Selling a house with tenants in Tennessee

You can sell a Tennessee rental with the tenant living in it. The tenant does not have to consent, and the sale does not end the lease: the buyer takes the house subject to it. In larger counties, the Uniform Residential Landlord and Tenant Act sets the rules for showing the house and for telling the tenant who the new owner is. The security deposit is yours to write into the purchase contract, because the deposit statute does not address a sale.

The lease survives the sale

In Southeast Diamond Jubilee Investments v. Uma Shiv (2020), the Tennessee Court of Appeals cited the 1924 decision Hughes v. Donlon for two points: a tenant’s consent to a sale of the leased premises is not necessary, and the tenant cannot be deprived of the leasehold by that sale. The buyer steps into your place as landlord for the rest of the term.

A buyer who wants the house empty has two options: wait for the lease to end, or reach an agreement with the tenant to leave early. A fixed-term lease runs to its end date unless the tenant agrees otherwise. A month-to-month tenancy ends on the notice the lease and Tennessee law require. Read your lease for any clause about a sale before you promise a buyer a vacant house.

Which rules apply depends on your county

The Uniform Residential Landlord and Tenant Act, Title 66, Chapter 28, applies only in counties with a population of more than 75,000 by federal census (§ 66-28-102). In those counties it occupies the whole field of landlord and tenant regulation, and the county cannot add its own rules. In smaller counties the act does not apply, and your lease and other Tennessee law govern. Look up your county on the Census Bureau’s QuickFacts before you rely on the act.

Showing the house

Where the act applies, § 66-28-403 lets you enter to show the premises to prospective or actual purchasers, and the tenant may not unreasonably withhold consent. The same section bars a landlord from abusing the right of access or using it to harass the tenant. Give written notice of each showing, group showings into a few set windows, and keep a record of what you sent and when.

Emergencies are separate. The act lets a landlord enter without consent for a sudden, unexpected situation that demands immediate action, and a buyer’s schedule is not one.

The security deposit

Section 66-28-301 requires a landlord who takes deposits to hold them in an account used only for that purpose, at a regulated bank or lending institution, and it sets the inspection and refund steps when a tenancy ends. It does not say what happens to deposits when the rental sells. Write it into the purchase contract: the amount of each deposit, whether it transfers to the buyer or is credited at closing, and who refunds it when the tenant moves out. Then tell the tenant, in writing, who holds it now.

Hand the buyer copies of the lease, the deposit records and every notice you have sent, so the new landlord starts with the same file you had.

What to tell the tenant

The act requires the landlord to give the tenant, in writing, the name and address of the person authorized to manage the premises and of an owner or the owner’s agent. Section 66-28-302 says that information must be kept current and is enforceable against any successor landlord, owner or manager. After closing, the tenant needs a letter with the new owner’s name and address and where rent goes from now on. Send it jointly with the buyer, so the tenant has no reason to think it is a scam.

Under the same section, a person who fails to make that disclosure becomes an agent of each landlord for receiving legal papers, notices and demands. Keep the tenant’s copy current through closing and make sure the buyer takes it over after.

Disclosure on a rental

Tennessee’s residential property disclosure law exempts an owner who has not lived on the property at any time in the three years before the transfer (§ 66-5-209). A landlord who moved out years ago falls under it. The exemption removes the form. It is not permission to misstate the condition of the house, and our post on selling as-is covers what still applies.

Selling occupied or vacant

An occupied rental sells to a buyer who wants a rental: an investor who values the rent and the lease. A vacant house can also sell to someone who will live in it. Which route pays you more depends on the rent, the lease terms, the condition, and how long until the lease ends. Our rent or sell calculator compares holding the rental against selling now, and our post on the cost to sell a house in Tennessee lists the lines on the selling side. When we buy a rental, we take it subject to the lease, like any buyer.

This is general information, not legal or tax advice. Talk to a Tennessee attorney or CPA about your situation.