The 5 most common listing agent issues regarding selling tenant occupied houses

Steve Schultz
President and Designated Broker
Blue Fox Properties

At Blue Fox Properties, LLC, our 100% focus is on managing unfurnished rental houses. In the current market conditions, many of our landlord clients are choosing to sell their rental house. After all, why not, it’s a great time to sell. We end up talking with a lot of listing agents about the sales process when they list one of our client’s tenant occupied houses. Although I understand the thought process behind listing a tenant occupied house, my initial recommendation to our client is always to wait for the tenant to vacate. There are numerous reasons why this is in the best interest of the seller, including a higher sales price. Nonetheless, we still get owners that choose to sell their property when it is tenant occupied. There are a lot of pitfalls to avoid in this scenario, but here are the 5 most common issues we come across.

1. Can the owner unilaterally force the tenant to vacate the property if the tenant has a term lease?
   The simple answer is no. However, if the owner and tenant mutually agree to an early lease termination and the terms of the lease termination, then that is totally acceptable, and legal.

2. What is considered proper legal notice in Arizona to enter a tenant occupied property?
   Per the Arizona Residential Landlord Tenant Act, ARS 33-1313, there are only three ways to serve a legal notice; hand delivery, registered mail, or certified mail. Although it is not uncommon for agents to post notices on the front door of the house, this does not constitute legal notice. However, the question is often asked about texts, emails and phone messages. Although these in and of themselves do not constitute proper legal notice, if the tenant responds to them, they are considered proper notice.

   If the agent or owner were to enter the property without giving proper legal notice and the tenant were to challenge that and win, well, see the next question…

3. What is the penalty for NOT giving a tenant proper legal notice to enter the property?
   If the tenant were to be awarded damages for an entry without proper legal notice, they could be awarded up to one month’s rent for each incident. So if the property rents for $1,500 and the landlord or agent entered 3 times without providing proper legal notice, for example, they simply posted a notice on the front door, that could result in a $4,500 penalty to the landlord. That’s a stiff penalty, so be sure you always provide proper legal notice.

4. Can a tenant deny access to the property if proper legal notice is given?
   Legally, they cannot refuse entry. However, next comes the practicality of trying to force your way past the tenant that will not allow you to enter the property. Although rare in my experience, this does happen on occasion. In these situations, I recommend you do not put yourself in harm’s way by trying to force the issue. Simply let the tenant know that they are violating the law, return to your office, and have the owner contact their attorney for further direction.

5. Can you put a lockbox or MLS key safe on the property while it is tenant occupied?
   Based on the responses to the above questions, I recommend never doing this. You cannot guarantee that proper legal notice would be given each time another agent enters the property.

As I mentioned, there are many pitfalls to navigate the successful sale of a tenant occupied house, and these are just a few. If you need help with this, feel free to contact us and we can get you pointed in the right direction, or contact your attorney.