But they still won’t budge.

Even worse, they refuse to let potential buyers inside the house. While such nightmare scenarios are rare, they do happen, so it pays to have a game plan just in case. Consider the following options:

Kram adds that unless you failed to disclose that the home was occupied by renters or had an agreement stating you would be responsible for getting them out before closing, the troublesome tenants will become the responsibility of the new owners.

»Learn more: Before moving forward with the sale of your California rental property, take a moment to figure out how much you could actually pocket from it. Try our Net Proceeds Calculator to get an estimate of your earnings after paying off your mortgage and covering the usual costs of selling.

What happens to the security deposit when the property is sold?

When you sell a rental property in California, you must either transfer the tenants’ security deposits to the new owner or return them to the tenants after making any lawful deductions. If you choose the former, you’ll transfer the full deposit to the buyer during escrow so they can take over responsibility once the property changes hands. Make sure there’s clear documentation showing the deposit amount and any required details.

It’s also important to notify the tenant in writing about the transfer, including the new owner’s name and contact information. Handling the security deposit correctly helps you avoid confusion or disputes later and makes for a much smoother closing process.

What are your options for selling a rental property with tenants?

Selling a rental property with tenants comes with its own set of challenges, but the right strategy can make the process smoother. Depending on your timeline, goals, and the type of buyers you want to attract, there are several ways to approach the sale:

• Sell as an investment property: Pitch your rental as an income-ready property with tenants already in place. This can attract investors who want to start earning rental income right away and help you find interested buyers faster.
• Offer tenant buyout or relocation incentives: If you’d rather sell to a traditional homebuyer, consider offering tenants some money to move out. This gives you a chance to stage the home, reach more potential buyers, and possibly get a better offer.
• Work with a house-buying company: If you want a fast and hassle-free sale, selling to a cash-for-homes company can be a great option. Companies like HomeLight’s Simple Sale make it easier to sell quickly without the typical delays of listing, showings, and negotiations, which is ideal for landlords who want to move on without disrupting tenants too much.

Sell Your California Rental Property Fast

Skip the showings, inspections, and long waits for your tenant-occupied rental property. With HomeLight’s Simple Sale, you can receive a cash offer within 24 hours of submitting your property details and close the sale in just 7 days.

Request Cash Offer

Partner with professionals for the best outcome

Selling a rental property can come with a few extra challenges, particularly when tenants are involved. That’s why it helps to have professionals on your side who know how to handle these kinds of sales.

An investor-friendly agent understands what buyers look for, how much they’re typically willing to pay, and what matters most in the investment market. Since they regularly work with property buyers, they may also be able to connect you with individuals or groups looking for a property like yours.

Use HomeLight to find a reliable real estate agent and sell your home faster. The service is 100% free, with no strings attached. It takes only two minutes to match you with an experienced agent who can help you navigate the murky waters of lease agreements and tenants’ rights.

Editor’s note: This blog post is for educational purposes only, not legal advice.  Reach out to your own advisor for professional assistance on selling a house in California and understanding tenants’ rights.

Header Image Source: (Wonderlane / Flickr via Creative Commons Legal Code)