Selling a House with Renters in Hawaii: What Landlords Need to Know
Selling a tenant-occupied property in Hawaii presents unique challenges due to the state's tenant-friendly laws. Hawaii landlords must honor existing lease agreements and provide proper notice according to HRS §521, with fixed-term leases generally transferring to the new owner upon sale.
Hawaii law provides significant protections for tenants during property sales, and failing to follow proper procedures can result in legal complications and delayed transactions. Consult with a Hawaii real estate attorney before listing a tenant-occupied property to ensure compliance with all state regulations.
Key Considerations
Scenarios
Decisions
Scenarios
Decisions
Scenarios
Decisions
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
Hawaii Landlord-Tenant Code (HRS Chapter 521)
This is the primary law governing landlord-tenant relationships in Hawaii. When selling a property with tenants, landlords must respect existing lease agreements. If tenants have a fixed-term lease, the new owner generally must honor the lease terms until expiration. Month-to-month tenants must receive proper notice (typically 45 days in Hawaii) before being required to vacate.
Hawaii's Notice Requirements (HRS § 521-71)
When selling a property with tenants in Hawaii, landlords must provide proper written notice. For month-to-month tenancies, landlords must give at least 45 days' notice before termination. This applies even when the property is being sold, unless the lease specifies otherwise.
Security Deposit Transfer Requirements (HRS § 521-44)
When selling a rental property in Hawaii, the seller must transfer all security deposits to the new owner or return them to tenants. The new owner becomes responsible for the security deposits and must comply with all provisions regarding their handling and potential return.
Disclosure Requirements (HRS § 508D)
Hawaii law requires sellers to disclose material facts about the property, including the existence of tenants and the terms of their leases. Failure to properly disclose tenant information could lead to legal issues with both the buyer and the tenants.
Right of Entry for Showings (HRS § 521-53)
When selling a property with tenants, Hawaii law allows landlords to enter the premises to show it to prospective buyers, but they must provide at least 48 hours' notice to tenants before entry, except in cases of emergency or impracticability.
Tenant's Right of First Refusal (HRS § 514B-98)
In certain condominium conversions in Hawaii, tenants may have a right of first refusal to purchase their unit before it's offered to other buyers. This gives existing tenants the opportunity to buy the property they're renting before it's sold to someone else.
Regional Variances
Hawaii County
Honolulu has stricter notice requirements for landlords selling tenant-occupied properties. Landlords must provide at least 45 days' written notice to month-to-month tenants (compared to 28 days under state law). Additionally, the Honolulu Landlord-Tenant Code requires landlords to offer tenants the first right of refusal to purchase the property before listing it on the open market.
Hawaii County follows the state's standard 28-day notice requirement for month-to-month tenancies. However, local regulations require landlords to disclose any existing rental agreements to potential buyers and include specific language in purchase contracts regarding tenant rights.
Maui County
Maui County has implemented additional protections for long-term tenants (those residing in a property for 5+ years). When selling a tenant-occupied property, landlords must provide these tenants with 60 days' notice and may be required to pay relocation assistance if the new owner intends to occupy the property.
Molokai follows state law regarding tenant notices but has additional requirements for properties in designated affordable housing zones. Sellers must notify the Molokai Housing Authority when selling tenant-occupied properties in these zones, as the county may exercise right of first refusal to maintain affordable housing inventory.
Kauai County
Kauai County requires landlords to provide tenants with 45 days' notice when selling a property. Additionally, if the property is located in a Vacation Destination Area (VDA), special rules apply regarding the continuation of existing leases, as the county has regulations to prevent the conversion of long-term rentals to vacation rentals.
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. Hawaii law requires that existing leases remain valid even after property ownership changes. Pay special attention to lease duration, renewal options, and any clauses that might affect the sale process.
Prepare Notice to Tenants of Intent to Sell
3 days after startingWhile Hawaii law doesn't specifically require notifying tenants of your intent to sell, providing written notice is a professional courtesy that helps maintain good relations and cooperation during the sales process. The notice should include your intentions, how showings will be handled, and reassurance about respecting their rights under the lease.
Prepare Property Disclosure Statement
7 days after startingHawaii law (Hawaii Revised Statutes §508D) requires sellers to disclose all material facts about the property, including its condition and any defects. Since the property has tenants, include information about the rental history, any ongoing maintenance issues reported by tenants, and the condition of tenant-occupied areas.
Request Estoppel Certificate from Tenants
14 days after startingAn estoppel certificate confirms the terms of the lease, current rent, security deposit amounts, and that the tenant has no claims against the landlord. While not required by Hawaii law, this document protects both the seller and buyer by documenting the tenant's acknowledgment of the lease terms and preventing future disputes.
Coordinate Property Showings in Compliance with Tenant Rights
15 days after startingHawaii law requires landlords to provide reasonable notice (typically 48 hours) before entering a tenant's unit. Schedule showings with proper notice and respect tenants' privacy rights. Consider creating a showing schedule that minimizes disruption to tenants' lives, possibly offering incentives for cooperation during the sales process.
Prepare Rent Roll Document
21 days after startingCreate a comprehensive rent roll that details all current tenancies, including monthly rent amounts, security deposits held, lease start and end dates, and payment history. This document is essential for the buyer to understand the income potential and current tenant situation of the property.
Consider Options for Vacant Property Sale
25 days after startingIf selling the property vacant would be advantageous, evaluate legal options for ending tenancies. In Hawaii, you can only terminate month-to-month tenancies with 45 days' written notice (HRS §521-71). Fixed-term leases cannot be terminated early solely for sale purposes unless the lease contains specific provisions allowing this.
Draft Early Lease Termination Agreement (If Applicable)
30 days after startingIf tenants are willing to move out before their lease ends, create an agreement that outlines the terms of early termination. This should include move-out date, any financial incentives offered, return of security deposit terms, and release of liability for both parties. This is only valid if mutually agreed upon - you cannot force tenants to terminate early.
Prepare Cash for Keys Agreement (If Applicable)
35 days after startingIf offering financial incentives for tenants to vacate, document the terms in a formal agreement. Specify the amount offered, move-out date, property condition requirements, and payment timing. This approach can be useful for month-to-month tenancies or when seeking voluntary early termination of fixed-term leases.
Draft Security Deposit Transfer Agreement
40 days after startingPrepare documentation for transferring tenant security deposits to the new owner. Hawaii law (HRS §521-44) requires landlords to return deposits to tenants or transfer them to the new owner. The agreement should detail all deposit amounts, any deductions made during your ownership, and acknowledgment of the new owner's responsibility.
Prepare Assignment of Leases
45 days after startingCreate a document that formally transfers all lease agreements to the new property owner. This should list all current leases, their terms, and explicitly state that the new owner assumes all landlord responsibilities and obligations under these leases. This document protects you from liability after the sale.
Finalize Real Estate Purchase Agreement with Tenant Provisions
50 days after startingEnsure the purchase agreement specifically addresses the property's tenant situation. Include provisions about lease assignments, security deposit transfers, prorated rent adjustments at closing, and any warranties about the accuracy of tenant information provided. In Hawaii, the agreement should acknowledge that existing leases survive the property transfer.
Notify Tenants of Ownership Change
60 days after startingOnce the sale is finalized, Hawaii law requires notifying tenants of the new ownership. Provide written notice including the new owner's name, address for rent payments, and contact information. This should be delivered to tenants immediately after closing to ensure a smooth transition.
| 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. Hawaii law requires that existing leases remain valid even after property ownership changes. Pay special attention to lease duration, renewal options, and any clauses that might affect the sale process. | - | 1 |
| Prepare Notice to Tenants of Intent to Sell | While Hawaii law doesn't specifically require notifying tenants of your intent to sell, providing written notice is a professional courtesy that helps maintain good relations and cooperation during the sales process. The notice should include your intentions, how showings will be handled, and reassurance about respecting their rights under the lease. | Notice to Tenants of Intent to Sell | 3 |
| Prepare Property Disclosure Statement | Hawaii law (Hawaii Revised Statutes §508D) requires sellers to disclose all material facts about the property, including its condition and any defects. Since the property has tenants, include information about the rental history, any ongoing maintenance issues reported by tenants, and the condition of tenant-occupied areas. | Property Disclosure Statement | 7 |
| Request Estoppel Certificate from Tenants | An estoppel certificate confirms the terms of the lease, current rent, security deposit amounts, and that the tenant has no claims against the landlord. While not required by Hawaii law, this document protects both the seller and buyer by documenting the tenant's acknowledgment of the lease terms and preventing future disputes. | Estoppel Certificate | 14 |
| Coordinate Property Showings in Compliance with Tenant Rights | Hawaii law requires landlords to provide reasonable notice (typically 48 hours) before entering a tenant's unit. Schedule showings with proper notice and respect tenants' privacy rights. Consider creating a showing schedule that minimizes disruption to tenants' lives, possibly offering incentives for cooperation during the sales process. | - | 15 |
| Prepare Rent Roll Document | Create a comprehensive rent roll that details all current tenancies, including monthly rent amounts, security deposits held, lease start and end dates, and payment history. This document is essential for the buyer to understand the income potential and current tenant situation of the property. | Rent Roll | 21 |
| Consider Options for Vacant Property Sale | If selling the property vacant would be advantageous, evaluate legal options for ending tenancies. In Hawaii, you can only terminate month-to-month tenancies with 45 days' written notice (HRS §521-71). Fixed-term leases cannot be terminated early solely for sale purposes unless the lease contains specific provisions allowing this. | - | 25 |
| Draft Early Lease Termination Agreement (If Applicable) | If tenants are willing to move out before their lease ends, create an agreement that outlines the terms of early termination. This should include move-out date, any financial incentives offered, return of security deposit terms, and release of liability for both parties. This is only valid if mutually agreed upon - you cannot force tenants to terminate early. | Early Lease Termination Agreement | 30 |
| Prepare Cash for Keys Agreement (If Applicable) | If offering financial incentives for tenants to vacate, document the terms in a formal agreement. Specify the amount offered, move-out date, property condition requirements, and payment timing. This approach can be useful for month-to-month tenancies or when seeking voluntary early termination of fixed-term leases. | Cash for Keys Agreement | 35 |
| Draft Security Deposit Transfer Agreement | Prepare documentation for transferring tenant security deposits to the new owner. Hawaii law (HRS §521-44) requires landlords to return deposits to tenants or transfer them to the new owner. The agreement should detail all deposit amounts, any deductions made during your ownership, and acknowledgment of the new owner's responsibility. | Security Deposit Transfer Agreement | 40 |
| Prepare Assignment of Leases | Create a document that formally transfers all lease agreements to the new property owner. This should list all current leases, their terms, and explicitly state that the new owner assumes all landlord responsibilities and obligations under these leases. This document protects you from liability after the sale. | Assignment of Leases | 45 |
| Finalize Real Estate Purchase Agreement with Tenant Provisions | Ensure the purchase agreement specifically addresses the property's tenant situation. Include provisions about lease assignments, security deposit transfers, prorated rent adjustments at closing, and any warranties about the accuracy of tenant information provided. In Hawaii, the agreement should acknowledge that existing leases survive the property transfer. | Real Estate Purchase Agreement | 50 |
| Notify Tenants of Ownership Change | Once the sale is finalized, Hawaii law requires notifying tenants of the new ownership. Provide written notice including the new owner's name, address for rent payments, and contact information. This should be delivered to tenants immediately after closing to ensure a smooth transition. | - | 60 |
Frequently Asked Questions
Yes, you can sell your house in Hawaii even if you have tenants living in it. The property can be sold with the existing lease in place, and the new owner will generally be bound by the terms of that lease. This is known as 'selling subject to the lease.' The tenancy doesn't automatically terminate when ownership changes hands.
While Hawaii law doesn't specifically require landlords to notify tenants of their intent to sell, it's considered best practice to inform your tenants. This helps maintain good relations and can make the selling process smoother. You should, however, provide proper notice before showing the property to potential buyers, typically 48 hours' notice as required by Hawaii landlord-tenant law.
In Hawaii, you cannot evict tenants simply because you want to sell the property. You can only evict tenants for legally valid reasons such as non-payment of rent, violation of lease terms, or if you're not renewing a fixed-term lease that has expired. If the tenant has a fixed-term lease, they generally have the right to stay until the lease ends, regardless of the sale.
When you sell your house in Hawaii, you must either transfer the tenants' security deposits to the new owner or return them to the tenants. If you transfer the deposits, you must notify the tenants in writing about the transfer, including the new owner's name and contact information. The new owner then becomes responsible for the security deposits and must return them according to the terms of the lease and Hawaii law.
The new owner must honor the existing lease terms, including the rent amount, until the lease expires. For month-to-month tenancies in Hawaii, the new owner can increase the rent but must provide at least 45 days' written notice before the rent increase takes effect. Any rent increase must comply with any applicable local rent control ordinances, though Hawaii currently has limited rent control measures.
In Hawaii, tenants have the right to quiet enjoyment of the property even during the selling process. This means you must provide reasonable notice (typically 48 hours) before showing the property. Tenants cannot unreasonably deny access for showings, but they do have the right to be present during showings. Their personal belongings and privacy must be respected throughout the process.
Yes, you can offer your tenants a 'cash for keys' agreement to incentivize them to move out early. This is a voluntary agreement where you provide financial compensation in exchange for the tenant vacating the property before their lease ends. This agreement should be documented in writing, signed by both parties, and specify the move-out date and amount to be paid. This can be a win-win solution if you want to sell a vacant property.
Yes, you must disclose to potential buyers that the property is tenant-occupied and provide details about the existing lease terms. Hawaii's disclosure requirements for real estate transactions require sellers to disclose material facts that could affect the value or desirability of the property, which includes existing tenancies. Providing copies of the lease agreements to potential buyers is recommended.
If your tenant has a fixed-term lease in Hawaii, the new owner must honor that lease until it expires, even if they want to live in the property themselves. The only exceptions would be if there's an early termination clause in the lease or if you can negotiate a voluntary move-out with the tenant. Otherwise, the new owner will need to wait until the lease term ends before they can move in.
Yes, you can include an early termination clause in your lease that specifically addresses the sale of the property. However, for existing leases without such a clause, you cannot retroactively add this provision without the tenant's agreement. For future leases in Hawaii, consider including a clause that allows termination upon sale with appropriate notice (typically 30-60 days) and possibly compensation to the tenant for the inconvenience.