Being a landlord in California can be very rewarding, but also challenging at times. Being a landlord and trying to sell your home can be even more challenging. In the Bay Area specifically, we’ve noticed a slowdown in the market recently, wherein buyers are becoming more selective. With that, sellers are being forced to go the extra mile to differentiate their homes in order to get an offer. Selling a home occupied by a tenant can result in some struggles for a seller, but there are some ways to make the process easier and more efficient.
As discussed in our firm’s California Landlord Basics Webinar, lease renewals are very important. Either due to busy schedules or lack of awareness, landlords often times allow their leases to become stale. We recommend landlords coordinate an annual lease renewal to ensure their leases are current and up to date.
While annual lease renewals are important legally, they also allow landlords to plan ahead. Most sellers know in advance that they are going to sell their home. In preparation for that, landlords should plan their leases around their plans to sell. If you plan on selling next year, a review of your tenant’s current lease could result in your ability to get them out prior to the sale. Alternatively, if their lease runs beyond your planned sell date, you will have ample time to adequately prepare.
Should a seller be forced to sell with a tenant inside, there are some mechanisms to make the process easier for sellers. Upon the hiring of a broker, your broker should serve the tenant with a Notice of Sale and Entry form under Civil Code Section 1954, giving notice to the tenant of the sale. Once served, the notice allows entry into the unit for the purpose of showing the property with 24 hours’ oral notice for 120 days. Civil Code Section 1954 outlines multiple cases in which a landlord may enter the unit, one of them including exhibiting the unit to prospective purchasers.
While 24 hours’ notice of entry is presumed reasonable under the law, there is case law in California that provides that the parties have a duty to be reasonable in the scheduling of showings and open houses. In the 2013 California Appellate Court case Dromy v. Lukovsky, the court noted that the 24 hours’ notice wasn’t set in stone, and instead assessed the facts of the particular transaction to determine if the notice given was reasonable under the circumstances. Both the landlord and tenant should be aware that should a dispute arise concerning notice under Section 1954, the court will look at the parties’ reasonableness considering the specifics of the transaction. There are circumstances in which more than or less than 24 hours’ notice is required, such as the tenant having a disability, and the parties must be reasonable in their accommodation of such.
Lastly, landlords selling their home with a tenant inside should be mindful of their duty to disclose. California law requires sellers to disclose, in writing, details about the property they are selling, including details about an existing tenant. (Civil Code Section 1102). Having an outdated lease or a negative relationship with your tenant could scare off potential purchasers. Planning ahead and respecting your tenant’s rights in the listing of your property could result in not only fewer disclosures, but they will also be more likely to cooperate with showings and open houses if their interests are considered.
While the law provides landlords with mechanisms to sell their home with a tenant inside, the landlord’s reasonableness will have a big effect on the efficiency and success of the sale. The sale of a home with a tenant inside can be complex and difficult to navigate.