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Selling Rental Property: What CA Landlords and Tenants Should Know

When owners consider selling rental property, it’s important that California landlords know there are specific California landlord-tenant rights during the real estate sale. Additionally, new regulations and tenant protections as a result of COVID-19 create more complexity when selling rental property. As San Francisco landlord-tenant law experts, we often receive questions about issues that arise when landlords think about selling rental property. In this article, we’ll go over some of the basic requirements when selling a tenant occupied property.

Landlords Must Provide Tenants Proper Notice Before Selling Rental Property

According to California Civil Code, landlords must provide at least 120 days notice of their intent to sell a property. The notice must be in writing.

Tenant Rights During Home Sale

Renters have the right to quiet enjoyment of their home without interruption. To that end, landlords must give twenty-four hours advance notice before entering the home for showings and inspections. 

What Landlords Should Know About Property Showings When Selling Rental Property

It’s important to realize when selling rental property that there may be some inconvenience to tenants when real estate agents show the property to potential buyers. With that in mind, landlords should follow the rules and respect tenants when arranging showings. Tenants can consider cooperating with any reasonable and legal request from the landlord. 

When selling rental property with tenants, the owner may ask that tenants: 

  • keep the home clean and orderly on a daily basis 
  • leave the premises during home tours, open houses or prospective buyer showings
  • agree to have a lockbox on the front door

In exchange, the owner may agree to provide reduced rent to compensate the tenant during the selling period.

Keep in mind, all of this is negotiable.

Even though landlords may ask a tenant to leave the premises during a showing or open house, the tenant has the right to say no to the request. Landlords should schedule showings at reasonable hours of the day and abide by the law when entering the rental unit.

Cooperation Between Tenants and Landlords During a Sale

During buyer showings when selling rental property, tenants and landlords should keep the lines of communication open. For example, tenants should inform the landlord and real estate agent if they are not comfortable with a lockbox on the front door. Moreover, tenants may ask the landlord for compensation for any inconvenience the sale may cause. To foster a spirit of cooperation when selling rental property, landlords may want to consider a gift of appreciation when asking to disrupt their day. Small gestures such as a coffee shop gift card can go a long way to show a sense of respect.

When selling rental property and showing the unit while the tenant is out, landlords must remember that California law requires them to leave a written notice that they were in the home.

Can Landlords Break A Lease When Selling Rental Property?

Tenants have the right to stay in their rental home until the end of the lease. Unless the terms allows it, the landlord cannot break the lease to try to sell the property empty. 

If the lease has a termination due to sale clause, it will state how much time the tenant has to move out. At the very least, the landlord must provide thirty days notice before requiring a tenant to move.

Sixty days is required for a tenancy exceeding a year. All of this is much more complex and restrictive in highly regulated cities like Oakland and San Francisco.

If the property sells during the lease, the tenant will pay rent to the new owner after the sale is complete.  At the end of the lease, the tenant and the new owner may choose to renew the lease under the same terms, they may decide to change the terms, or the tenant may choose to move out.

Landlord Rights During Home Sale

Under California law, landlords have rights when selling rental property. For this reason, tenants are not allowed to impede the sale or intentionally make it difficult to market. In addition, renters must continue to pay their rent and follow the terms of the lease. 

Under the Ellis Act, a California landlord may evict all tenants to change the use of the building or convert the rental property into tenancies-in-common (TICs). In order to qualify, the landlord must take all the units off of the rental market and exit the rental business for that building. 

If this is the case, the tenant will receive advance notice that the landlord is taking this action. Ellis Act evictions can take time. And, the landlord must pay the tenant a relocation fee.

COVID-19 Tenant Protection Laws and Property Sales

The California State Assembly passed AB 832 which extended the statewide evictions ban due to COVID-19 through September 30, 2021. While the legislation provided critical rental relief, it will have continuing implications even after the eviction moratoriums end. For example, landlords may resume issuing 3-Day Notices to Pay or Quit, but it is only for tenancies that begin on or after October 1, 2021. 

As time goes on, it will also be important for landlords to keep an eye on local city and county rules that may extend COVID-19 tenant protections. 

Follow the Law When Selling Rental Property

When landlords demand tenants to leave without just cause, they can face charges of wrongful eviction. For this reason, landlords need to use caution and follow proper legal procedures when selling an occupied rental property. Above all, landlords must honor the lease. If the property sells with ten months left on the lease, the tenant has the right to live in the unit for the remaining ten months and pay the rent to the new owner. The sale of the property does not change the terms of the lease.

As longstanding San Francisco landlord-tenant attorneys, we can clarify how the sale of a rental home affects both parties. Steven Adair MacDonald & Partners has resolved landlord-tenant disputes and real estate issues for over 30 years. To schedule a consultation, please call 415-956-6488. 

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