Selling an apartment in NYC is complicated enough, even more so when you already have a tenant in place. If you’re looking to sell but already have a tenant on a lease, then you need to make some careful considerations before you proceed. Your ability to advertise the property and conduct showings will have to consider your tenants’ rights under the lease, state laws, and your own needs as a seller. Here’s what to consider when selling your tenant-occupied apartment.
What does the lease say?What does the lease say?
First off, consider approaching the tenant to see if they would be interested in buying the property. This could save you money by avoiding a sales commission and a lot of hassle and doesn’t cost you anything to ask. If they decline, then move on to checking the lease they signed with you. You have to be crystal clear with interested buyers about what they’re getting into. If you misrepresent the property, you risk getting into legal trouble. So check and double-check the lease to make sure it’s not a rent-regulated apartment and what the terms are if you wish to sell.
The good thing is that in NYS, you have the right to sell if a tenant-occupied. Of course, that still depends on the lease. Chances are, there will be a term stipulated that the lease agreement will remain in full effect should the owner/landlord choose to sell.
Advertising and listingAdvertising and listing
Marketing a property that already has a tenant-occupied can be an attractive option for investors. It means they’ll be able to start making money from day one, and they’ll easily be able to compare current income and expenditure to see how profitable it is. Just make sure that the listing ad states “investment property only,” so it’s clear to buyers that they can’t move in. However, if the tenant is behind on their rent or paying below market value, it won’t look so attractive to buyers, and you should consider other options.
One option would be to try negotiating with the tenant for a lease modification or termination. In return for a monetary sum, the tenant could agree to move out by a specific date. However, this can look risky to buyers as the tenant could always refuse to comply with the renegotiated terms and remain in place beyond closing. The new owner would then have to file for eviction and hold you responsible for all the costs involved.
When facing this possible scenario, best to wait until the tenant’s lease is up before you list the apartment. By the manner specified in the rental lease agreement, you should notify the tenant that you are planning to sell and will not be renewing the lease. Most month-by-month rental agreements require a 30-day notice for this.
Ideally, you should already have photos and video recordings of the apartment before you rented it. This way, you can show it to prospective buyers without having to bother the tenant. But if you don’t or the buyer still wishes to see the apartment, then you’ll need to work out a way to do showings. Check the lease to see how much notice you must give the tenant for displays if you end up wanting to sell the apartment. Other helpful advice includes:
- Make showing times easy for the tenant by giving them at least 24 hours’ notice. Also, inform the sales agent of what times the property cannot be shown due to the tenant’s schedule.
- It’s always better if the tenant is not around during showings. They’ll be more likely to play ball if you offer them a reduced rent for the duration of the sales process.
- If the tenant is behind on their rent, now is the time to get them up-to-date. One option would be to forgive any delinquency in rent in exchange for the tenant agreeing to move out.
Final thoughtsFinal thoughts
When selling your tenant-occupied apartment, you should ensure that the tenant remains happy and cooperative. Offering them reduced rent until the sale is finalized will go a long way towards this course. Offering consideration to the tenant and respecting that the property is still their home shouldn’t be overlooked.