Q: Do I have to notify my tenants that I'm selling my building? What are my responsibilities as a building owner in a sale?
A: From your question it seems that you have more than one unit in your building, you do not reside any in the building and your building is in Oakland. This means you are under rent and eviction control and would need a valid legal reason or “just cause” for evicting your tenants.
It is your right to sell your building whenever you want. You do not have an obligation to disclose this information to your tenants. There is state law that requires the new owner to notify the tenant about new ownership, how to contact the new landlord, and where to mail the rent in the future. At some point, your tenants will find out.
Many investors in the Bay Area are happy to purchase properties with existing tenants who are current on their rent or have long-term leases. This information will typically be disclosed during negotiations for the purchase of the property.
However, if your current tenant owes back rent you may want to consider a move-out (buyout) agreement. This typically means the tenant agrees to voluntarily vacate a rental unit in exchange for money. The Oakland ordinance prohibits offering tenants money to vacate with intimidation or threats. There are very important terms and payment requirements associated with move-out agreements. Also, effective May 1, 2018 landlords will be required to disclose additional information such as the tenants’ eligibility for relocation payments and how much they are entitled to. It is advisable that you have an attorney draft a move-out agreement to ensure you are protected. Disclosing your intention of selling your property to your tenants is optionable. Keep in mind, if your tenant fails to vacate after agreeing to do so, they can’t be evicted on this basis.
If you do not want to go through the hassle of moveout agreements, you can sell your property subject to any current leases. In this case, you may want to disclose your intention of selling the building to your tenants because you may need your tenants’ cooperation when showing the building to a prospective buyer. California law permits landlords to enter a rental unit to show the building to prospective buyers. You or your agent must give the tenant at least 24 hours’ advance notice. Providing this type of notice, will necessarily require you to disclose the sale of your building.
The buyer steps in to the shoes of the old owner. You should provide leases, documents, notices, and files for each unit in the building. This will prevent the new owner from tracking you down to obtain this information in the future.
All security deposits should be transferred to the new owner. The buyer will be responsible for refunding the deposits to the tenants when that time comes. This should all be written to avoid any confusion at closing.
Copyright © 2018 by Fried & Williams LLP. All Rights Reserved. The information in this article is general in nature and should not be considered legal advice. For any specific matter, please consult with an attorney.