Sell a Rental Property With Tenants — The Lease, the Deposit, and What Actually Happens at Closing

Selling With a Tenant in Place Doesn't Start With an Eviction

A house doesn't need to be vacant to sell. Under Tex. Prop. Code §92.001(2), a "landlord" is defined as "the owner, lessor, or sublessor of a dwelling" — not a specific person named on the original lease. That definition is what makes selling an occupied rental work: whoever owns the dwelling holds the landlord's obligations under the lease, so when the property sells, the buyer steps into that role for whatever's left of the term. Nothing in the sale itself terminates the tenancy or requires the seller to remove the tenant first.

If you're ready to sell a Houston property with a tenant already in place, we buy occupied rentals for cash and can close around the existing lease instead of requiring it to end first.

Fixed-Term Lease or Month-to-Month? It Changes What Happens Next

What kind of lease is on the property decides how much runway the buyer — or the seller, if a deal falls through — actually has.

A Fixed-Term Lease

A one-year lease, or any lease with a stated end date, runs to that date no matter who owns the house in the meantime. The new owner takes the property subject to it. Tex. Prop. Code §92.001(3) defines a lease broadly as "any written or oral agreement between a landlord and tenant that establishes or modifies the terms, conditions, rules, or other provisions regarding the use and occupancy of a dwelling" — an oral arrangement counts as much as a signed document.

A Month-to-Month Tenancy

A monthly tenancy doesn't need a triggering event to end — either side can terminate it by giving notice to the other, under Tex. Prop. Code §91.001(a). If the rent-paying period is at least a month, §91.001(b) ends the tenancy on whichever is later: the date named in the notice, or one month after notice was given. Selling the house doesn't serve that notice by itself — someone still has to give it, in writing, if ending the tenancy (rather than transferring it to the new owner) is the goal.

Notice to Vacate: What the Law Actually Requires

Selling the property is not, by itself, a notice to vacate and isn't grounds for eviction. Tex. Prop. Code §24.005 sets the baseline: before a forcible detainer (eviction) suit against a tenant who defaults or holds over past the lease term, the tenant is generally owed at least three days' written notice to vacate — unless the lease sets a different period, which controls instead. That clock is for a tenant in default or overstaying, not a clock a for-sale sign starts.

§24.005 also has a narrower rule: a purchaser at a tax or trustee's foreclosure sale under a lien senior to the tenant's lease must give a paying, non-defaulting tenant at least 30 days' notice to vacate if not continuing the lease. That's built for foreclosure auctions, not a voluntary cash sale where the buyer takes the property subject to the lease.

If it comes to an eviction filing, Tex. Prop. Code §24.004(a) puts jurisdiction in "a justice court in the precinct in which the real property is located." Harris County runs eight JP precincts, so which court hears a given eviction depends on where the house sits.

What Happens to the Security Deposit When the House Sells

The deposit follows the property, not the seller's bank account. Tex. Prop. Code §92.105(a) — "Cessation of Owner's Interest" — makes the new owner liable for returning the tenant's security deposit "from the date title to the premises is acquired," once the owner's interest ends by "sale, assignment, death, appointment of a receiver, bankruptcy, or otherwise." Practically, the deposit has to move from seller to buyer at closing, the same way a mortgage payoff does.

§92.105(b) requires the new owner to give the tenant a signed statement acknowledging the purchase, responsibility for the deposit, and its exact dollar amount. §92.105(b-1) keeps the seller on the hook for a deposit received during their ownership "until the new owner has received the deposit or has assumed the liability for the deposit," unless the parties agree otherwise in writing — so silence on the deposit at closing doesn't make it disappear. (§92.105(c) carves out a foreclosing mortgage lienholder — a different fact pattern than a negotiated sale.) Separately, Tex. Prop. Code §92.104 sets the seller's duties while they still hold the deposit: deductions are limited to charges the tenant is legally liable for, normal wear and tear can't be charged against it, and an itemized accounting is owed for anything withheld.

Call (346) 641-3335 and we’ll walk through how the deposit and the lease transfer at closing on your property.

Repairs, Code Compliance, and What Still Follows the Property

Owning a rental with a tenant in it comes with an ongoing repair duty, and that duty doesn't pause during a sale. Tex. Prop. Code §92.052(a) requires a landlord to make a diligent effort to repair a condition once a non-delinquent tenant gives written notice (when the lease itself calls for written notice) of a problem that materially affects health or safety, or of a failed hot-water heater. §92.052(b) excuses damage the tenant, their family, or their guests caused beyond normal wear and tear — but the health-and-safety duty otherwise stands regardless of a pending closing.

A rental with open code violations on a rental property carries that duty on top of a city enforcement action — common enough on older rental stock that it gets its own page, covering what a title company and a cash buyer each do about open violations.

When the Rental Math Stops Working

A rental doesn't have to be in crisis to become a problem. Property taxes, insurance, and maintenance keep coming whether or not the tenant is current, whether or not a unit is filled, and whether or not the owner has any interest left in managing it. A tenant who's fallen behind, a repair the owner can't afford, a lease about to renew on a property the owner wants out of — any of those can turn a rental into a monthly bill with no clear end date.

Selling doesn't require solving that first. A cash sale that takes the property subject to the existing lease means the owner isn't carrying it through a vacancy, isn't paying to evict anyone, and isn't waiting for a lease to expire before listing. The lease and the deposit go with the property, and the carrying costs stop on the seller's side at closing.

Tax Considerations on an Occupied Rental Sale

A rental is investment property, not a primary residence, so the tax treatment differs from selling the house you live in — there's no owner-occupant exclusion to fall back on, and depreciation claimed over the years generally has to be accounted for at sale. That's a question for a CPA who can see the actual depreciation schedule and basis.

If the mortgage balance is close to or more than the sale proceeds will cover, the sale may end up structured as a short sale — the lender releasing its lien for less than the full balance — which brings its own question: whether the forgiven amount shows up as income on a Form 1099-C. The mechanics of that form, and when a forgiven amount is and isn't taxable, are a separate question a CPA can walk through with the actual numbers.

Selling an Occupied Rental for Cash: How the Offer Actually Works

Buying a tenant-occupied rental starts with the same information a lender or retail buyer would want, minus the financing contingency: the lease terms, the rent amount and whether it's current, the security deposit on file, and the property's condition, including anything the tenant has flagged under §92.052 that hasn't been fixed yet. None of that has to be resolved before an offer — it gets priced in and handled at or after closing.

The tenant doesn't need to move out, the lease transfers with the deed, and the deposit accounting is handled in writing at closing the way §92.105 requires. Spotless fixed-term lease, shaky month-to-month tenant, or open repair items — we buy houses in any condition, tenant and all.

A rental sale sometimes overlaps with other life events on the same property — if this one is also part of a split, see how a divorce sale works in Texas while the lease is still active.

We are a professional home buyer, not a law firm or a tax advisor. This page is general information about how the Texas Property Code treats leases, deposits and notice — not legal advice about your specific lease or tenant. For the legal call on your situation, talk to a Texas attorney.