Selling a Minnesota Rental With Tenants Still Living There
You want to sell a rental house, and someone is living in it under a lease. Can you sell now, or do you have to wait? What happens to the lease and the security deposit? Here is how it works in Minnesota, your four realistic options, and how to pick between them.
Short answer: yes, you can sell a Minnesota rental with tenants in it. The lease does not end when you sell. It transfers to the buyer, who becomes the new landlord and has to honor the existing lease unless the buyer and the tenant both agree to change it.
What happens to the lease
The Minnesota Attorney General's Landlords and Tenants: Rights and Responsibilities handbook puts it plainly. When a landlord sells the house or apartment, as opposed to a bank foreclosure, the lease transfers to the buyer, who becomes the landlord. The new landlord must follow the lease that existed between the old landlord and the tenant unless both agree to change it.
In practice that means:
- A lease with an end date (for example, a one-year lease) stays in force until that date. The buyer cannot simply move the tenant out because the house changed hands.
- A month-to-month tenancy continues too. Either side can end it later with proper written notice under the lease and Minnesota law, the same as before the sale.
- Rent goes to the new owner from the closing onward. Tell the tenant in writing who the new owner is and where to pay.
Foreclosures and contract-for-deed cancellations follow different rules. If either applies to you, read that section of the Attorney General's handbook or talk to an attorney before you do anything else.
Your four options
| Option | Works best when | Trade-offs |
|---|---|---|
| 1. Sell with the tenant in place | The tenant pays on time and the rent is close to market. The buyer is an investor or landlord who wants a rental. | A smaller pool of buyers. Many owner-occupant buyers want the house empty. |
| 2. Wait for the lease to end, then sell vacant | The lease ends soon and you can carry the house until then. | You pay the mortgage, taxes and insurance while it sits empty, plus any make-ready repairs. |
| 3. Agree with the tenant to end early | The tenant is willing to move sooner, for example in exchange for help with moving costs. | Only works if the tenant agrees. Put the agreement in writing, signed by both of you. |
| 4. Sell to the tenant | The tenant wants to buy and can get financing. | Often slow. Depends on the tenant's mortgage approval. |
Showing the house while tenants live there
Tenants still have a right to privacy during a sale. According to the Attorney General's handbook, a landlord may enter only for a reasonable business purpose, and showing the unit to a prospective buyer is one of them. The landlord must give at least 24 hours' advance notice, and unless both sides agree otherwise, entry is limited to between 8:00 AM and 8:00 PM.
Showings go better when the tenant is on your side. Give a schedule in advance, keep the number of showings down, and offer something for the trouble, such as a rent credit. A tenant who feels ambushed can make a house very hard to sell.
The security deposit
Minnesota's security deposit law, Minn. Stat. § 504B.178, covers this directly:
- Within 60 days after your interest in the property ends, you must either transfer the deposit to the buyer and notify the tenant of the buyer's name and address, or return the deposit to the tenant (subdivision 5).
- The buyer takes over all of the landlord's rights and obligations for that deposit (subdivision 6).
- Interest: deposits earn simple interest of 1% per year (subdivision 2), so account for it when you transfer or return the deposit.
The simplest approach is to settle the deposit, with interest, at closing as a credit to the buyer, and send the tenant a written notice the same day.
Paperwork to gather before you list
- A copy of every current lease, including any signed changes.
- A rent ledger showing what has been paid and when, and any balance owed.
- The security deposit amount for each tenant and the date it was paid.
- Tenant contact details for scheduling showings.
- Recent repairs, open maintenance requests, and your city rental license if your city requires one.
Buyers of rentals ask for all of this. Having it ready makes the house easier to price and the sale faster.
When a cash sale is the wrong choice
A cash buyer pays for speed and certainty. That is a good trade when the house needs work, the tenant situation is difficult, or you need to be done quickly. It is not always the right trade. If the house is in good shape, the lease ends soon, and you can wait, listing it vacant with an agent will often bring a higher price. Compare both before you decide.
How MireProperty can help
MireProperty is a Minnesota company that buys houses for cash, and rental properties from tired landlords are one of the situations we buy. If your house has tenants, tell us about the lease, the rent and the condition when you call, and we will tell you plainly whether a cash offer makes sense for you.
Buying a rental instead? See our investor checklist for buying a rental property in St. Paul.
Frequently asked questions
Can I sell my rental house in Minnesota while tenants live there?
Yes. Minnesota does not require a rental to be vacant before it is sold. When a landlord sells, the lease transfers to the buyer, who becomes the new landlord and must follow the existing lease unless the buyer and tenant both agree to change it (Minnesota Attorney General, Landlords and Tenants handbook).
Does the lease end when the house is sold?
No. A sale by the landlord does not end the lease. The buyer takes over as landlord under the same terms until the lease ends or the buyer and tenant agree otherwise. A bank foreclosure follows different rules.
What happens to the tenant's security deposit when a rental is sold?
Under Minn. Stat. § 504B.178, subd. 5, within 60 days after your interest in the property ends you must either transfer the deposit to the buyer and tell the tenant the buyer's name and address, or return the deposit to the tenant. The buyer then has all of the landlord's rights and obligations for that deposit.
Selling a Rental in Minnesota?
Tell us about the house and the lease. No obligation.
This page is general information, not legal advice. Laws change, and every lease is different. Confirm the details of your situation with a Minnesota real estate attorney, and read the current Attorney General's handbook and Minnesota Statutes chapter 504B.