If you’ve been renting your house and you have decided it’s time to sell, there is a lot to consider. First things first, you need to give your tenants proper notice. In California that means if they’ve been in the house less than a year they get a 30-day notice. Beyond 1 year, they get a 60-day notice. However, just because you’ve given them notice doesn’t mean they’ll be out on time. If push comes to shove and you need to formally evict, you need know that if you didn’t deliver the initial notice properly, a judge may make you give notice again. Tenants would gain an additional 30-60 days period before court proceedings would resume.
The California Association of Realtors has a form for termination of tenancy, and it can be delivered a few different ways. Personal service is one way, however I prefer sending it certified/registered mail. This way, getting the notice is impersonal and verifiable. I’m sorry to be cold about this, but the fact is I consider giving someone notice a business decision. When you rent out your house, you have a contract with the tenants. If that contract is up, you can give them notice anytime and that’s the harsh reality of being a renter.
What happens if the lease is not up? Then you can’t give the tenants notice, they are still under contract. That being said, you can let the tenants know you plan on selling the house and if they want to move out prior to the end of the lease you can offer a financial incentive to move. Hopefully the tenants recognize the writing on the wall and take you up on your offer. Sometimes tenants will find a place to go prior to the notice ending, and if they are smart, they will ask to leave early without penalty. By all means, you should let them go. Other times landlords will offer incentives for tenants to leave early, and I am not sold on that idea. The tenants need to go. If they can find a place, they should grab it and not wait around for the end of the lease. I don’t think a financial incentive makes a difference in the end, although it could light a fire to get moving for some tenants. It won’t be good if they decide to look for a new place at the end of the notice period.
What happens if the tenants don’t leave at the end of the notice period? At that point you can go one of three routes (1) offer them an incentive to get out (2) begin the formal eviction process (3) wait and give them more time. If they are not out when they are supposed to be, you might consider options 1 or 3 first. Or maybe you decide to do both. The issues with option 2 are time and money. Utopia Management Company has a good breakdown of the costs which can be considerable, especially if the tenants stop paying rent. If you need to go the legal route it’s going to be a hassle, which is one of the main reasons people don’t want to be landlords.
You might think about trying to sell the house with the tenant still living there. Don’t! It’s a very bad idea because sellers have a hard enough time presenting their properties while still living in them. Imagine a tenant presenting your property, someone who has no skin in the game. Or perhaps in the worst-case scenario they try to sabotage the sale, either purposely or not. They can make the house difficult to show. They can fail to clean up after themselves. They can stay in the house while it’s being shown. There’s just too much that can go wrong.
Sometimes tenants will offer to purchase the home. If the price is right you might want to consider the offer, just so you don’t have to go through the process of getting them out. However, you should be advised that if the house doesn’t come on the market, you’ll never know how much more you could have gotten.