Selling a House with Renters in Michigan: What Landlords Need to Know
Selling a property with existing tenants in Michigan requires careful navigation of both landlord-tenant law and real estate regulations. Michigan landlords must honor existing lease agreements when selling rental property, though they have options including selling to investors, waiting until lease expiration, or negotiating with tenants for early termination.
Failure to properly respect tenant rights during a property sale can result in legal complications, delayed closings, and potential lawsuits in Michigan. Always provide proper notice according to Michigan law and consider consulting with a real estate attorney familiar with Michigan landlord-tenant regulations before listing your occupied rental property.
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
Michigan Landlord-Tenant Relationships Act (Act 348 of 1972)
This law governs the relationship between landlords and tenants in Michigan. When selling a property with tenants, the new owner must honor existing lease agreements. The sale of a property does not automatically terminate a valid lease, and tenants have the right to remain until their lease expires.
Michigan Truth in Renting Act (Act 454 of 1978)
This act prohibits certain provisions in rental agreements and requires specific disclosures. When selling a property with tenants, landlords must ensure that any representations made to tenants are accurate, including information about the potential sale of the property.
Michigan Security Deposit Act (Act 348 of 1972, Chapter 554)
This law regulates how security deposits must be handled. When selling a property, the original landlord must either transfer the security deposits to the new owner or return them to the tenants. The new owner becomes responsible for the security deposits and must provide written notice to tenants about the transfer of ownership.
Michigan Notice Requirements for Termination of Tenancy
For month-to-month tenancies, Michigan law requires a 30-day written notice to terminate the tenancy. For tenants with a lease, the landlord generally cannot terminate before the lease ends unless the tenant violates lease terms. When selling a property, these notice requirements still apply if the new owner wishes to terminate tenancies after purchase.
Michigan Covenant of Quiet Enjoyment
This legal principle guarantees tenants the right to peacefully enjoy their rental property. When selling a property with tenants, both the seller and buyer must respect this covenant, meaning showings and inspections must be conducted with reasonable notice (typically 24 hours) and minimal disruption to tenants.
Michigan Seller Disclosure Act (Act 92 of 1993)
While primarily focused on disclosures to buyers, this act indirectly affects tenants during a sale. Sellers must disclose the existence of leases to potential buyers, and buyers purchase the property subject to those existing leases unless otherwise negotiated.
Regional Variances
Southeast Michigan
Detroit has additional tenant protections through the Detroit Housing Commission. Landlords must provide a minimum 60-day notice to vacate for month-to-month tenants when selling a property, compared to the standard 30 days in other parts of Michigan. The city also requires sellers to disclose any outstanding blight violations to potential buyers, which can affect the sale process if rental properties have unresolved violations.
Ann Arbor has stronger tenant rights ordinances than most Michigan municipalities. Landlords must provide 90 days' notice before terminating a lease due to property sale. Additionally, Ann Arbor requires early showing restrictions - landlords can only show occupied rental properties to prospective buyers during reasonable hours and with 24-hour written notice, compared to the state's more general 'reasonable notice' requirement.
West Michigan
Grand Rapids has enacted a Rental Property Owner Registration program that requires all rental properties to be registered and certified. When selling a property with tenants, the seller must transfer this registration to the new owner and notify the city. Failure to maintain proper registration during the sale process can result in fines. Additionally, Grand Rapids has specific lead hazard regulations that may require remediation before a sale can be completed if the rental property was built before 1978.
Kalamazoo has implemented a Rental Housing Ordinance that requires all rental units to pass inspection before being sold with existing tenants. The city also has a Tenant Relocation Assistance program that may require sellers to provide financial assistance to displaced tenants if the sale will result in tenant removal. This can add significant costs to the selling process not present in other Michigan jurisdictions.
Northern Michigan
Traverse City has seasonal rental restrictions that affect the sale of properties with tenants. Due to the tourism-based economy, there are specific regulations regarding converting long-term rentals to short-term vacation rentals after purchase. Sellers must disclose these restrictions to buyers, and tenants have additional protections during peak tourist season (May-September) when evictions due to property sales are more strictly regulated.
Upper Peninsula
Marquette has unique winter eviction restrictions that affect property sales with tenants. From November through April, there are additional requirements for landlords selling properties with tenants, including ensuring adequate alternative housing is available. This can delay closing processes or require special arrangements with buyers who intend to occupy the property immediately after purchase.
Suggested Compliance Checklist
Review Existing Lease Agreements
1 days after startingCarefully review all current lease agreements to understand tenant rights, lease terms, and expiration dates. Michigan law requires that existing leases remain valid even when ownership changes. Pay special attention to any clauses regarding property sale, early termination options, or right of first refusal that may be included in the lease.
Determine Selling Strategy Based on Lease Status
3 days after startingDecide whether to sell with tenants in place or wait until leases expire. In Michigan, you cannot simply terminate a lease because you want to sell. If selling with tenants, the property may appeal to investors. If waiting for vacancy, you'll need to plan around lease end dates or negotiate early termination.
Prepare Notice to Tenants of Intent to Sell
5 days after startingWhile Michigan law doesn't specifically require notifying tenants of your intent to sell, providing written notice is a professional courtesy and helps maintain good relations. The notice should explain your plans, reassure tenants their lease rights will be preserved, and outline the showing process. This is not a termination notice.
Complete Michigan Seller's Disclosure Statement
7 days after startingMichigan law (Seller Disclosure Act, Act 92 of 1993) requires sellers to complete a Property Disclosure Statement revealing known conditions of the property. This must be provided to potential buyers before they make an offer. Include information about the rental situation, including any maintenance issues reported by tenants.
Establish Showing Procedures Compliant with Tenant Rights
10 days after startingUnder Michigan law, landlords must provide 'reasonable notice' before entering a rental unit, which is generally interpreted as 24 hours. Create a showing schedule that respects this requirement. Document your notification process and tenant responses to demonstrate compliance with entry laws.
Request Tenants Complete Estoppel Certificates
14 days after startingAsk tenants to complete estoppel certificates that verify the terms of their tenancy, current rent, security deposit amounts, and confirm whether the landlord has fulfilled all obligations. While not required by Michigan law, these certificates provide assurance to buyers about the status of existing leases.
Prepare Rent Roll Documentation
16 days after startingCreate a comprehensive rent roll that details all units, current tenants, lease terms, monthly rent amounts, security deposits held, and payment history. This document is essential for potential buyers to understand the income potential and current status of the rental property.
Consider Cash for Keys Option (If Applicable)
20 days after startingIf you prefer to sell the property vacant, consider offering tenants financial incentives to vacate early through a 'cash for keys' agreement. This is legal in Michigan as long as it's voluntary and not coercive. The agreement should clearly state the move-out date, amount offered, and condition requirements for the unit upon vacancy.
Draft Early Lease Termination Agreement (If Applicable)
23 days after startingIf tenants are willing to terminate their lease early without a cash incentive, create a formal agreement documenting this arrangement. The agreement should specify the move-out date, any modifications to the original lease terms regarding notice periods, and how security deposits will be handled. Both parties must sign to make it legally binding.
Prepare Real Estate Purchase Agreement with Tenant Provisions
25 days after startingWork with your real estate agent to create a purchase agreement that specifically addresses the presence of tenants. Include language that makes clear the property is being sold subject to existing leases, and attach copies of all current leases as exhibits to the agreement.
Create Security Deposit Transfer Agreement
28 days after startingMichigan law (MCL 554.603) requires landlords to either return security deposits to tenants or transfer them to the new owner when selling property. Prepare a transfer agreement documenting the exact amounts being transferred for each unit. The new owner must notify tenants in writing within 30 days of the transfer.
Prepare Assignment of Leases Document
30 days after startingDraft a formal assignment of leases that transfers all landlord rights and responsibilities to the new owner. This document should list all current leases being transferred and affirm that you've provided complete and accurate copies of all lease agreements to the buyer.
Notify Tenants of New Ownership
35 days after startingOnce the sale is complete, Michigan law requires that tenants be notified of the change in ownership, including the name and address of the new owner or property manager for sending rent payments and maintenance requests. While this is technically the new owner's responsibility, coordinating this communication helps 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 expiration dates. Michigan law requires that existing leases remain valid even when ownership changes. Pay special attention to any clauses regarding property sale, early termination options, or right of first refusal that may be included in the lease. | - | 1 |
| Determine Selling Strategy Based on Lease Status | Decide whether to sell with tenants in place or wait until leases expire. In Michigan, you cannot simply terminate a lease because you want to sell. If selling with tenants, the property may appeal to investors. If waiting for vacancy, you'll need to plan around lease end dates or negotiate early termination. | - | 3 |
| Prepare Notice to Tenants of Intent to Sell | While Michigan law doesn't specifically require notifying tenants of your intent to sell, providing written notice is a professional courtesy and helps maintain good relations. The notice should explain your plans, reassure tenants their lease rights will be preserved, and outline the showing process. This is not a termination notice. | Notice to Tenants of Intent to Sell | 5 |
| Complete Michigan Seller's Disclosure Statement | Michigan law (Seller Disclosure Act, Act 92 of 1993) requires sellers to complete a Property Disclosure Statement revealing known conditions of the property. This must be provided to potential buyers before they make an offer. Include information about the rental situation, including any maintenance issues reported by tenants. | Property Disclosure Statement | 7 |
| Establish Showing Procedures Compliant with Tenant Rights | Under Michigan law, landlords must provide 'reasonable notice' before entering a rental unit, which is generally interpreted as 24 hours. Create a showing schedule that respects this requirement. Document your notification process and tenant responses to demonstrate compliance with entry laws. | - | 10 |
| Request Tenants Complete Estoppel Certificates | Ask tenants to complete estoppel certificates that verify the terms of their tenancy, current rent, security deposit amounts, and confirm whether the landlord has fulfilled all obligations. While not required by Michigan law, these certificates provide assurance to buyers about the status of existing leases. | Estoppel Certificate | 14 |
| Prepare Rent Roll Documentation | Create a comprehensive rent roll that details all units, current tenants, lease terms, monthly rent amounts, security deposits held, and payment history. This document is essential for potential buyers to understand the income potential and current status of the rental property. | Rent Roll | 16 |
| Consider Cash for Keys Option (If Applicable) | If you prefer to sell the property vacant, consider offering tenants financial incentives to vacate early through a 'cash for keys' agreement. This is legal in Michigan as long as it's voluntary and not coercive. The agreement should clearly state the move-out date, amount offered, and condition requirements for the unit upon vacancy. | Cash for Keys Agreement | 20 |
| Draft Early Lease Termination Agreement (If Applicable) | If tenants are willing to terminate their lease early without a cash incentive, create a formal agreement documenting this arrangement. The agreement should specify the move-out date, any modifications to the original lease terms regarding notice periods, and how security deposits will be handled. Both parties must sign to make it legally binding. | Early Lease Termination Agreement | 23 |
| Prepare Real Estate Purchase Agreement with Tenant Provisions | Work with your real estate agent to create a purchase agreement that specifically addresses the presence of tenants. Include language that makes clear the property is being sold subject to existing leases, and attach copies of all current leases as exhibits to the agreement. | Real Estate Purchase Agreement | 25 |
| Create Security Deposit Transfer Agreement | Michigan law (MCL 554.603) requires landlords to either return security deposits to tenants or transfer them to the new owner when selling property. Prepare a transfer agreement documenting the exact amounts being transferred for each unit. The new owner must notify tenants in writing within 30 days of the transfer. | Security Deposit Transfer Agreement | 28 |
| Prepare Assignment of Leases Document | Draft a formal assignment of leases that transfers all landlord rights and responsibilities to the new owner. This document should list all current leases being transferred and affirm that you've provided complete and accurate copies of all lease agreements to the buyer. | Assignment of Leases | 30 |
| Notify Tenants of New Ownership | Once the sale is complete, Michigan law requires that tenants be notified of the change in ownership, including the name and address of the new owner or property manager for sending rent payments and maintenance requests. While this is technically the new owner's responsibility, coordinating this communication helps ensure a smooth transition. | - | 35 |
Frequently Asked Questions
Yes, you can sell your house in Michigan even if you have tenants living in it. However, the sale does not automatically terminate the lease agreement. The new owner generally must honor the existing lease terms until the lease expires, unless the lease specifically states otherwise.
While Michigan law doesn't specifically require you to notify tenants of your intent to sell, it's considered best practice to inform them. You should review your lease agreement, as it may contain provisions about property sales. Additionally, you'll need to coordinate with tenants for property showings, which typically requires reasonable notice (24 hours is standard in Michigan).
In Michigan, you cannot evict tenants simply because you want to sell the property. Tenants with a valid lease have the right to remain until the lease expires. For month-to-month tenancies, you must provide at least 30 days' written notice to terminate the tenancy. Valid reasons for eviction include non-payment of rent, lease violations, or if the tenant holds over after the lease expires.
When selling a rental property in Michigan, you must either transfer the security deposits to the new owner or return them to the tenants. Michigan law (MCL 554.603) requires that you notify tenants in writing about the transfer of their security deposit to the new owner, including the new owner's name and address. The new owner becomes responsible for the security deposits and must handle them according to Michigan law.
Yes, you must disclose to potential buyers that the property has tenants and provide details about the lease terms. This is important information that affects the property's value and the buyer's rights after purchase. Failing to disclose this information could potentially lead to legal issues after the sale.
No, the new owner must honor the existing lease terms until the lease expires. They cannot raise the rent or change other lease conditions during the active lease period unless the lease specifically allows for such changes. After the lease expires, the new owner can offer new terms or choose not to renew the lease, following proper notice requirements.
If your tenants are on a month-to-month agreement, you have more flexibility. In Michigan, either party can terminate a month-to-month tenancy with at least 30 days' written notice. This means you could potentially sell the property without tenants by providing proper notice before closing. However, the new owner would still need to honor this notice period if the sale occurs during this time.
Yes, you can negotiate with your tenants to leave early by offering incentives, commonly known as 'cash for keys.' This might include returning their full security deposit, paying moving expenses, or offering a lump sum payment. Any agreement should be documented in writing and signed by both parties to avoid future disputes.
Yes, you have the right to show the property to potential buyers, but you must respect your tenants' rights. Michigan law requires that you provide reasonable notice before entering the property (typically 24 hours). The lease may also specify requirements for showings. It's best to work cooperatively with tenants to establish a showing schedule that minimizes disruption to their lives.
If a tenant unreasonably refuses to allow showings despite proper notice, they may be violating the lease, particularly if it contains provisions about property access. You can remind them of their obligations under the lease and Michigan law. If they continue to refuse access, you might have grounds for eviction, but it's advisable to consult with an attorney before proceeding with any legal action.