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

A fairly common question asked by people who own a rented property is whether they can find out how to sell a flat quickly with a tenant while there is a rental agreement in place. The short answer is YES, because there is no regulated restriction that makes it impossible to carry out this transaction. In fact, there is the LAU, the Urban Leasehold Law.

But what would happen if the tenant wants to maintain the agreement? Well, the house would be sold freely and the agreement would be transferred to the new owner. The rental relationship would maintain the same terms until the contract reaches its end and the agreed expiration date arrives.

Is it legal to sell an apartment with tenants?

To begin with, there are several legal issues that must be carefully addressed to ensure that the negotiation of the sale of the apartment is successful. In fact, you can sell a rented apartment with people living in it because there is no law prohibiting it; of course, it is regulated by law.

Article 14 of the LAU provides for this particular situation, but it is advisable to review the rental agreement to find out what the parties agreed upon. This document may mention the well-known right of first refusal and repurchase, which gives the resident a prerogative in the transaction or sale.

The tenant has the right of first refusal, but it is up to them to demonstrate their interest in the property, in a similar context to that of third parties. Your tenant can request to use this prerogative when it has been provided for in the rental document. Similarly, the right of first refusal also applies when:

• The owner did not inform him in a timely manner about the sale of the apartment.
• Yes, but in the wrong way.
• If the owner closed the deal under conditions that were disadvantageous to the tenant and prevented them from exercising their right of first refusal.

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

As we have already seen, it is perfectly valid to sell a property with a tenant in Spain. You just need to seek advice from a professional who can guide you through the process. Below, we will take a step-by-step look at how to successfully close a deal on your property, even if you have a current rental agreement.

Notify the tenant

Your first move should be to notify your tenant of the law, providing them with all the details of the deal, including the price and dates.

Tenant's refusal to purchase

If your tenant prefers not to compromise, then you will have to negotiate with them to allow you to show the apartment. We suggest being very respectful of the agreed-upon agreement.

Closing the sale of the apartment

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

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

The LAU establishes the exercise of the right of first refusal, in other words, if you decide to sell, the tenant has preference over third parties. The ideal thing to do in these cases, and what is really recommended, is to follow these steps:

Notify the tenant

You must notify the tenant in writing of your intention to sell the social housing and specify how the negotiation would take place, primarily the cost. It is necessary to indicate in the notified communication the negotiation periods for the house or flat.

The lessee shall be liable.

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

Sell the property

If your tenant wants 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 other interested parties.

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

Technically, there are situations where the lessee is not obligated to disclose their intention to sell the house, but it is always advisable to do so. These situations are:

Waiver of preemptive rights

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

This prerogative does not apply if more than one property is sold.

The aforementioned prerogative or right does not apply when the same owner agrees to negotiate jointly with a single buyer. Here we are referring to several properties located in the same building. 

Variable circumstances at the time of signing the agreement

There are rental agreements that were made in accordance with previous regulations, where the lessor or lessee is not allowed to waive their preferential right. In this regard, if the document was signed before 2019, the clauses and legislation used must be verified with the help of a professional.

What happens to the tenant or lessee when the property is sold?

Fortunately for the lessee or tenant, the LAU provided protection, which 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 full details of the sale.

The tenant maintains stability and can remain in their rented position in the house that is being sold or has been sold. Ultimately, if they decide not to buy, they will effectively have to vacate the apartment within the time frame stipulated by law, following prior notice of eviction.

Does selling a house with a tenant inside affect the price?

In fact, the price of a rented apartment or house can be determined based on the income generated during the term of the lease agreement. The amount of rent for your apartment and the cost of purchasing it are directly proportional to the net asset value of the apartment and depend on its profitability. I recommend using a profitability calculator to obtain an accurate result.

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

Tips for selling an apartment with a tenant

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

Tips for the homeowner

The first step in selling a rented property is to read the rental agreement to ensure that a preferential right to rent has been agreed upon. In addition, you must verify what has been agreed upon in the event of a possible sale or purchase of the apartment.

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

The next step is for the owner to inform the tenant about the negotiation, recording in the purchase agreement that they have complied with this requirement. 

Tips for tenants

Both the lessee and the prospective buyer must verify what was agreed upon regarding the owner's prerogatives to redeem the property. This could eventually happen, and the buyer, as the new owner, would be subrogated to the provisions of the document in this case. 

Tips for buyers

All interested parties have the right to be informed if the sale includes tenants, because it would be a short-term rental, but they must respect the agreement. Understandably, they will not be able to live in that apartment, but they must know exactly what the contract says and what the rental relationship has been like. 

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

There are a few details you need to know to avoid problems when selling a house with tenants, which we will mention right away:

Attempt an eviction

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

Respects the right of first refusal

Avoid ignoring the tenant's or lessee's right of first refusal; it is a legal provision that you cannot ignore.

Notify your tenant

Don't assume that if you don't notify your tenant, everything will turn out perfectly, because that's not the case; not all tenants are peaceful.

Avoid conflicts

It is always best to avoid any conflict with your landlord or tenant. Remember that you will need their permission to show the property you are selling.

Can a tenant refuse to show a property?

In fact, the tenant can refuse to show your rental property while they live there and the lease is in effect. Given this, we suggest 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 conclude that it is possible to sell an apartment with a tenant, provided that the rules agreed upon from the outset by the landlord and tenant are respected.