Are you wanting to sell your tenant occupied rental home in Utah? If so, it’s important that you understand your options and your tenant’s rights. For your specific situation, we ask that you consult your property manager and/or landlord attorney for guidance.
There is not currently a Utah State Statute that allows for a lease to be terminated with the sale of a property. Options and grounds for early termination are discussed in UCA §§ 78B-6-802, and the sale of the property is not one of the options. A lease agreement is a contract of common law which provides the tenant a claim against the property even without being recorded with the County Recorder’s office. In most cases, you will need to wait for the lease to expire.
There are some situations which will allow you to sell the property while tenant occupied.
Here are a few questions to help you determine if your situation allows for the sale of your rental home:
Are you selling it as a rental investment? If so, then yes, since the lease will transfer to the new buyer and will have to be honored by the new owner. If the answer is no, continue by answering the next questions.
Is the lease expired (month-to-month)? If so, then yes, you can sell the property to an owner occupant since the notice requirement is 15 days, providing the notice is to expire at the end of the month term. If not, the lease will need to be honored.
Is the tenant in default? If so, there may be grounds to terminate the lease in which case it may be possible to sell following the termination of the lease.
Does the lease have a special provision? This would include verbiage where both parties agreed to allow the sale and termination of the lease prior to lease expiration? If yes, the terms of the lease agreement will most likely allow for this. If not, your lease will have to be honored with the sale of the property and the new owner will need to honor the agreement with all of its terms.
So what can an investor do that needs to sell the property to an owner occupant?
Your tenant may want to buy the home! This should be your number one option! Discuss this option with your tenant and you may be surprised. This could also save you money in eliminated vacancy time and potential commissions. You can approach your tenant with an agreeable option to mutually terminate the lease. Keep in mind that they may be wanting to move as and terminate the lease early. If that’s the case, you could be doing them a favor. If not, you may need to offer them a buy-out where you cover moving expenses, and even a month or two of rent in order for them to be enticed with the option of moving. If they have no desire to move, you may be stuck, and will need to wait. You will want to abide by quite-enjoyment laws and not force anything upon them, as the consequences of that can be costly.
Since we have helped facilitate many landlord to tenant sales as well as landlord to public sales, please reach out should you have any questions or you would like us to review your specific situation.