Selling a House with Renters in California: What Landlords Need to Know
Selling a property with tenants in California requires navigating specific state laws that provide substantial protections for renters. California landlords must understand proper notice requirements, tenant rights under just cause eviction laws, and potential complications with showing occupied properties to prospective buyers.
California has some of the strongest tenant protection laws in the nation, including statewide rent control and just cause eviction requirements under the Tenant Protection Act of 2019. Failing to follow proper procedures when selling a tenant-occupied property can result in significant legal penalties and delays.
Key Considerations
Scenarios
Decisions
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Scenarios
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Relevant Documents
Assignment of Leases
A legal document that transfers the landlord's rights and obligations under existing lease agreements to the new property owner, ensuring continuity of the tenancy terms.
Cash for Keys Agreement
A document that formalizes an arrangement where the property owner offers financial incentive to tenants to vacate the property voluntarily before the sale or closing date.
Early Lease Termination Agreement
If the seller and tenants mutually agree to end the lease early before the sale, this document outlines the terms of that agreement, including any compensation or notice periods.
Estoppel Certificate
A document signed by tenants confirming the terms of their lease, current rent amount, security deposit held, and that the landlord is not in default. This provides assurance to potential buyers about the status of existing tenancies.
Notice to Tenants of Intent to Sell
A formal written notice informing tenants of the property owner's intention to sell the property. This document helps establish clear communication and may be required by law in many jurisdictions.
Property Disclosure Statement
A document where the seller discloses known material defects and other important information about the property, including the presence of tenants and the terms of their occupancy.
Real Estate Purchase Agreement
The contract between seller and buyer that should specifically address the existence of tenants, the status of their leases, and how those leases will be handled during and after the sale.
Rent Roll
A document that lists all rental units, current tenants, lease terms, monthly rent amounts, security deposits, and payment histories. This provides potential buyers with a clear picture of the property's rental income.
Security Deposit Transfer Agreement
A document that formalizes the transfer of tenant security deposits from the seller to the buyer, including accounting for all deposits and accrued interest where applicable.
Relevant Laws
California Civil Code Section 1946.1
This law requires landlords to provide at least 60 days' written notice to terminate a tenancy if the tenant has resided in the rental unit for one year or more. For tenants who have lived in the property for less than one year, a 30-day notice is required. When selling a property with tenants, this notice requirement must be followed unless the lease specifies otherwise.
California Civil Code Section 1950.5
This section governs security deposits for residential tenancies. When selling a property with tenants, the seller must either transfer the security deposits to the new owner or return them to the tenants. The new owner becomes liable for the security deposits if they are transferred, and proper documentation of this transfer should be included in the sale agreement.
California Civil Code Section 1954
This law specifies that landlords must provide reasonable notice (typically 24 hours) before entering a rental property for showings to prospective buyers. The law balances the landlord's right to sell the property with the tenant's right to quiet enjoyment of their home during the sales process.
Ellis Act (California Government Code Section 7060-7060.7)
The Ellis Act allows landlords to evict tenants if they intend to remove the property from the rental market entirely. This can be relevant when selling a property if the new owner intends to occupy the property themselves rather than continue renting it. However, the Ellis Act has specific notice requirements and potential relocation payment obligations, particularly in cities with rent control.
Tenant Protection Act of 2019 (AB 1482)
This California law establishes statewide rent control and just cause eviction protections. When selling a property with tenants, both the seller and buyer must be aware that evictions are only permitted for specific reasons listed in the law, and that rent increases are capped. This significantly impacts the sale of tenant-occupied properties as it limits the new owner's ability to raise rents or evict existing tenants without just cause.
Local Rent Control Ordinances
Many California cities have their own rent control and eviction protection ordinances that may be more restrictive than state law. Cities like San Francisco, Los Angeles, and Berkeley have particularly strong tenant protections that can significantly impact the sale of tenant-occupied properties. These local laws may impose additional notice requirements, relocation assistance payments, or restrictions on evictions when a property is sold.
Regional Variances
Bay Area
San Francisco has some of the strongest tenant protections in California. The San Francisco Rent Ordinance limits evictions to 16 'just causes' and requires substantial relocation payments (ranging from $7,500 to $22,500 depending on tenant circumstances). The city's Condominium Conversion Ordinance also restricts converting rental units to condos, which affects sales strategies. Additionally, the COVID-19 eviction moratorium in San Francisco had longer extensions than other parts of California.
Oakland's Just Cause for Eviction Ordinance requires one of 11 specific reasons to evict tenants. Sellers must disclose to potential buyers that the property is subject to these protections. Oakland also has a Tenant Move Out Agreement Ordinance that regulates buyout negotiations, requiring specific disclosures and a right to rescind within 25 days. Relocation payments for no-fault evictions are substantial, currently starting at $7,443 per unit plus additional amounts for households with seniors, disabled persons, or children.
Berkeley has particularly strict rent control and eviction protections. The Rent Stabilization and Eviction for Good Cause Ordinance limits rent increases and requires just cause for evictions. Berkeley also has a Tenant Buyout Ordinance requiring written disclosures, a 30-day right of rescission, and city filing requirements. The city's Ellis Act implementation requires longer notice periods (one year for elderly/disabled tenants) and higher relocation payments than state minimums.
Southern California
Los Angeles has the Rent Stabilization Ordinance (RSO) that applies to buildings built before October 1978. Under the RSO, landlords must pay relocation assistance ranging from $8,750 to $22,050 depending on tenant status. LA also has a Tenant Anti-Harassment Ordinance that prohibits pressuring tenants to vacate. The city requires a 60-day notice for no-fault evictions rather than the state-standard 30 days for tenancies under one year.
Santa Monica has comprehensive rent control laws that survive the sale of a property. The city requires just cause for eviction and mandates relocation fees ranging from $16,500 to $31,000 depending on unit size and tenant circumstances. Santa Monica also has a Tenant Harassment Ordinance with significant penalties. Additionally, the city has specific rules about Ellis Act withdrawals, requiring longer notice periods and substantially higher relocation payments than state law.
San Diego has the Tenants' Right to Know Ordinance requiring just cause for eviction in buildings with 2+ units. Unlike other major California cities, San Diego does not have comprehensive rent control, but is subject to the statewide rent cap under AB 1482. The city has specific notice requirements for terminating tenancies and recently enacted a COVID-19 eviction moratorium with provisions that extended beyond the state protections.
Central California
Sacramento has a Tenant Protection Program that limits annual rent increases to 5% plus CPI (not to exceed 10%) for buildings built before February 1, 1995. The ordinance requires just cause for evictions and relocation assistance of $1,500 for no-fault evictions. These protections are less stringent than those in the Bay Area or Los Angeles, potentially making it easier to sell tenant-occupied properties.
Fresno has fewer local tenant protections than coastal cities and primarily follows state law (AB 1482) for tenant protections. This means sellers have more flexibility when selling tenant-occupied properties, though they must still comply with state requirements for just cause evictions and relocation assistance. Fresno does have a Rental Housing Improvement Program requiring rental property registration and inspections, which sellers should ensure compliance with before transferring ownership.
Suggested Compliance Checklist
Review Existing Lease Agreements
1 days after startingCarefully review all current lease agreements to understand tenant rights, lease terms, and any provisions related to property sale. Pay special attention to lease duration, termination clauses, and any right of first refusal provisions. California law generally requires new owners to honor existing leases after a sale.
Determine Tenant Rights Based on Lease Status
3 days after startingCalifornia law provides different protections based on whether tenants have a fixed-term lease or month-to-month tenancy. Fixed-term leases must be honored by new owners until expiration. Month-to-month tenancies can be terminated with proper notice, but local rent control ordinances may provide additional protections.
Check Local Rent Control and Just Cause Eviction Ordinances
5 days after startingResearch if your property is subject to local rent control or just cause eviction ordinances (common in cities like San Francisco, Los Angeles, Oakland, Berkeley, and others). These ordinances may restrict your ability to terminate tenancies even when selling the property. The California Tenant Protection Act (AB 1482) also provides statewide rent control and just cause eviction requirements for many properties.
Prepare Notice to Tenants of Intent to Sell
7 days after startingWhile not legally required in all California jurisdictions, it's good practice to formally notify tenants of your intent to sell. This builds goodwill and sets expectations. The notice should include information about showing procedures, tenant rights during the sale process, and your commitment to minimizing disruption.
Establish Property Showing Procedures
8 days after startingCalifornia Civil Code Section 1954 requires landlords to give tenants reasonable notice (typically 24 hours) before entering the property for showings. Establish a showing schedule that respects tenant privacy and complies with this requirement. Consider offering incentives for tenant cooperation during showings.
Complete Property Disclosure Statement
10 days after startingCalifornia law requires sellers to disclose all known material facts about the property, including any issues with tenants. Complete the Transfer Disclosure Statement (TDS) and other required disclosures, noting tenant occupancy, any lease violations, pending disputes, or maintenance issues reported by tenants.
Request Estoppel Certificates from Tenants
14 days after startingAsk tenants to complete estoppel certificates that verify the terms of their tenancy, current rent, security deposit amounts, and confirm there are no landlord defaults. This document protects both the seller and buyer by establishing the facts of the tenancy. In California, tenants are generally required to complete these within a reasonable time if the lease requires it.
Prepare Rent Roll
16 days after startingCreate a comprehensive rent roll documenting all current tenants, their lease terms, monthly rent amounts, security deposits held, and payment history. This document is essential for the buyer's due diligence and will be referenced during the sale process.
Consider Options for Vacant Property Sale
18 days after startingIf you prefer to sell the property vacant, evaluate legal options based on tenant lease status. For month-to-month tenancies not subject to rent control, you can typically issue a 60-day notice to terminate (30 days if tenancy less than one year). For fixed-term leases or properties under rent control, consider negotiating voluntary move-outs.
Draft Cash for Keys Agreement (if applicable)
21 days after startingIf pursuing voluntary move-outs, prepare a Cash for Keys agreement offering financial incentives for tenants to vacate early. This agreement should clearly state the move-out date, amount offered, condition requirements for the unit, and release of claims. Ensure the agreement complies with California law and doesn't appear coercive, which could violate tenant protection laws.
Draft Early Lease Termination Agreement (if applicable)
23 days after startingFor tenants with fixed-term leases who agree to move out early, prepare a formal early lease termination agreement. This should document the agreed-upon move-out date, any financial compensation, handling of security deposits, and mutual release of future obligations under the lease.
Prepare Real Estate Purchase Agreement with Tenant Provisions
25 days after startingWork with your real estate agent to ensure the purchase agreement properly addresses the property's tenant-occupied status. Include provisions about lease assignments, security deposit transfers, prorated rent at closing, and whether the sale is contingent on vacant delivery or tenant-occupied status.
Draft Assignment of Leases
28 days after startingPrepare an assignment of leases document that formally transfers all landlord rights and obligations under existing leases to the new owner at closing. This document should list all current leases being transferred and affirm that there are no undisclosed amendments or side agreements with tenants.
Prepare Security Deposit Transfer Agreement
30 days after startingCalifornia law (Civil Code Section 1950.5) requires sellers to either transfer all security deposits to the new owner or return them to tenants. Create a security deposit transfer agreement documenting the exact amounts being transferred for each unit, including any deductions already taken and interest accrued if applicable.
Notify Tenants of Ownership Change
35 days after startingAfter closing, California law requires the new owner to provide written notice to tenants informing them of the ownership change, including the new owner's name, address, and instructions for rent payment. While this is the buyer's responsibility, ensure this requirement is clearly communicated in your sale documents.
| Task | Description | Document | Days after starting |
|---|---|---|---|
| Review Existing Lease Agreements | Carefully review all current lease agreements to understand tenant rights, lease terms, and any provisions related to property sale. Pay special attention to lease duration, termination clauses, and any right of first refusal provisions. California law generally requires new owners to honor existing leases after a sale. | - | 1 |
| Determine Tenant Rights Based on Lease Status | California law provides different protections based on whether tenants have a fixed-term lease or month-to-month tenancy. Fixed-term leases must be honored by new owners until expiration. Month-to-month tenancies can be terminated with proper notice, but local rent control ordinances may provide additional protections. | - | 3 |
| Check Local Rent Control and Just Cause Eviction Ordinances | Research if your property is subject to local rent control or just cause eviction ordinances (common in cities like San Francisco, Los Angeles, Oakland, Berkeley, and others). These ordinances may restrict your ability to terminate tenancies even when selling the property. The California Tenant Protection Act (AB 1482) also provides statewide rent control and just cause eviction requirements for many properties. | - | 5 |
| Prepare Notice to Tenants of Intent to Sell | While not legally required in all California jurisdictions, it's good practice to formally notify tenants of your intent to sell. This builds goodwill and sets expectations. The notice should include information about showing procedures, tenant rights during the sale process, and your commitment to minimizing disruption. | Notice to Tenants of Intent to Sell | 7 |
| Establish Property Showing Procedures | California Civil Code Section 1954 requires landlords to give tenants reasonable notice (typically 24 hours) before entering the property for showings. Establish a showing schedule that respects tenant privacy and complies with this requirement. Consider offering incentives for tenant cooperation during showings. | - | 8 |
| Complete Property Disclosure Statement | California law requires sellers to disclose all known material facts about the property, including any issues with tenants. Complete the Transfer Disclosure Statement (TDS) and other required disclosures, noting tenant occupancy, any lease violations, pending disputes, or maintenance issues reported by tenants. | Property Disclosure Statement | 10 |
| Request Estoppel Certificates from Tenants | Ask tenants to complete estoppel certificates that verify the terms of their tenancy, current rent, security deposit amounts, and confirm there are no landlord defaults. This document protects both the seller and buyer by establishing the facts of the tenancy. In California, tenants are generally required to complete these within a reasonable time if the lease requires it. | Estoppel Certificate | 14 |
| Prepare Rent Roll | Create a comprehensive rent roll documenting all current tenants, their lease terms, monthly rent amounts, security deposits held, and payment history. This document is essential for the buyer's due diligence and will be referenced during the sale process. | Rent Roll | 16 |
| Consider Options for Vacant Property Sale | If you prefer to sell the property vacant, evaluate legal options based on tenant lease status. For month-to-month tenancies not subject to rent control, you can typically issue a 60-day notice to terminate (30 days if tenancy less than one year). For fixed-term leases or properties under rent control, consider negotiating voluntary move-outs. | - | 18 |
| Draft Cash for Keys Agreement (if applicable) | If pursuing voluntary move-outs, prepare a Cash for Keys agreement offering financial incentives for tenants to vacate early. This agreement should clearly state the move-out date, amount offered, condition requirements for the unit, and release of claims. Ensure the agreement complies with California law and doesn't appear coercive, which could violate tenant protection laws. | Cash for Keys Agreement | 21 |
| Draft Early Lease Termination Agreement (if applicable) | For tenants with fixed-term leases who agree to move out early, prepare a formal early lease termination agreement. This should document the agreed-upon move-out date, any financial compensation, handling of security deposits, and mutual release of future obligations under the lease. | Early Lease Termination Agreement | 23 |
| Prepare Real Estate Purchase Agreement with Tenant Provisions | Work with your real estate agent to ensure the purchase agreement properly addresses the property's tenant-occupied status. Include provisions about lease assignments, security deposit transfers, prorated rent at closing, and whether the sale is contingent on vacant delivery or tenant-occupied status. | Real Estate Purchase Agreement | 25 |
| Draft Assignment of Leases | Prepare an assignment of leases document that formally transfers all landlord rights and obligations under existing leases to the new owner at closing. This document should list all current leases being transferred and affirm that there are no undisclosed amendments or side agreements with tenants. | Assignment of Leases | 28 |
| Prepare Security Deposit Transfer Agreement | California law (Civil Code Section 1950.5) requires sellers to either transfer all security deposits to the new owner or return them to tenants. Create a security deposit transfer agreement documenting the exact amounts being transferred for each unit, including any deductions already taken and interest accrued if applicable. | Security Deposit Transfer Agreement | 30 |
| Notify Tenants of Ownership Change | After closing, California law requires the new owner to provide written notice to tenants informing them of the ownership change, including the new owner's name, address, and instructions for rent payment. While this is the buyer's responsibility, ensure this requirement is clearly communicated in your sale documents. | - | 35 |
Frequently Asked Questions
Yes, you can sell your property in California even with tenants living in it. The lease agreement transfers to the new owner, and tenants generally have the right to stay until their lease expires. Month-to-month tenants typically require proper notice according to California law, which is usually 30 or 60 days depending on how long they've lived there.
While California law doesn't explicitly require you to inform tenants that you're selling the property, it's considered best practice to do so. You must, however, provide proper notice before showing the property to potential buyers. California Civil Code requires 24 hours' written notice before entry, and showings must occur during normal business hours unless the tenant agrees otherwise.
In California, you cannot evict tenants simply to sell a property. Valid reasons for eviction include non-payment of rent, lease violations, or specific 'just causes' under state law. However, if you're selling a single-family home and the buyer intends to occupy it as their primary residence, you may be able to terminate a month-to-month tenancy with proper notice. Fixed-term leases generally cannot be terminated early just because you want to sell.
California's Tenant Protection Act (AB 1482) limits rent increases and requires 'just cause' for evictions in many properties. In rent-controlled cities like San Francisco or Los Angeles, additional protections may apply. Some jurisdictions have 'owner move-in' eviction allowances, but these typically require the owner (not just any buyer) to move in, proper notice periods (often 60 days), and sometimes relocation assistance payments to tenants.
In California, you must provide tenants with at least 24 hours' written notice before showing the property to prospective buyers. Showings must be during reasonable hours (generally 8am-8pm on weekdays, 9am-5pm on weekends). You cannot force tenants to leave during showings. It's advisable to work cooperatively with tenants, perhaps by scheduling regular showing times or offering incentives for maintaining the property in showing condition.
When selling a property with tenants, you have two options for handling security deposits: 1) Transfer the deposits to the new owner and notify tenants in writing about the transfer, including the new owner's name, address, and phone number, or 2) Return the deposits to the tenants and let the new owner collect new deposits. California law requires detailed documentation of this transfer, and the seller remains liable if the new owner doesn't honor the deposits.
Yes, you can offer tenants a 'cash for keys' agreement to voluntarily vacate before selling. This is legal in California as long as there's no coercion. The amount is negotiable, but typically covers moving expenses, security deposit for a new rental, and sometimes additional compensation. Get any agreement in writing, specifying the move-out date, amount, and condition the property should be left in. In some rent-controlled jurisdictions, there may be minimum payment requirements for buyout agreements.
When selling a tenant-occupied property in California, you must disclose: 1) Existing lease terms and copies of all lease agreements, 2) Current rent amounts and security deposit information, 3) Any pending tenant disputes or litigation, 4) Rent control status of the property, and 5) Any known tenant issues or property defects. Failure to make proper disclosures could result in legal liability to the buyer after the sale.
Tenants cannot unreasonably refuse property showings if you've provided proper notice (24 hours written notice in California). However, they have the right to be present during showings and can refuse entry if the showing is at an unreasonable time or without proper notice. If a tenant consistently prevents properly noticed showings, you may have grounds for legal action, but it's generally better to work cooperatively with tenants during the sales process.
If your property is in a California city with local rent control (like San Francisco, Los Angeles, or Berkeley), additional restrictions may apply when selling. These often include stricter 'just cause' eviction requirements, relocation payment obligations, and limitations on owner move-in evictions. Some jurisdictions require special notices or filings when selling rent-controlled properties. Check with your specific city's rent board or housing department for local regulations that may supersede state law.