Selling a House with Renters in South Dakota: What Landlords Need to Know
Selling a property with existing tenants in South Dakota requires careful navigation of both landlord-tenant law and real estate regulations. South Dakota landlords must honor existing lease agreements when selling rental property, though they have options including selling with tenants in place or providing proper notice for termination depending on lease terms.
Failure to follow proper procedures when selling a tenant-occupied property in South Dakota could result in legal disputes, delayed sales, or potential liability. Always review lease agreements carefully and consider consulting with a real estate attorney familiar with South Dakota landlord-tenant law before listing your 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
South Dakota Codified Laws § 43-32-13
This law establishes that when a landlord sells a rental property, the new owner becomes the landlord and inherits the existing lease agreement. This means that tenants cannot be automatically evicted just because the property is sold. The new owner must honor the terms of the existing lease until it expires.
South Dakota Codified Laws § 43-32-19
This statute outlines the proper notice requirements for terminating a tenancy in South Dakota. For month-to-month tenancies, a landlord must provide at least 30 days' written notice before terminating the tenancy. This applies to new owners who wish to end a tenancy after purchasing a property, but only after the existing lease term has ended.
South Dakota Codified Laws § 43-32-6
This law requires landlords to disclose the names and addresses of persons authorized to manage the property. When selling a property with tenants, the seller must notify tenants of the change in ownership and provide contact information for the new owner or property manager.
South Dakota Codified Laws § 43-32-12
This statute addresses security deposits, which is relevant when selling a property with tenants. The law requires that security deposits be transferred to the new owner, who then assumes responsibility for returning the deposit at the end of the tenancy. The seller should document the transfer of deposits to protect all parties.
South Dakota Codified Laws § 43-8-8
This law pertains to the disclosure requirements when selling residential property. While not specific to rental properties, it requires sellers to disclose certain material defects. When selling a property with tenants, this disclosure should include information about existing leases and tenant rights.
Regional Variances
Eastern South Dakota
Sioux Falls, as South Dakota's largest city, has more formalized rental procedures. Landlords must provide at least 30 days' written notice to terminate month-to-month tenancies. The city has a more active rental market with higher tenant turnover, potentially making it easier to coordinate sales with lease endings. Local real estate agents often have experience with tenant-occupied property sales.
As a college town housing South Dakota State University, Brookings has a significant student rental population. This creates a unique seasonal rental market that can affect home sales. Selling during summer months may be advantageous as student leases typically run August-to-August. The city has specific ordinances regarding rental property inspections that may need to be addressed before a sale.
Western South Dakota
Rapid City has a strong tourism influence due to proximity to the Black Hills and Mount Rushmore, creating a market for short-term rentals. The city has specific ordinances regarding short-term rentals that may affect property sales. Additionally, Rapid City has a significant military population from Ellsworth Air Force Base, creating unique rental dynamics with military tenants who have federal protections.
Sturgis has unique rental considerations due to the annual Sturgis Motorcycle Rally. Many property owners utilize short-term rental arrangements during the rally, which can significantly impact property values and sales timing. Local ordinances may have specific provisions for rally-related rentals that could affect property transfers with existing tenants.
Tribal Jurisdictions
Properties within or adjacent to the Pine Ridge Reservation may be subject to tribal jurisdiction or have special considerations regarding land status. Selling property with tenants in these areas may require additional steps, including potential tribal approval or notification. Tribal housing authorities may have specific regulations that differ from state law.
Properties within the Cheyenne River Reservation boundaries may be subject to tribal housing regulations that differ from state law. Sellers should verify jurisdiction and applicable laws when selling tenant-occupied properties in these areas. Tribal housing authorities may need to be consulted during the sale process.
Suggested Compliance Checklist
Review Lease Agreement
1 days after startingCarefully review all existing lease agreements to understand tenant rights, lease terms, and any clauses related to property sale. Pay special attention to lease duration, termination clauses, and any right of first refusal that may be included. In South Dakota, valid lease agreements must be honored by new owners.
Prepare Notice to Tenants of Intent to Sell
3 days after startingWhile South Dakota 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 document should inform tenants of your plans to sell, potential showing schedules, and reassurance about their rights under existing leases.
Complete Property Disclosure Statement
7 days after startingSouth Dakota law (SDCL § 43-4-38 through 43-4-44) requires sellers to disclose known material defects of the property. This disclosure must be provided to potential buyers before they make an offer. When selling a tenant-occupied property, include information about existing tenancies in this disclosure.
Request Estoppel Certificate from Tenants
14 days after startingAn estoppel certificate confirms the terms of the lease, current rent amount, security deposit held, and that the tenant has no claims against the landlord. While not legally required in South Dakota, this document protects both seller and buyer by documenting the current status of all tenancies. Request this from each tenant.
Prepare Rent Roll
10 days after startingCreate a comprehensive rent roll that includes all current tenants, their monthly rent amounts, security deposits held, lease start and end dates, and any outstanding issues. This document will be essential for potential buyers to understand the rental income and tenant situation.
Coordinate Property Showings with Tenants
15 days after startingIn South Dakota, landlords must provide reasonable notice (typically 24 hours) before entering a rental property. Schedule showings with proper notice and try to minimize disruption to tenants. Consider offering incentives for cooperative tenants, such as rent reductions during the showing period.
Evaluate Options for Vacant Property Sale
20 days after startingIf you prefer to sell the property vacant, review your options based on lease terms. For month-to-month tenancies, South Dakota requires at least one month's notice to terminate. For fixed-term leases, you generally cannot terminate early unless the lease contains specific provisions allowing this or the tenant violates lease terms.
Consider Cash for Keys Agreement
25 days after startingIf you want to sell the property vacant but have tenants with valid leases, consider offering a 'cash for keys' agreement. This voluntary agreement offers financial incentive for tenants to vacate early. The amount should be significant enough to cover moving expenses and the inconvenience of relocating before the lease ends.
Draft Early Lease Termination Agreement
28 days after startingIf tenants are willing to terminate their lease early without a cash incentive, document this agreement formally. This should include the agreed-upon move-out date, condition requirements for the property, and terms for the return of security deposits. Both parties should sign this document.
Prepare Real Estate Purchase Agreement
35 days after startingWhen you find a buyer, ensure the purchase agreement clearly addresses the property's tenant-occupied status. The agreement should specify whether the property will be delivered vacant or with tenants in place, and include contingencies related to tenant cooperation if necessary.
Draft Assignment of Leases
40 days after startingIf selling the property with tenants in place, prepare an assignment of leases to transfer all landlord rights and obligations to the new owner. This document should list all active leases being transferred and confirm that security deposits will also transfer to the new owner.
Prepare Security Deposit Transfer Agreement
42 days after startingSouth Dakota law (SDCL § 43-32-24) requires landlords to transfer security deposits to the new owner when property is sold. Document this transfer formally, including the amount for each unit, and provide notice to tenants about the transfer of their deposits to the new owner.
Notify Tenants of New Ownership
45 days after startingOnce the sale is complete, provide written notice to all tenants with the new owner's name and contact information for rent payments and maintenance requests. While not specifically required by South Dakota law, this is a professional practice that helps ensure a smooth transition.
Transfer Utilities and Service Contracts
47 days after startingCoordinate with the new owner to transfer any utilities that remain in your name and any service contracts for the property (lawn care, snow removal, etc.). Provide the new owner with vendor contact information and service schedules.
Final Accounting and Record Keeping
50 days after startingMaintain copies of all tenant-related documents, communications, and agreements for at least three years after the sale (longer if required by your tax advisor). This includes proof of security deposit transfers and tenant notifications, which may be needed for tax purposes or in case of future disputes.
| Task | Description | Document | Days after starting |
|---|---|---|---|
| Review Lease Agreement | Carefully review all existing lease agreements to understand tenant rights, lease terms, and any clauses related to property sale. Pay special attention to lease duration, termination clauses, and any right of first refusal that may be included. In South Dakota, valid lease agreements must be honored by new owners. | - | 1 |
| Prepare Notice to Tenants of Intent to Sell | While South Dakota 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 document should inform tenants of your plans to sell, potential showing schedules, and reassurance about their rights under existing leases. | Notice to Tenants of Intent to Sell | 3 |
| Complete Property Disclosure Statement | South Dakota law (SDCL § 43-4-38 through 43-4-44) requires sellers to disclose known material defects of the property. This disclosure must be provided to potential buyers before they make an offer. When selling a tenant-occupied property, include information about existing tenancies in this disclosure. | Property Disclosure Statement | 7 |
| Request Estoppel Certificate from Tenants | An estoppel certificate confirms the terms of the lease, current rent amount, security deposit held, and that the tenant has no claims against the landlord. While not legally required in South Dakota, this document protects both seller and buyer by documenting the current status of all tenancies. Request this from each tenant. | Estoppel Certificate | 14 |
| Prepare Rent Roll | Create a comprehensive rent roll that includes all current tenants, their monthly rent amounts, security deposits held, lease start and end dates, and any outstanding issues. This document will be essential for potential buyers to understand the rental income and tenant situation. | Rent Roll | 10 |
| Coordinate Property Showings with Tenants | In South Dakota, landlords must provide reasonable notice (typically 24 hours) before entering a rental property. Schedule showings with proper notice and try to minimize disruption to tenants. Consider offering incentives for cooperative tenants, such as rent reductions during the showing period. | - | 15 |
| Evaluate Options for Vacant Property Sale | If you prefer to sell the property vacant, review your options based on lease terms. For month-to-month tenancies, South Dakota requires at least one month's notice to terminate. For fixed-term leases, you generally cannot terminate early unless the lease contains specific provisions allowing this or the tenant violates lease terms. | - | 20 |
| Consider Cash for Keys Agreement | If you want to sell the property vacant but have tenants with valid leases, consider offering a 'cash for keys' agreement. This voluntary agreement offers financial incentive for tenants to vacate early. The amount should be significant enough to cover moving expenses and the inconvenience of relocating before the lease ends. | Cash for Keys Agreement | 25 |
| Draft Early Lease Termination Agreement | If tenants are willing to terminate their lease early without a cash incentive, document this agreement formally. This should include the agreed-upon move-out date, condition requirements for the property, and terms for the return of security deposits. Both parties should sign this document. | Early Lease Termination Agreement | 28 |
| Prepare Real Estate Purchase Agreement | When you find a buyer, ensure the purchase agreement clearly addresses the property's tenant-occupied status. The agreement should specify whether the property will be delivered vacant or with tenants in place, and include contingencies related to tenant cooperation if necessary. | Real Estate Purchase Agreement | 35 |
| Draft Assignment of Leases | If selling the property with tenants in place, prepare an assignment of leases to transfer all landlord rights and obligations to the new owner. This document should list all active leases being transferred and confirm that security deposits will also transfer to the new owner. | Assignment of Leases | 40 |
| Prepare Security Deposit Transfer Agreement | South Dakota law (SDCL § 43-32-24) requires landlords to transfer security deposits to the new owner when property is sold. Document this transfer formally, including the amount for each unit, and provide notice to tenants about the transfer of their deposits to the new owner. | Security Deposit Transfer Agreement | 42 |
| Notify Tenants of New Ownership | Once the sale is complete, provide written notice to all tenants with the new owner's name and contact information for rent payments and maintenance requests. While not specifically required by South Dakota law, this is a professional practice that helps ensure a smooth transition. | - | 45 |
| Transfer Utilities and Service Contracts | Coordinate with the new owner to transfer any utilities that remain in your name and any service contracts for the property (lawn care, snow removal, etc.). Provide the new owner with vendor contact information and service schedules. | - | 47 |
| Final Accounting and Record Keeping | Maintain copies of all tenant-related documents, communications, and agreements for at least three years after the sale (longer if required by your tax advisor). This includes proof of security deposit transfers and tenant notifications, which may be needed for tax purposes or in case of future disputes. | - | 50 |
Frequently Asked Questions
Yes, you can sell your house in South Dakota even if you have tenants living in it. The property can be sold with the existing lease intact, and the new owner will generally be bound by the terms of the existing lease agreement. This is known as 'selling subject to the lease.' The tenants have the right to remain in the property until their lease expires, unless specific provisions in the lease state otherwise.
While South Dakota law doesn't specifically require landlords to notify tenants of a sale, it's considered best practice to inform your tenants about your intention to sell. This helps maintain a good relationship and can make the selling process smoother. You should review your lease agreement as it may contain provisions about notification requirements for property showings or sales.
Yes, you can show the property to potential buyers while tenants are living there, but you must respect the tenants' rights to quiet enjoyment of the property. In South Dakota, landlords generally need to provide reasonable notice (typically 24 hours) before entering the property for showings. Check your lease agreement for any specific provisions regarding entry notice requirements.
When you sell a property with tenants in South Dakota, you should transfer the security deposits to the new owner and notify the tenants of this transfer in writing. The new owner becomes responsible for returning the security deposits at the end of the tenancy. South Dakota law requires security deposits to be returned within two weeks after the tenant vacates the premises, less any deductions for damages beyond normal wear and tear.
In South Dakota, you cannot evict tenants simply because you want to sell the property. Tenants with a fixed-term lease have the right to remain until the lease expires. For month-to-month tenancies, you can terminate the tenancy with proper notice (typically one month's notice in South Dakota), but this must be done in accordance with state law and cannot be discriminatory or retaliatory.
If a buyer wants the property vacant, you have several options: 1) Wait until the lease naturally expires before closing the sale, 2) Negotiate with your tenants to leave early, perhaps by offering cash for keys or other incentives, or 3) Sell to a buyer who is willing to purchase with tenants in place. You cannot legally force tenants with a valid lease to vacate just because a buyer prefers a vacant property.
South Dakota law does not automatically grant tenants a right of first refusal to purchase the property before it's sold to someone else. However, check your lease agreement, as it may contain a clause granting this right. If there is no such clause, you are not legally obligated to offer your tenants the opportunity to buy the property before selling it to another party.
The new owner must honor the existing lease until it expires. They cannot raise the rent or change lease terms during the lease period unless the lease specifically allows for such changes. Once the lease expires, the new owner can offer a new lease with different terms, including increased rent, or continue on a month-to-month basis with proper notice of any changes as required by South Dakota law (typically one month's notice for month-to-month tenancies).
You should transfer all tenant-related documents to the new owner, including: 1) Original lease agreements, 2) Security deposit information and records, 3) Rental payment history, 4) Maintenance request records, 5) Any notices or communications with tenants, 6) Tenant contact information, and 7) Move-in inspection reports or documentation of the property condition. This ensures the new owner has all necessary information to manage the tenancy properly.