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

Carefully review all current lease agreements to understand tenant rights, lease terms, and any provisions related to property sale. Texas Property Code protects tenants' right to stay until the end of their lease term, even when ownership changes. Pay special attention to lease duration, renewal options, and any clauses regarding property sale or early termination.

Research Texas Property Code Chapter 92 to understand tenant protections. In Texas, when a property is sold, the lease transfers to the new owner who must honor existing lease terms. Month-to-month tenants typically require 30 days' notice before termination. Fixed-term leases generally cannot be terminated early just because of a sale unless the lease specifically allows it.

While not legally required in Texas, it's good practice to formally notify tenants of your intent to sell. This document should explain the selling process, how showings will be handled, and reassure tenants about their rights. Include information about property access for showings (Texas law requires reasonable notice, typically 24 hours) and emphasize that their lease terms remain valid.

Texas Property Code §5.008 requires sellers to provide buyers with a Seller's Disclosure Notice detailing the property's condition. When tenants occupy the property, include information about existing leases, rental history, any tenant issues or disputes, and the condition of tenant-occupied units. Be thorough and honest to avoid future liability.

Create a comprehensive rent roll that details all current tenants, their lease terms, monthly rent amounts, security deposits held, payment history, and any outstanding issues. This document is essential for potential buyers to understand the rental income and tenant situation. Update this document regularly throughout the selling process to keep it accurate.

Ask each tenant to complete an estoppel certificate that verifies their lease terms, 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 mandatory in Texas, it's highly recommended for rental property sales.

When showing the property to potential buyers, you must provide tenants with reasonable notice (typically 24 hours in Texas). Schedule showings at reasonable times and be respectful of tenants' privacy and comfort. Document all notices given to tenants about showings to demonstrate compliance with access requirements under Texas Property Code §92.0081.

If you need vacant property for sale and tenants have valid leases, consider offering a 'cash for keys' agreement. This voluntary agreement offers financial incentive for tenants to vacate early. The amount should be meaningful (often moving costs plus 1-3 months' rent). Remember this is entirely voluntary - tenants cannot be forced to accept, and any attempt to pressure tenants could violate Texas tenant protection laws.

If tenants are willing to terminate their lease early, create a formal agreement documenting the terms. Include the termination date, any financial compensation, security deposit handling, and release of future obligations. Both parties must sign this agreement for it to be valid. Remember that in Texas, tenants cannot be forced to terminate early due to a sale unless their lease specifically allows it.

When drafting the purchase agreement, include specific provisions addressing the existing tenants. Clearly state whether the property is being sold with tenants in place and that leases will transfer to the new owner. Include copies of all lease agreements, the rent roll, and estoppel certificates as attachments. Specify how security deposits and prorated rents will be handled at closing.

Prepare a document that formally transfers all tenant security deposits to the new owner at closing. Texas Property Code §92.105 requires the new owner to be responsible for security deposit refunds, even if the previous owner failed to transfer them. This agreement should detail each tenant's deposit amount, document the transfer to the buyer, and include acknowledgment that the buyer assumes all deposit obligations.

Create a formal assignment document that transfers all lease agreements from seller to buyer. This document should list all current leases being transferred, affirm that copies have been provided to the buyer, and state that the buyer assumes all landlord obligations under these leases. This protects the seller from future claims related to lease obligations after the sale.

After closing, Texas Property Code §92.105 requires prompt notification to tenants about the change in ownership. While the new owner typically handles this, ensure they understand this obligation. The notice should include the new owner's name, address, and instructions for rent payment and maintenance requests. Security deposits must be transferred to the new owner, who assumes responsibility for them.