If I want to sell my rental property, when do I notify my tenants? Can I just wait until I see if there is any interest by a potential buyer?
Obviously, if a “For Sale” sign is installed on the property, the tenants will know of a possible sale. Even if the marketing of the property does not include on-site signage, the tenants will know that the property is being sold because it is almost always necessary that potential buyers (perhaps more than one) and/or their agents (e.g., lenders, appraisers, inspectors, contractors) visit the property once marketing begins, particularly after the first purchase offer is made, with this often being well in advance of escrow closing. While many of these tasks do not require access to interiors of units, it is almost certain that one or more tenants will notice strangers who are involved in surveying common areas.
For example, often prior to marketing of the property the owner hires contractors to do deferred maintenance and/or improvement and those vendors often know that they are doing the work because of a future sale. Curious tenants will likely obtain this info from those vendors. Thus, at least some tenants will know well in advance of other indications that a sale will likely occur in the future – perhaps before it is even listed for sale. And, one tenant knowing something usually means all tenants know that something.
Of course all access of leased premises would require advance notice of entry in accordance with state law and it would be nearly impossible and inadvisable to not disclose why access is being requested. Having multiple units often complicates matters.
Since you will want cooperation of tenants regarding buyer inspections and estoppel certificates, it is recommended that you notify tenants of the pending sale as soon as there is a fully executed purchase contract. You should explain that the buyer or his agent will be making inspections and you appreciate the tenants’ cooperation during the inspections. Keeping tenants in the loop and remaining on good terms with them may reduce the chance of them voicing complaints about the property to the buyer or his agent.
Providing tenants with written notice of the potential sale also gives the owner a chance to reassure the tenants that their lease agreement is fully binding on a future buyer and their security deposit will be transferred to a new owner through escrow. The tenants should be notified immediately upon close of escrow and provided contact information regarding the new owner.