Selling a House with Renters in Pennsylvania: What Landlords Need to Know

Carefully review all current lease agreements to understand tenant rights, lease terms, and any clauses related to property sale. Pay special attention to lease duration, early termination provisions, and any right of first refusal clauses that may give tenants the option to purchase the property before it's sold to a third party. Pennsylvania law requires honoring existing leases even after property sale.

Under Pennsylvania's Real Estate Seller Disclosure Law (68 Pa. C.S. §§ 7301-7315), sellers must disclose known material defects using the standard disclosure form. When selling a tenant-occupied property, include information about the rental situation, any ongoing maintenance issues reported by tenants, and the condition of tenant-occupied areas. This disclosure must be provided to potential buyers before they sign an agreement of sale.

While Pennsylvania law doesn't specifically require notifying tenants of your intent to sell, providing written notice is a professional courtesy and helps maintain good relations. This notice should inform tenants of your plans to sell, explain how showings will be handled, and reassure them that their lease rights will be respected. Include information about how and when property showings will occur.

In Pennsylvania, landlords have the right to show the property to prospective buyers, but must provide reasonable notice to tenants (typically 24 hours, unless lease specifies otherwise). Create a showing schedule that respects tenant privacy and complies with lease terms. Document all communications about showings to avoid disputes.

Create a detailed rent roll document that lists all current tenants, their lease terms, monthly rent amounts, security deposit amounts, payment history, and any outstanding issues. This document is essential for potential buyers to understand the rental income and tenant situation they would be acquiring with the property.

Ask tenants to sign an estoppel certificate that verifies the terms of their lease, current rent, security deposit amount, and confirms they have no claims against the landlord. This document protects both the seller and buyer by preventing tenants from later claiming different lease terms. While not required by Pennsylvania law, it's a standard practice in investment property sales.

If you prefer to sell the property vacant, review your options based on lease terms. For month-to-month leases, you can provide proper notice to terminate (30 days in Pennsylvania). For fixed-term leases, you'll need to either wait until lease expiration, negotiate an early termination, or sell with tenants in place. Remember that in Pennsylvania, a new owner must honor existing leases.

If tenants agree to move out before their lease ends, draft an early lease termination agreement that outlines the terms, including move-out date, any financial incentives offered, and release of future rent obligations. This agreement should be signed by both parties and clearly state that it supersedes relevant portions of the original lease.

If you want tenants to vacate before selling and they're not otherwise obligated to leave, consider offering a 'cash for keys' arrangement. This document should specify the amount offered, the condition the property must be left in, and the exact date by which tenants must vacate. Ensure the agreement complies with Pennsylvania law and doesn't appear coercive.

Work with a real estate attorney to draft a purchase agreement that addresses the property's tenant-occupied status. Include provisions about lease assignments, security deposit transfers, and whether the property will be delivered vacant or tenant-occupied. In Pennsylvania, be sure to include required disclosures and clearly state which party is responsible for tenant relations during the escrow period.

Draft an assignment of leases document that transfers all landlord rights and obligations under existing leases to the new owner. This document should list all current leases being transferred and state that the new owner assumes all landlord responsibilities. In Pennsylvania, this assignment is typically executed at closing as part of the property transfer.

Under Pennsylvania law (68 P.S. § 250.512), security deposits must be properly transferred to the new owner. Draft an agreement that documents the transfer of all security deposits, including amounts, dates collected, and any deductions already made. The new owner must notify tenants in writing about the transfer of their security deposits within a reasonable time after closing.

After closing, ensure tenants are properly notified of the change in ownership. While Pennsylvania doesn't specify exactly how this must be done, written notice should include the new owner's name, contact information, and instructions for future rent payments. This is typically the buyer's responsibility but confirm it's handled properly to avoid confusion.

Update your tax records to reflect the sale of rental property. For Pennsylvania state tax purposes, you'll need to report the sale on your PA-40 Schedule D (Sale, Exchange or Disposition of Property) and potentially on your federal taxes as well. Consult with a tax professional about potential capital gains implications and any available exemptions.