Selling an Inherited House With Tenants in New Jersey

You can sell an inherited house with tenants in New Jersey, but the sale doesn't end their tenancy: the state's Anti-Eviction Act requires good cause to remove a residential tenant, and selling isn't one of the general causes. So the estate either sells with the tenants in place, reaches an agreement with them to leave, or uses the narrow sale-related cause the law allows for small buildings, with the estate's attorney guiding every step.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. A rented estate home in Monmouth or Ocean County has one more set of people to respect: the tenants who live there. Here's how the rules shape the sale.

Who is the landlord after the owner dies?

In practice, the estate, acting through the executor or administrator. New Jersey's fiduciary powers statute gives them the power to take possession of and manage estate real property, collect the rents, pay the taxes and other charges, and lease the property for up to three years, unless the will, the appointment or a court order limits those powers (N.J.S.A. 3B:14-23).

First jobs for the executor: find the leases, the rent records and the security deposit records, tell the tenants in writing where to pay rent now, and ask the attorney how the estate should hold the money.

Does selling the house end the lease?

No. The Department of Community Affairs' Truth in Renting guide explains that under the Anti-Eviction Act a landlord may recover possession of a home only with the tenant's consent or through the legal eviction process, that a landlord must have good cause to evict, and that a judgment for possession must be entered by a court before a tenant is required to move.

The guide also says most residential landlords can't refuse to renew a lease without good cause. It lists exceptions, including owner-occupied two- or three-family homes and seasonal units, so if the house was a summer rental at the shore or a two-family the owner lived in, ask the attorney which rules apply.

Can a buyer get the house vacant?

Sometimes. The Truth in Renting guide describes one sale-related cause: the owner of a building with three residential units or less who has contracted to sell a unit to a buyer who wants to live in it, where the contract calls for the unit to be vacant at closing. It describes a similar cause for an owner of three or fewer condominium or cooperative units. Even then, the tenant must get a Notice to Quit at least two months before an eviction case is filed, and no case can be brought until the lease expires (N.J.S.A. 2A:18-61.1(l)).

That makes timing the whole game. A buyer who wants to move in has to be willing to wait for the lease and the notice period, and the attorney has to handle the notices.

Should you sell with the tenants in place or wait until it's vacant?

There are two different pools of buyers, and I'll show you both plans with real numbers:

• Sell with tenants in place. The buyer takes over the lease and the rent. These buyers look at the rent, the lease terms and the condition. The leases and rent records need to be organized before we market it.
• Sell vacant. Buyers who want to live in the home see it at its best and can make it theirs. That only works if the tenants leave by agreement or through the process above, which takes time.

Which plan nets the estate more depends on the house, the lease and the timeline. Start with my home value tool, then let me walk it. I spent years building and remodeling New Jersey homes, so you'll get a construction-level read on what a buyer's inspector will find.

What happens to the tenant's security deposit?

It follows the house. The Truth in Renting guide says that when a property is sold or transferred, the new owner has a duty to obtain the security deposit plus accrued interest from the former owner, and that whether or not it's transferred, the new owner becomes responsible for the deposit, its investment, the notices and its return (N.J.S.A. 46:8-21). The estate's attorney handles the transfer at closing, so pull those deposit records early.

Do tenants have to allow showings?

Check the lease. The Truth in Renting guide says no statute or available case law obligates a tenant to let a landlord in for purposes other than inspection, maintenance and repair, so showings depend on the lease terms. In practice, cooperation goes further than any clause. Give plenty of notice, keep the schedule predictable, and respect that it's their home.

One more item from the guide: a landlord who owns a one- or two-family home that isn't owner-occupied must file a registration statement with the municipal clerk, and a landlord who isn't properly registered can't evict a tenant (N.J.S.A. 46:8-27 to -37). Ask the attorney whether the registration is current.

What's the plan for a rented estate home?

1. Authority first. The attorney confirms who can sign for the estate.
2. Paperwork second. Leases, rent records, deposits and registration.
3. Talk to the tenants. A respectful letter about the sale and what it means for them.
4. Pick a plan. Tenants in place or vacant, with numbers on each.
5. Market it right. The first two weeks set the price, so launch with the right buyers in mind.
6. Same update for everyone. The executor and every heir get the same written update at each step.

The Estate & Probate Guide covers the whole estate sale, and you can see how I handle estate homes.

Frequently Asked Questions

Do tenants have to leave when a house is sold in New Jersey?

No. The Anti-Eviction Act requires good cause and a court process to remove a residential tenant, according to the DCA's Truth in Renting guide. A sale alone doesn't end the tenancy.

Who collects rent after the owner dies?

The executor or administrator, under New Jersey's fiduciary powers statute. The attorney will tell you how the estate should hold it.

Can the estate sell to the tenant?

It can, if the tenant wants to buy and the price is right for the estate. A market evaluation helps both sides start from the same number.

What happens to the security deposit at closing?

The DCA guide says the new owner must obtain it, with interest, and becomes responsible for it either way. The attorney handles the transfer.

This is general information, not legal, tax or lending advice. Notices to tenants and anything involving possession should go through the estate's attorney.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

Keep reading

• How to sell an inherited house in New Jersey
• When one heir lives in the house and won't sell
• The Estate & Probate Guide
• Have a question this didn't answer? Send it to Dennis Mark.