How to sell a building with tenants

How to sell a building with tenants

The real estate market observes very varied situations regarding the sale and rental of flats, houses and real estate. One of them is the possibility of selling a building with tenants.

What actions should we take into account as owners? And as for future buyers? What are our rights as tenants? Is there some kind of law that regulates this process?

Selling a building with tenants: frequently asked questions and answers

The situation is more common than it seems: an owner has a flat, or even an entire building rented, and when faced with a good opportunity, he decides to sell it. The process to buy/sell a building with tenants is regulated by the Urban Leasing Law (LAU), the last modification of which dates from June 2013.

The modification date plays a fundamental role in its execution since these changes affect only the homes rented later.

What novelties does article 14 of the Urban Leasing Law provide?

The main novelty that the modification of the LAU brings is reflected in its Article 14 and it was created so that the Property Registry would be the body that would prevail in the event of selling a building with tenants.

We explain it in a simple way: when a rental contract is registered in the Land Registry, its conditions must also be respected after the sale, especially with regard to the validity period of the contract. In these cases, the new owner of the home will adopt the figure of “landlord” at the legal level.

If the rental is not registered in the said registry (which is unlikely), the lease will terminate directly at the time of sale to a third party.

Are there any limitations to this Law?

Yes, fundamentally one: article 14 of the LAU and its implications are applicable only when the sale of a building with tenants is carried out on a voluntary basis, which excludes cases such as forced sale due to foreclosure.

Should the tenant leave if his lease is not registered on the property?

No. When the rental contract is not registered in the Property Registry, the tenant can avail himself of article 1571 of the Civil Code, which specifies that the buyer of a leased property «has the right to terminate the current lease upon verification of the sale, unless otherwise agreed and the provisions of the Mortgage Law “. That is, the first person who has the right to continue with that lease is the current tenant of the home/building.

In this case, the tenants or tenants have a period of three months to leave the house from the date on which the new buyer notifies his desire not to continue renting the house.

Does the landlord have to pay any kind of compensation to the tenant?

If there is any special clause or compensation in favor of the tenant in the event of abrupt termination of the rental contract, this amount must be provided by the former owner.

What about the rented properties before the LAU update?

According to the LAU, when the lease contracts are dated prior to June 6, 2013, the new homeowner must accept the minimum 5-year term of the rental (in the case of extended one-year contracts).

And what happens with the old rental apartments?

Selling an apartment with tenants with old rental contracts is more complicated. Landlords with tenants with this type of income who want to sell their properties must do so for the capitalization price of 4.5% of the annual rent paid by the tenant.

Other aspects that the LAU observes and that modify the contracts of this type of housing in case of purchase and sale are:

  • The tenant will be responsible for the payment of the IBI of the rented apartment.
  • The tenant will assume the maintenance and upkeep of the house.
  • The rights of first refusal and withdrawal will not proceed.
  • The rent will be updated. The tenant can oppose the update and, communicating it to the owner within 30 days of receiving the request.
  • Income will be updated annually with the variation of the National General Index of the Consumer Price Index System in the 12 months prior to each update.
  • If the tenant does not accept this update, the rental contract will expire in 8 years.

Duties and rights of tenants and new owners

When selling a building with tenants, both owners and tenants must meet some requirements.

The tenant will have the right of preferential acquisition of the house in which he lives. In the event that an owner decides to sell a rented apartment, he must notify them of the sale offer. That is why the first step is for the owner to send a communication to the tenants to offer them the purchase of the property. If within 30 days no response has been obtained to this trial, the owner can sell the house to a third party without a problem.

On the other hand, the owner must notify the future buyer of the presence of tenants in the building, as well as the conditions of the rental contract. If the owner does not communicate this notification or it is incomplete, the tenant may withdraw and appeal to the court.

Can we reach an agreement to sell a building with tenants more quickly?

Yes. In fact, it is recommended that both parties reach a beneficial agreement before selling a building to tenants.

Many times, the tenant is given the option of continuing to lease this home by reaching a new agreement and registering it in the Land Registry. This is quite common in the case of investors, although it can be somewhat more complicated in the case of individuals.

In any case, when the apartment is acquired as an investment, having a tenant with a current contract and a clean payment history is positive.

In case the tenants do not want -a prior- to leave the building, there are some options to facilitate its sale. Think that future buyers will want to visit the property and for that, you need the authorization of the people who live there. A good option is to offer the current tenant another apartment for rent or advice to move. You can even offer a discount on the last months of rent or cover the expenses of the move.

And what happens if the tenant does not want to leave?

In principle, we cannot evict a tenant from one day to the next to sell a rented apartment. As we have already explained, you must be informed with at least 30 days of the sale offer, since you have a preference in the purchase, and you have up to three months of time to leave after the sale becomes effective to a third party.

The only exception is that the owner needs the home for the use or enjoyment of his or her immediate family on a permanent basis. In this case, the tenant must be notified at least two months in advance, and the tenant may not submit extensions of any kind if the contract was signed more than a year ago.

At Sky Marketing we are experts in the sale of apartments and houses. As an online real estate company, we carry out our operations without commissions. You only pay a fixed price when you sell your home. Of course, and thanks to our experience, we know that there are cases in which selling a building with tenants is difficult. Our recommendation is twofold: follow the law and try not to enter into lawsuits with tenants. In these cases, the best option is to negotiate and reach a mutually beneficial agreement.
Do you want us to advise you on this? Contact us!

Leave a Reply