Selling a house with a tenant: cancel or continue the lease?
A rented property is often harder to sell. What can you do as the seller? Comparis explains the different options.
07.03.2023
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1. Selling a house with a tenant: what are the options?
Are you planning to sell a property you rent out? If you sell your property, all rental agreements will remain in place. According to the law (Art. 261 Para. 1 OR), the existing tenancy is transferred to the new owners.
You have two options:
Option A: you terminate the lease before selling
Option B: you sell the property with the existing tenancy
Do you want to determine the value of your home? With the Comparis property valuation tool, you can receive an initial appraisal of your apartment or house – free of charge.
2. Option A: you terminate the lease before selling
What are the pros and cons of selling a house or apartment without an existing tenancy? This overview provides information:
| Pros | Cons |
|---|---|
| Your property becomes more attractive to buyers. You can usually get a higher selling price. This is especially true for detached or semi-detached houses. | Tenants can legally defend themselves against evictions. It is not certain that you can terminate the lease as planned. |
| You create clear conditions for yourself and for the buyer. This makes the subsequent sales process easier and more relaxed. | After the lease ends, you will no longer receive any rental income. This can create an income gap. |
Evicting tenants before selling a home: how does it work?
Before selling a house, it usually makes sense to cancel any rental agreements. This applies in particular to detached and semi-detached houses, which are predominantly bought by private individuals for their own use.
Tenancy agreements can generally be terminated in compliance with the contractually stipulated termination dates and notice periods.
According to the law (Art. 266 OR), you as a landlord must observe the following points:
Notice must be in writing.
You must use a special form approved by the canton. This is usually referred to as the “notice of termination form”. You must sign the form.
If you do not comply with the rules, the termination is invalid.
Notice given to married couples
Are the tenants married? If so, you will need to give notice to both partners separately. This also applies if only one of the partners has signed the lease.
Tenants are not powerless when it comes to having their lease terminated. They can delay the eviction, or even have it cancelled.
Appeal against wrongful eviction: tenants have the right to know the reason why their lease is being terminated. They have 30 days in which to contest it. In doing so, they demand that the eviction be reversed. The eviction is wrongful, for example, if the idea behind terminating the lease is to get your tenants to buy the property.
Extension of the tenancy: the tenancy can be extended even if the eviction was lawful. The tenants may extend the tenancy by a maximum of 4 years. Reasons for an extension may include tight financial circumstances or advanced age.
Good to know: if the tenancy agreement is violated or the rent not paid on time, an extension is no longer possible.
In some cases, the tenant does not want to move out – and successfully resists eviction. In that case, an out-of-court settlement may make sense.
Try to work it out and make compromises. For example, you can offer the tenant an extension of one year or a severance payment.
Selling a house – is the situation overwhelming you?
Professional estate agents can assist you in selling your property. Especially in the event of a dispute with the tenants, external help can be useful.
3. Option B: you sell the property with the existing tenancy
What are the pros and cons of selling a house or apartment with an existing tenancy? This overview provides information:
| Pros | Cons |
|---|---|
| You don’t have to worry about terminating the lease. | It is often more difficult to sell a house with tenants. You may have to reduce the price of the property. |
| You will receive rental income until the new owner is entered into the land register. | The new owner can announce that they want the property for personal use and terminate the tenancy early. According to the law (Art. 261 para. 3 OR), tenants may claim damages from you. |
Selling a house with tenants: how does it work?
Have you decided to sell your property with an existing lease? In that case, transparent communication with your tenants and those interested in buying is crucial.
Do I have to inform prospective buyers about leases?
It is best to inform prospective buyers about existing rental agreements at an early stage. This way, you avoid unpleasant discussions just before the sale is concluded.
At the latest when creating the purchase contract, you must provide information about existing rental contracts. If you do not disclose existing rental agreements, you are violating the warranty obligation established by law (Art. 192 para. 1 OR).
Do I have to inform the tenants when I sell my property?
In Switzerland, you do not necessarily have to inform tenants about a planned house sale. However, it makes sense and is fair for private landlords in particular to create transparency at an early stage.
Potential buyers generally want to be able to see the property in advance. The tenant will find out that a sale is planned then at the very latest.
Right of first refusal for tenants
Do you have a right of first refusal in your tenancy agreement? In this case, you should notify your tenants early. They may be interested purchasing the property.
Organize your viewing appointments in good time
As a landlord with an intention to sell, you have the right (Art. 257h para. 2 OR) to carry out viewings of the property you rent out.
Ask your tenants what times and days are suitable for a property viewing. Announce appointments in advance.
Important: tenants are allowed to be present during the viewing. And: according to the law (Art. 257h para. 3 OR), depending on the circumstances, they can claim damages and a rent reduction.
4. Property for personal use: what tenancy law says
After a house with current tenants living in it is sold, the new owners may register an urgent need to use the property in the land register once it has been transferred to them.
Definition of personal use: how is personal use regulated in tenancy law?
The law (Art. 261 para. 2) states that the new owner can claim “urgent need of such premises for himself, his close relatives or in-laws”. Existing tenancies can thus be terminated with three months’ notice before the next statutory termination date.
Tenants are less able to defend themselves against this type of termination. Cancellation periods specified in the rental agreement do not play a role in this case.
You are liable for early termination
This scenario is a risk for you as a seller. According to the law (Art. 261 Para. 3), you as the previous landlord are liable for the damage caused to the tenant by the early termination.
However, as a seller, you can take certain precautions. You have two possibilities to prevent your tenants being evicted due to the buyer wanting the property for personal use:
In the purchase contract, you can state that the buyer must waive the extraordinary right of termination due to their own needs.
Have existing rental agreements entered in the land register. As a result, buyers have to adhere to the contractual notice periods and claim the property for private use.
This article was first published on 08.05.2019
