Selling a House with Renters in Washington State: What Landlords Need to Know
Selling a property with existing tenants in Washington State requires careful navigation of specific tenant protection laws that vary by location. Landlords must provide proper notice periods (60-120 days depending on the municipality), honor existing lease terms, and in some cases, may need to provide relocation assistance or first right of refusal to tenants.
Washington has some of the strongest tenant protection laws in the country, with cities like Seattle imposing additional requirements beyond state law. Failing to follow proper procedures when selling tenant-occupied property can result in delayed sales, legal liability, and potential financial penalties.
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
Washington Residential Landlord-Tenant Act (RLTA)
This is the primary law governing landlord-tenant relationships in Washington state. When selling a property with tenants, landlords must respect existing lease agreements. If a tenant has a fixed-term lease, the new owner generally must honor the lease terms until expiration. The RLTA provides specific requirements for notices, entry rights, and tenant protections that must be followed during the sale process.
60-Day Notice Requirement for Termination
In Washington, landlords must provide at least 60 days' written notice to terminate a month-to-month tenancy without cause in most jurisdictions. This applies when selling a property and wanting vacant possession. Some cities like Seattle have stricter 'just cause' eviction protections that limit a property sale as grounds for termination.
Notice Requirements for Showing Property
When selling a property with tenants, Washington law requires landlords to provide at least 24 hours' notice before showing the property to potential buyers. The notice must specify the date, approximate time, and purpose of entry. Landlords cannot abuse this right by conducting excessive showings that unreasonably interfere with the tenant's right to quiet enjoyment.
Security Deposit Transfer Requirements
When a property is sold, Washington law requires the original landlord to either transfer all security deposits to the new owner or return them to the tenants. The seller must notify tenants in writing about the transfer of their deposits to the new owner, including the new owner's name and address.
Just Cause Eviction Protections in Seattle
Seattle's Just Cause Eviction Ordinance provides additional protections for tenants. In Seattle, the sale of a property is not considered a 'just cause' for eviction. This means that even if you sell your property, the new owner cannot evict tenants without one of the specifically enumerated just causes in the ordinance.
Tenant Relocation Assistance Ordinance
In some Washington cities, including Seattle, if a property owner plans to substantially rehabilitate, demolish, or change the use of a property, they may be required to obtain a tenant relocation license and provide relocation assistance to low-income tenants. This applies when selling a property that the new owner intends to redevelop.
Regional Variances
Western Washington
Seattle has some of the strongest tenant protections in Washington state. The Just Cause Eviction Ordinance requires landlords to have a legitimate reason to end a tenancy. When selling a property with tenants, the sale itself is not considered just cause. Additionally, Seattle has a Tenant Relocation Assistance Ordinance that requires landlords to pay relocation assistance to low-income tenants if they're displaced by demolition, substantial rehabilitation, or change of use. The First-in-Time rule also requires landlords to accept the first qualified applicant, which affects new owners who want to re-rent the property.
Tacoma requires 60-day notice (rather than the state minimum of 20 days) for no-cause terminations of month-to-month tenancies. The city also has a Rental Housing Code that provides additional protections for tenants. When selling a property with tenants, landlords must provide proper notice according to these enhanced requirements.
Bellingham has enacted tenant protection ordinances that require 60-day notice for rent increases over 5% and for termination of tenancy. Sellers must ensure compliance with these extended notice periods when planning to sell tenant-occupied properties.
Eastern Washington
Spokane has enacted tenant protections that require 90-day notice for substantial rent increases (over 5%). The city also prohibits winter evictions between December 1 and February 28 except in certain circumstances. These protections must be considered when selling tenant-occupied properties, as they may affect the timing and process of the sale.
Kennewick generally follows state law regarding tenant protections with no significant additional local ordinances. Sellers must provide the state-required 20-day notice for month-to-month tenancies and honor existing fixed-term leases when selling properties with tenants.
Central Washington
Yakima follows state law regarding tenant protections with minimal additional local regulations. When selling a property with tenants, landlords must adhere to the standard Washington state requirements, including honoring existing lease terms and providing proper notice for termination of month-to-month tenancies.
Wenatchee primarily follows state law for tenant protections. Sellers of tenant-occupied properties must honor existing leases and provide proper notice according to state requirements.
King County (Outside Seattle)
Bellevue has enacted tenant protection ordinances requiring 120-day notice for substantial rent increases (over 10%). When selling a property with tenants, landlords must consider these extended notice requirements if the sale might result in rent increases by the new owner.
Redmond requires 60-day notice for no-cause termination of month-to-month tenancies, which is longer than the state minimum. Sellers must account for this extended notice period when planning to sell tenant-occupied properties.
Suggested Compliance Checklist
Review Lease Agreement
1 days after startingCarefully review all current lease agreements to understand tenant rights, lease terms, and any provisions related to property sale. Pay special attention to lease duration, early termination clauses, and any right of first refusal provisions. Washington law requires honoring existing leases even after property sale.
Prepare Notice to Tenants of Intent to Sell
3 days after startingIn Washington, while not legally required, it's best practice to provide written notice to tenants about your intent to sell. This helps maintain good relations and prepares tenants for showings. Include information about the showing process and how their privacy will be respected.
Complete Property Disclosure Statement
7 days after startingWashington law (RCW 64.06) requires sellers to provide a disclosure statement to potential buyers. This must include information about the property's condition, including any known defects. When tenants occupy the property, note their presence and lease terms in this disclosure.
Coordinate Property Showings with Tenants
10 days after startingUnder Washington law (RCW 59.18.150), landlords must provide at least 24 hours' notice before entering a rental unit for showings. Coordinate a showing schedule that respects tenant rights while facilitating the sale process. Document all communications regarding access.
Request Estoppel Certificate from Tenants
14 days after startingAn estoppel certificate confirms the terms of the lease, current rent, and security deposit amounts. While not required by Washington law, this document protects both seller and buyer by documenting the tenant's acknowledgment of lease terms and preventing later disputes.
Prepare Rent Roll
15 days after startingCreate a detailed rent roll documenting all current tenants, their lease terms, monthly rent amounts, security deposits held, and payment history. This document is essential for the buyer to understand the rental income and tenant situation they're acquiring.
Evaluate Options for Vacant Property Sale
20 days after startingIf selling the property vacant would be advantageous, research options including waiting for lease expiration, negotiating early termination, or offering cash incentives. Remember that in Washington, you cannot force tenants to leave during their lease term without cause, even when selling.
Draft Early Lease Termination Agreement (if applicable)
25 days after startingIf tenants agree 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.
Prepare Cash for Keys Agreement (if applicable)
28 days after startingIf offering financial incentives for tenants to vacate early, document the arrangement in a Cash for Keys Agreement. Specify the amount offered, move-out date, property condition requirements, and payment terms. This approach must be voluntary for tenants and cannot be coercive.
Negotiate Real Estate Purchase Agreement with Tenant Provisions
35 days after startingWhen drafting the purchase agreement, include specific provisions addressing the presence of tenants. Detail how security deposits and prepaid rent will be handled at closing, and include language confirming that leases will be assigned to the new owner.
Prepare Assignment of Leases
40 days after startingCreate a document that formally transfers all lease agreements from seller to buyer. This should list all current leases, their key terms, and state that all landlord rights and obligations will transfer to the new owner at closing. This document protects both parties and clarifies ongoing responsibilities.
Draft Security Deposit Transfer Agreement
42 days after startingWashington law (RCW 59.18.270) requires proper transfer of security deposits to the new owner. Create a document detailing all security deposits held, their amounts, and confirming their transfer at closing. The new owner must notify tenants in writing about the transfer within a reasonable time.
Notify Tenants of New Ownership
50 days after startingAfter closing, Washington law requires that tenants be notified of 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 where to send rent payments.
File Final Tax Documentation
60 days after startingUpdate your tax records to reflect the sale of rental property. This includes reporting the sale on your federal and Washington state tax returns, and properly accounting for depreciation recapture. Consult with a tax professional to ensure compliance with all tax obligations.
| Task | Description | Document | Days after starting |
|---|---|---|---|
| Review Lease Agreement | Carefully review all current lease agreements to understand tenant rights, lease terms, and any provisions related to property sale. Pay special attention to lease duration, early termination clauses, and any right of first refusal provisions. Washington law requires honoring existing leases even after property sale. | - | 1 |
| Prepare Notice to Tenants of Intent to Sell | In Washington, while not legally required, it's best practice to provide written notice to tenants about your intent to sell. This helps maintain good relations and prepares tenants for showings. Include information about the showing process and how their privacy will be respected. | Notice to Tenants of Intent to Sell | 3 |
| Complete Property Disclosure Statement | Washington law (RCW 64.06) requires sellers to provide a disclosure statement to potential buyers. This must include information about the property's condition, including any known defects. When tenants occupy the property, note their presence and lease terms in this disclosure. | Property Disclosure Statement | 7 |
| Coordinate Property Showings with Tenants | Under Washington law (RCW 59.18.150), landlords must provide at least 24 hours' notice before entering a rental unit for showings. Coordinate a showing schedule that respects tenant rights while facilitating the sale process. Document all communications regarding access. | - | 10 |
| Request Estoppel Certificate from Tenants | An estoppel certificate confirms the terms of the lease, current rent, and security deposit amounts. While not required by Washington law, this document protects both seller and buyer by documenting the tenant's acknowledgment of lease terms and preventing later disputes. | Estoppel Certificate | 14 |
| Prepare Rent Roll | Create a detailed rent roll documenting all current tenants, their lease terms, monthly rent amounts, security deposits held, and payment history. This document is essential for the buyer to understand the rental income and tenant situation they're acquiring. | Rent Roll | 15 |
| Evaluate Options for Vacant Property Sale | If selling the property vacant would be advantageous, research options including waiting for lease expiration, negotiating early termination, or offering cash incentives. Remember that in Washington, you cannot force tenants to leave during their lease term without cause, even when selling. | - | 20 |
| Draft Early Lease Termination Agreement (if applicable) | If tenants agree 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. | Early Lease Termination Agreement | 25 |
| Prepare Cash for Keys Agreement (if applicable) | If offering financial incentives for tenants to vacate early, document the arrangement in a Cash for Keys Agreement. Specify the amount offered, move-out date, property condition requirements, and payment terms. This approach must be voluntary for tenants and cannot be coercive. | Cash for Keys Agreement | 28 |
| Negotiate Real Estate Purchase Agreement with Tenant Provisions | When drafting the purchase agreement, include specific provisions addressing the presence of tenants. Detail how security deposits and prepaid rent will be handled at closing, and include language confirming that leases will be assigned to the new owner. | Real Estate Purchase Agreement | 35 |
| Prepare Assignment of Leases | Create a document that formally transfers all lease agreements from seller to buyer. This should list all current leases, their key terms, and state that all landlord rights and obligations will transfer to the new owner at closing. This document protects both parties and clarifies ongoing responsibilities. | Assignment of Leases | 40 |
| Draft Security Deposit Transfer Agreement | Washington law (RCW 59.18.270) requires proper transfer of security deposits to the new owner. Create a document detailing all security deposits held, their amounts, and confirming their transfer at closing. The new owner must notify tenants in writing about the transfer within a reasonable time. | Security Deposit Transfer Agreement | 42 |
| Notify Tenants of New Ownership | After closing, Washington law requires that tenants be notified of 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 where to send rent payments. | - | 50 |
| File Final Tax Documentation | Update your tax records to reflect the sale of rental property. This includes reporting the sale on your federal and Washington state tax returns, and properly accounting for depreciation recapture. Consult with a tax professional to ensure compliance with all tax obligations. | - | 60 |
Frequently Asked Questions
Yes, you can sell your house in Washington even if you have tenants living in it. The lease agreement transfers to the new owner, and tenants retain their rights under the existing lease terms. However, you must follow proper notification procedures and respect tenant rights throughout the sales process.
While Washington law doesn't specifically require landlords to notify tenants of a sale, it's considered best practice to inform your tenants of your intentions. This helps maintain a good relationship and can make the sales process smoother. However, you must provide proper notice if you need access to the property for showings, following the notice requirements in your lease and Washington law (typically 48 hours notice).
In Washington, you generally cannot evict tenants simply to sell a property. If tenants have a fixed-term lease, they have the right to remain until the lease expires, even if ownership changes. For month-to-month tenancies, landlords must provide at least 20 days' written notice before the end of the rental period in most areas, though Seattle and some other municipalities have stricter requirements. Some cities like Seattle have 'just cause' eviction protections that further limit a landlord's ability to end tenancies.
When selling a property with tenants in Washington, you have two options for handling security deposits: 1) Transfer the deposits to the new owner and notify tenants in writing about the transfer, including the new owner's name and contact information, or 2) Return the deposits to the tenants and let the new owner collect new deposits. The transfer of security deposits should be explicitly addressed in your purchase and sale agreement.
You don't need your tenants' permission to show the property, but you must provide proper notice before entering (typically 48 hours in Washington). The notice should specify the date, approximate time, and purpose of entry. It's advisable to work with your tenants to establish a showing schedule that minimizes disruption to their lives. Remember that tenants have the right to quiet enjoyment of the property during their tenancy.
Seattle has additional tenant protections beyond Washington state law. These include Just Cause Eviction Ordinance (requiring one of 18 specific reasons to terminate a tenancy), longer notice periods for certain actions, and specific disclosure requirements. If you're selling a property with tenants in Seattle, consult with a real estate attorney familiar with Seattle's tenant protection laws to ensure compliance with all local regulations.
The new owner must honor the existing lease terms, including the rent amount, until the lease expires. For month-to-month tenancies, the new owner must provide at least 60 days' written notice before increasing rent in most of Washington (90 days' notice for increases of 10% or more in a 12-month period). Some municipalities like Seattle have additional rent increase notice requirements and potential restrictions.
Your purchase and sale agreement should clearly address: 1) The transfer of all lease agreements, 2) The handling of security deposits and last month's rent, 3) Proration of rent at closing, 4) Copies of all tenant communications and lease documents to be provided to the buyer, and 5) Representations about any pending tenant disputes or issues. Having these items clearly documented helps prevent disputes after the sale closes.
When selling a rental property in Washington, you may face several tax considerations: 1) Federal capital gains tax on profits, 2) Depreciation recapture tax, 3) Washington Real Estate Excise Tax (REET), which varies by county and sale price, and 4) Potential 1031 exchange opportunities to defer taxes. Consult with a tax professional before selling to understand your specific tax situation and potential strategies to minimize tax liability.
In Washington, you must complete a Seller Disclosure Statement (Form 17) for residential properties, disclosing known defects and material facts about the property. For tenant-occupied properties, you should also disclose information about existing leases, any tenant disputes, maintenance issues reported by tenants, and any pending legal actions involving tenants. Failure to make required disclosures could result in liability to the buyer after the sale.