Selling Your California Rental? 6 Tips to Navigate the State’s Tenant-Friendly Laws
Disclaimer: As a friendly reminder, this blog post is meant to be used for educational purposes only, not legal advice. If you need assistance navigating the legalities of a landlord selling a house and tenants’ rights in California, HomeLight always encourages you to reach out to your own advisor.
If you own an occupied rental property in California, perhaps you’re ready to sell it — and hope to make a juicy profit on your investment. Strong demand coupled with a dwindling housing supply continues to fuel record-breaking prices in California. In March 2024, the median cost of a home in the Golden State surged to $904,210, a new all-time high.
But before you plant that for sale sign, you need to know the rights of your tenants. California is known as one of the most tenant-friendly states in the country — next to New York, California has the second-largest share of renters. Renters occupy some 44% of homes in California, which is higher than the national average of 35%.
Read on to get up to speed on California tenant rights so that you don’t let an opportunity to turn this rental into gold slip between your fingers.
1. Give tenants ample warning of your intent to sell
Before you list your rental unit for sale, you’ll need to be familiar with California’s tenant notification requirements. One source to review these requirements is “A Guide to Residential Tenants’ and Landlords’ Rights and Responsibilities,” posted on courts.ca.gov.
The notification requirements vary depending on the type of agreement you have with your tenant. For example, a periodic month-to-month or week-to-week tenancy agreement may have different requirements than a longer-term lease agreement. How long your tenant has lived in the unit can also affect the notification requirements. HomeLight always recommends you consult a trusted legal advisor regarding when and how to notify your tenants that you are selling the rental property.
There are additional notification requirements if you plan to let potential buyers in to show your unit (up to 120 days notice), according to California Civil Code, Section 1954.
As a landlord, you should also familiarize yourself with Assembly Bill 1482, which enacted the Tenant Protection Act of 2019. The bill broadens the state’s definition of “no-fault” evictions and the rights of tenants facing them. It applies to most multi-unit housing and single-family rentals owned by a real estate investment trust, LLC, or corporate member.
2. Know how to handle month-to-month renters
Many states require landlords whose renters have a monthly lease to provide only 30 days’ notice to vacate the property they’re selling. But California is more generous when it comes to giving month-to-month renters time to figure out their future living arrangements. In the state of California, if you have month-to-month tenants who have resided in your place for at least a year, you must provide a 60-day warning if you want them to move, according to California Civil Code 1946.1.
3. Play fair with fixed-term tenants
In California, renters with a fixed-term lease have the right to stay put until it expires. This is true even if you sell the property before the lease is up. “A fixed-term lease protects the tenant from eviction from the current or subsequent owner,” explains Brian F. Kram, a Marin County real estate attorney who specializes in California tenant and landlord law.
If your buyer is an investor, your tenant simply pays rent to the new owner until the lease ends. At that point, they can work out new terms.
However, when your buyer plans to live in the tenant-occupied home, the situation gets trickier. While you can’t legally force a tenant to leave, you can try to motivate them with money (aka “cash for keys”).
“It’s really about feeling out the tenant and having a conversation,” says Justin Bonney, a top Los Angeles-based real estate agent who’s helped clients maneuver the challenges of selling tenant-occupied rental homes, as well as other types of houses for sale in Los Angeles. “The average varies, but between $4,000-$6,000 seems to be the sweet spot to help cover expenses like moving trucks and security deposits.”
