Selling a House with Renters in Tennessee: What Landlords Need to Know
Selling a property with active tenants in Tennessee requires careful navigation of state landlord-tenant laws that protect renters' rights while allowing property owners to sell. Tennessee landlords must honor existing lease agreements and provide proper notice according to state law, while potential buyers must understand they typically purchase the property subject to existing tenancy.
Failure to follow Tennessee's legal requirements when selling tenant-occupied property could result in legal disputes, delayed sales, or financial penalties. Always consult with a real estate attorney familiar with Tennessee landlord-tenant law before listing a rented property for sale.
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
Tennessee Uniform Residential Landlord and Tenant Act (URLTA)
This law governs landlord-tenant relationships in Tennessee and is relevant when selling a property with tenants. It requires landlords to honor existing lease agreements even when ownership changes. The new owner must abide by the terms of any existing lease until it expires, meaning tenants cannot be automatically evicted just because the property is sold.
Tennessee Code § 66-28-512 - Effect of Sale of Premises
This statute specifically addresses what happens when a rental property is sold. It states that the new owner is subject to the provisions of any existing lease and steps into the shoes of the previous landlord. This means all security deposits and prepaid rent must be transferred to the new owner, who becomes responsible for returning them to the tenant.
Tennessee Code § 66-28-505 - Termination of Periodic Tenancy
For month-to-month tenancies (as opposed to fixed-term leases), this law requires landlords to provide at least 30 days' written notice to terminate the tenancy. This applies when selling a property with tenants who don't have a long-term lease. The new owner must still provide proper notice if they wish to end the tenancy after purchase.
Tennessee Code § 66-28-507 - Landlord's Access to Dwelling Unit
This law is relevant when showing a tenant-occupied property to potential buyers. It requires landlords to give tenants at least 24 hours' notice before entering the property for showings. The law balances the landlord's right to sell the property with the tenant's right to quiet enjoyment.
Tennessee Code § 66-28-401 - Security Deposits
When selling a property with tenants, this law requires the transfer of security deposits to the new owner. The seller must either transfer all security deposits to the buyer or return them to the tenants. The law also specifies requirements for handling and returning security deposits, which the new owner must follow.
Regional Variances
Major Metropolitan Areas
Nashville has additional tenant protections that require landlords to provide at least 60 days' notice before terminating a lease when selling a property, even if the lease agreement specifies a shorter period. The Metropolitan Development and Housing Agency also offers relocation assistance programs for low-income tenants displaced by property sales.
Memphis has a Tenant Notification Ordinance that requires landlords to provide written notice to tenants within 10 days of listing a property for sale. Additionally, Memphis has stronger enforcement of the state's retaliatory eviction laws, making it more difficult to evict tenants shortly after listing a property.
Knoxville has implemented a Fair Housing Ordinance that provides additional protections for tenants during property sales. Landlords must provide tenants with information about their rights and at least 30 days' notice before showing the property to potential buyers.
Tourist-Heavy Counties
Due to the high number of vacation rentals, Sevier County has specific regulations for selling properties with short-term rental permits. If tenants have a vacation rental agreement, different rules apply than for long-term residential leases, often with fewer protections for the occupants.
Hamilton County has implemented additional disclosure requirements for sellers with tenants in place. Sellers must provide potential buyers with complete copies of all lease agreements and rental payment histories, which can affect the selling process and timeline.
University Towns
Areas near the University of Tennessee have specific regulations regarding student housing. Properties sold with student tenants in place may be subject to additional inspections and must comply with stricter safety codes than other residential properties.
Murfreesboro has enacted ordinances that limit the timing of property showings during academic terms when selling student rentals. Sellers must work around exam periods and cannot disrupt students during designated study periods.
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. Tennessee law requires that you honor existing leases even when selling the property. Pay special attention to any clauses regarding property sale, right of first refusal, or early termination options.
Prepare Notice to Tenants of Intent to Sell
3 days after startingWhile Tennessee 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, reassure them about their lease rights, and explain how showings will be conducted.
Understand Tenant Rights During Property Showings
5 days after startingIn Tennessee, landlords must provide reasonable notice (typically 24 hours) before entering the property for showings. Review your lease agreements for specific notice requirements. You cannot force tenants to leave during showings, and showings must occur at reasonable times.
Complete Property Disclosure Statement
7 days after startingTennessee law (TCA § 66-5-201) requires sellers to provide a residential property disclosure statement to potential buyers. This must include all known material defects. When tenants occupy the property, note any maintenance issues they've reported that haven't been addressed.
Request Estoppel Certificate from Tenants
10 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 required by Tennessee law, this document protects both seller and buyer by documenting the tenant relationship status at time of sale.
Prepare Rent Roll Document
12 days after startingCreate a comprehensive rent roll showing all current tenants, their lease terms, monthly rent amounts, security deposits held, and payment history. This document is essential for potential buyers to understand the rental income and tenant situation.
Consider Cash for Keys Option
14 days after startingIf you prefer to sell the property vacant, you may offer tenants financial incentive to vacate early through a 'cash for keys' agreement. This is legal in Tennessee as long as it's voluntary and not coercive. The agreement should specify the move-out date, amount to be paid, and condition requirements for the property.
Draft Early Lease Termination Agreement (If Applicable)
16 days after startingIf tenants agree to terminate their lease early without a cash incentive, document this agreement formally. The agreement should include the move-out date, any fees waived, and confirmation that both parties voluntarily agree to end the lease. Tennessee law allows this if both parties consent.
Prepare Real Estate Purchase Agreement with Tenant Provisions
20 days after startingWhen drafting the purchase agreement, include specific language addressing the existing tenancies. The agreement should clearly state whether the property is being sold with tenants in place and that leases will transfer to the new owner. In Tennessee, leases automatically transfer to the new owner upon sale.
Create Assignment of Leases Document
22 days after startingPrepare a formal assignment of leases to transfer all landlord rights and obligations to the new owner. This document should list all current leases, their terms, and explicitly transfer all landlord interests to the buyer at closing.
Draft Security Deposit Transfer Agreement
24 days after startingTennessee law (TCA § 66-28-301) requires landlords to transfer all security deposits to the new owner or return them to tenants upon property sale. This agreement documents the transfer of all security deposits to the buyer, including amounts, tenant names, and acknowledgment of the buyer's responsibility for these funds going forward.
Notify Tenants of New Ownership
30 days after startingAfter closing, Tennessee law requires that tenants be notified of the new ownership and where to send rent payments. While this is technically the new owner's responsibility, coordinating this communication helps ensure a smooth transition for all parties.
| 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. Tennessee law requires that you honor existing leases even when selling the property. Pay special attention to any clauses regarding property sale, right of first refusal, or early termination options. | - | 1 |
| Prepare Notice to Tenants of Intent to Sell | While Tennessee 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, reassure them about their lease rights, and explain how showings will be conducted. | Notice to Tenants of Intent to Sell | 3 |
| Understand Tenant Rights During Property Showings | In Tennessee, landlords must provide reasonable notice (typically 24 hours) before entering the property for showings. Review your lease agreements for specific notice requirements. You cannot force tenants to leave during showings, and showings must occur at reasonable times. | - | 5 |
| Complete Property Disclosure Statement | Tennessee law (TCA § 66-5-201) requires sellers to provide a residential property disclosure statement to potential buyers. This must include all known material defects. When tenants occupy the property, note any maintenance issues they've reported that haven't been addressed. | 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 required by Tennessee law, this document protects both seller and buyer by documenting the tenant relationship status at time of sale. | Estoppel Certificate | 10 |
| Prepare Rent Roll Document | Create a comprehensive rent roll showing all current tenants, their lease terms, monthly rent amounts, security deposits held, and payment history. This document is essential for potential buyers to understand the rental income and tenant situation. | Rent Roll | 12 |
| Consider Cash for Keys Option | If you prefer to sell the property vacant, you may offer tenants financial incentive to vacate early through a 'cash for keys' agreement. This is legal in Tennessee as long as it's voluntary and not coercive. The agreement should specify the move-out date, amount to be paid, and condition requirements for the property. | Cash for Keys Agreement | 14 |
| Draft Early Lease Termination Agreement (If Applicable) | If tenants agree to terminate their lease early without a cash incentive, document this agreement formally. The agreement should include the move-out date, any fees waived, and confirmation that both parties voluntarily agree to end the lease. Tennessee law allows this if both parties consent. | Early Lease Termination Agreement | 16 |
| Prepare Real Estate Purchase Agreement with Tenant Provisions | When drafting the purchase agreement, include specific language addressing the existing tenancies. The agreement should clearly state whether the property is being sold with tenants in place and that leases will transfer to the new owner. In Tennessee, leases automatically transfer to the new owner upon sale. | Real Estate Purchase Agreement | 20 |
| Create Assignment of Leases Document | Prepare a formal assignment of leases to transfer all landlord rights and obligations to the new owner. This document should list all current leases, their terms, and explicitly transfer all landlord interests to the buyer at closing. | Assignment of Leases | 22 |
| Draft Security Deposit Transfer Agreement | Tennessee law (TCA § 66-28-301) requires landlords to transfer all security deposits to the new owner or return them to tenants upon property sale. This agreement documents the transfer of all security deposits to the buyer, including amounts, tenant names, and acknowledgment of the buyer's responsibility for these funds going forward. | Security Deposit Transfer Agreement | 24 |
| Notify Tenants of New Ownership | After closing, Tennessee law requires that tenants be notified of the new ownership and where to send rent payments. While this is technically the new owner's responsibility, coordinating this communication helps ensure a smooth transition for all parties. | - | 30 |
Frequently Asked Questions
Yes, you can sell your house in Tennessee even if you have tenants living in it. The property can be sold with the existing lease in place, and the new owner generally must honor the terms of that lease. This means the tenants have the right to stay until their lease expires, unless specific provisions in the lease state otherwise.
While Tennessee law doesn't specifically require landlords to notify tenants of a sale, it's considered best practice to inform your tenants about your intentions to sell. Your lease agreement may also contain provisions about notification requirements. Providing proper notice helps maintain good relations and can make the selling process smoother.
In Tennessee, when you sell a property with an active lease, the lease transfers with the property. This means the new owner becomes the new landlord and must honor the existing lease terms until it expires. The only exceptions would be if the lease specifically addresses property sales or if the tenant and new owner mutually agree to terminate or modify the lease.
Generally, no. In Tennessee, having plans to sell your property is not legal grounds for eviction. You can only evict tenants for legally valid reasons such as non-payment of rent, lease violations, or if the lease term has ended. If you have a month-to-month tenancy, you can terminate it with proper notice (typically 30 days in Tennessee), but you cannot evict simply to sell the property if there's a fixed-term lease in place.
In Tennessee, landlords must provide reasonable notice (typically 24 hours) before entering the property, including for showings to potential buyers. Tenants have the right to quiet enjoyment of the property, so showings must be conducted at reasonable times and with proper notice. You cannot force tenants to leave during showings, and their rights to privacy must be respected throughout the selling process.
Yes, you can negotiate with your tenants to leave early by offering incentives, commonly known as 'cash for keys.' This might include returning their security deposit in full, covering moving expenses, or providing a lump sum payment. Any agreement should be documented in writing and signed by both parties. This approach can be beneficial if you believe the property will sell more easily vacant, but tenants are not obligated to accept such offers.
If you want to sell your Tennessee property vacant but have tenants with an active lease, your options are limited. You can: (1) Wait until the lease expires before selling; (2) Sell to a buyer who is willing to purchase with tenants in place; (3) Negotiate with tenants to terminate the lease early with compensation; or (4) Include a clause in your sales contract making the sale contingent on the property being vacant by closing. You cannot legally force tenants out before their lease ends simply to sell the property.
Yes, when selling a property with tenants in Tennessee, you must transfer all security deposits to the new owner. Tennessee law 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 returning the security deposit at the end of the tenancy.
While tenants cannot unreasonably refuse access for showings, they do have rights to privacy and quiet enjoyment of the property. In Tennessee, landlords must provide reasonable notice (typically 24 hours) before showings and conduct them at reasonable times. If a tenant consistently refuses access despite proper notice, you may have grounds for legal action, but it's best to try to work cooperatively with tenants and possibly offer incentives for their cooperation during the sales process.
Whether to wait until a lease expires depends on your specific situation. Selling with vacant possession may attract more potential buyers and possibly command a higher price. However, waiting could delay your plans and result in lost income. Some investors specifically look for properties with reliable tenants already in place. Consider factors such as current market conditions, your timeline, the condition of the property, the terms of the existing lease, and the quality of your tenant relationship when making this decision.