Selling an Apartment with a Tenant: Everything You Need to Know

A very common question from people who own a rented property is whether they can find out how to sell an apartment quickly with a tenant while a rental agreement exists. To answer directly, YES, because there is no regulated restriction that prevents this negotiation from taking place; in fact, the LAU (Urban Leases Act) exists.

But what would happen if the tenant wants to maintain the agreement? Well, the house would be sold freely, and the agreement would be subrogated to the new owner. The tenancy relationship would maintain the same terms until the aforementioned contract reaches its purpose and the agreed-upon expiration date arrives.

Is it legal to sell an apartment with tenants?

To begin, there are several legal matters that must be carefully managed to ensure the successful sale of the apartment. Indeed, you can sell a rented apartment with people living in it because there is no law prohibiting it; this scenario is legally regulated.

Article 14 of the LAU addresses this matter, but it is advisable to review the rental agreement to understand what the parties agreed upon. This document may eventually mention the well-known right of first refusal and right of redemption, which grants the resident a prerogative in the transaction or sale.

The tenant has the right of redemption, but it is up to them to demonstrate their interest in the property, in a context similar to that of third parties. Your tenant can request to use this prerogative when it has been stipulated in the rental agreement; similarly, the right of redemption also applies when:

• The owner did not inform them in a timely manner about the sale of the apartment
• If they did, but in an incorrect way
• If the owner closed the negotiation under less favorable conditions than those offered to the tenant, thereby preventing access to the exercise of the right of first refusal.

How to sell an apartment with a tenant inside? Step-by-step

As is now clear, in Spain it is perfectly valid to sell an apartment with a tenant, you just need to consult with a professional who can guide you properly. Next, we will look at a step-by-step guide on how to successfully close the sale of your apartment, even if you have an active tenancy agreement.

Notify the tenant

Your first step should be related to the legal notice for your tenant, informing them of all the details of the transaction, including the price and dates.

Tenant's refusal to buy

If your resident prefers not to proceed with the purchase, then you will need to negotiate with them to allow you to show the apartment; here, we suggest being very respectful of the agreed-upon terms.

Closing the apartment sale

You must also inform any buyer of the condition of the house you are selling, and if they agree, all that remains is to close the deal.

How to notify the tenant about the sale of the property?

The LAU establishes the right of first refusal; in other words, if you decide to sell, the tenant has priority over third parties. The ideal and recommended approach in these cases is to follow these steps:

Notifying the tenant

You must notify the tenant in writing, stating your intention to sell the social housing and specify the terms of the negotiation, primarily the cost. The notification must clearly state the negotiation deadlines for the house or apartment.

The tenant will respond

Your tenant has a statutory thirty calendar days to respond. If they do not, it is understood that they have rejected the offer, and you will be free to sell.

Selling the property

If your tenant wishes to buy the property, they have a maximum of 180 days to close the deal. If, on the other hand, they decide not to buy it, the offer can be extended to interested third parties.

When is it not necessary to notify the tenant about the sale of the property?

Technically, there are situations where there is no obligation to inform the tenant about the intention to sell the house, but it is always recommended. These situations are:

Waiver of the right of first refusal

Many rental agreements include a provision where the tenant expressly waives this right, so it is advisable to read the contract.

This right does not apply if more than one property is sold

The aforementioned right does not apply when the same owner negotiates jointly with a single buyer. This refers to several properties located within the same building. 

Circumstances varying based on the agreement's signing date

There are rental agreements made under previous regulations, where the tenant is not allowed to waive their right of first refusal. In such cases, if the document was signed before 2019, the clauses and applicable legislation should be verified with the support of a professional.

What happens to the tenant when the property is sold?

Fortunately for the tenant, the LAU (Urban Leases Act) provided a protection that could be described as partial legal protection. In principle, they have the right to be notified of the owner's intention to sell the apartment, with all the details of the sale laid out.

The tenant maintains their stability and can remain in their rented home, whether it is being sold or has already been sold. Ultimately, if they decide not to purchase the property, they will indeed have to vacate the apartment within the timeframes stipulated by law, following prior notice of eviction.

Does selling a house with a tenant affect the price?

In fact, the price of a rented apartment or house can be determined based on the rents generated during the lease agreement. The amount of your apartment's rent and its purchase cost are directly proportional to the net asset value of the apartment, and depends on its profitability. I recommend using a yield calculator to get a fair result.

To calculate this price, you subtract the annual amount you receive in rent from the apartment's annual expenses, and divide by the apartment's purchase price. The higher the rental income, the higher the apartment's valuation will be, as the buyer will gain more profit. Find out more about living off rental income

Tips for selling an apartment with a tenant

Next, we will look at some practical suggestions for successfully negotiating a rented property, aimed at those involved in this transaction:

Suggestions for the owner

The first step to selling a rented property is to read the lease agreement to ensure that a lease with a right of first refusal was agreed upon. Additionally, it is necessary to verify what was agreed upon in the event of a potential sale or transfer of ownership of the apartment.

It is mandatory to inform the buyer about the pre-existence of a lease agreement so that they are aware of what that previously signed agreement stipulates. This demonstrates that the buyer has been informed about the particular status of the property.

The next step is for the owner to inform the tenant about the negotiation, leaving a record in the purchase agreement that this has been complied with. 

Suggestions for the tenant

Both the tenant and the prospective buyer must verify what was agreed upon regarding the owner's prerogatives to reclaim the property. This is something that could eventually happen, and in such a scenario, the buyer, as the new owner, would assume the rights and obligations outlined in the document. 

Suggestions for the buyer

Any interested party has the right to be informed if the sale includes tenants, as this would mean inheriting a short-term rental agreement that must be respected. Understandably, they won't be able to live in that apartment immediately, but they must know the exact contents of the aforementioned contract and the nature of the tenancy. 

What should you avoid when selling an apartment with a tenant?

There are some details you need to know to avoid problems when you want to sell a house with tenants, which we'll mention immediately:

Attempting an eviction

Due to legal provisions, you cannot evict your tenant, as the law protects them and offers certain privileges that you must respect. 

Respect the right of first refusal

Avoid being unaware of the right of first refusal held by the lessee or tenant; it's a legal provision you cannot overlook.

Notify your tenant

Avoid thinking that everything will go perfectly if you don't notify your tenant, because that's not the case; not all tenants are cooperative.

Avoid conflicts

It's always wise to avoid any conflict with your lessee or tenant; remember that you will need their authorization to show the property you are selling.

Can a tenant refuse to show a property?

Indeed, the tenant can refuse to show your rented property as long as they live there and the tenancy agreement is valid. Given this, it is suggested that you maintain a friendly and respectful relationship with your tenant; remember that you may need their approval to show the apartment.

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Conclusion

We can finally infer that you can sell an apartment with a tenant, provided that the rules initially agreed upon by the landlord and tenant are respected.