Under the Civil Code, if the owner of a thing changes, all related rights and obligations automatically pass to the new owner. When a rented flat is sold, the existing lease agreement therefore transfers to the current owner of the property. That owner must observe all the arrangements agreed in it, so they cannot, for instance, raise the rent without reason or change the duration of the commitment.
Communication is key
Although the law imposes no obligation to inform the tenant about a planned sale of the flat, it is advisable to tell them in advance and agree together on how to proceed. In practice, three different situations may arise. It often happens that the tenant decides to buy the property themselves – after all, they live there happily. This allows the owner to complete the sale considerably faster, with no worries about preparing a listing, and it saves the hassle of arranging viewings and the like. Although this is usually the most time-efficient and overall simplest option, the whole sale can still take several months, for example if the tenant applies for a mortgage. The second case occurs when the tenant would rather move out because of the upcoming sale of the property. Unless both parties agree otherwise, the tenant gives notice and the three-month notice period starts to run. During this time the tenant must make the flat accessible for viewings by potential buyers. However, their obligations do not include immaculate cleaning and carefully staging the interior, so the property may not impress prospective buyers as much as it could.
Selling a flat with a lease agreement in place may – but certainly need not – mean that its occupants have to move out
The final option is selling the property together with the tenant, who wishes to continue living in the flat. And it is this option we will look at in more detail.
The pitfalls of selling a flat with a lease agreement
Owners who decide to put a flat with an ongoing lease agreement up for sale must expect a smaller pool of potential buyers. Understandably, the property will not suit people who are looking for a home of their own and need to move in within a short time frame. Nor will it be a good choice for those who need a high degree of flexibility – for example, they do not want to move into the purchased flat just yet, but given their lifestyle the situation could change suddenly. A lease agreement cannot be terminated (by the landlord) without a statutory reason and observing the three-month notice period. Some potential buyers looking for an investment opportunity may have concerns about the quality of the tenant, whom they did not choose themselves and do not know. An occupant who causes problems, fails to pay the monthly rent properly or does not cooperate in resolving damage, significantly reduces the property's appeal on the market.
Advantages for the new owner of the property
For many buyers interested in an investment flat, a reliable tenant already living in the property can be a very significant benefit, because it means several worries fewer right from the start. It is therefore important to highlight the key points of the lease agreement in the property listing, along with positive experience with the tenant in question. A potential buyer may be attracted by the fact that in this case they do not have to rack their brains or waste time looking for a suitable tenant. With an established occupant there is no need to conclude a new agreement or explain matters relating to running the household. The risk of the flat standing empty is entirely minimised and there is no time lag between the purchase and the first income. Passive income from rent is one of the main reasons why investors buy property. A tenant with proven solvency who makes the agreed payments regularly and on time is therefore the ideal occupant of their flat. This reinforces buyers' sense of security about their long-term investment.
An open-ended lease agreement that is well drafted and signed with a reliable person increases the value of a flat as an investment
The process of selling a flat with a lease agreement
When planning the sale of a flat with an existing lease agreement, it is advisable to first prepare all the documentation – a copy of the lease agreement (including information on any termination conditions) and proof of rent payments, which reflect how reliable the flat's occupants are. These in particular can be crucial in the eyes of investors. The flat's owner must be able to answer buyers' questions about the amount of rent and how utilities are paid, should know how long the tenant has been using the flat, should be able to describe their experience with them, and should have an overview of the property's current technical condition. It is also good practice to inform the tenant and agree on days when the flat can be shown to prospective buyers. Regular and open communication between all parties – owner, tenant and buyer – is essential for a successful sale. Upon conclusion of the purchase contract and transfer of the property, all rights and obligations relating to the lease agreement pass to the new owner. The lease agreement therefore continues on the originally agreed terms, with only the landlord's side changing. If the agreement stipulates obligations going beyond the law, these are binding on the future owner only if they were informed of them before the purchase contract was concluded. Changes to the lease agreement can be made by means of addenda, subject to mutual consent. The new owner is not entitled to terminate the agreement and evict the tenant merely because of the change of ownership. This applies even if such an option were written into the lease agreement, because the owner may terminate it only on statutory grounds. The situation differs if the owner or their relatives want to move into the property themselves. Under the Civil Code, the owner is entitled in this case to give the tenant notice of an open-ended agreement. Other statutory grounds for termination of the tenancy by the landlord, applying to both fixed-term and open-ended agreements, include a gross breach of the tenant's obligations, for example long-term non-payment of rent or serious damage to the property. Such conduct must, however, be duly supported by evidence.
Termination of a lease agreement, whether shortly before the sale or after the purchase of the flat, is governed by the Civil Code and the reason must meet statutory requirements
In the notice, the landlord must always state the specific reasons justifying it. It must be delivered to the tenant in writing, and the tenant has the right to raise objections and, if necessary, ask a court to assess whether the notice is justified. Have you bought a property together with a tenant and would like to rid yourself of the related administrative worries? Or do you have no time to deal with routine repairs in the rented household? Write to us at sales@flatservice.cz or call +420 277 000 330 and we will be happy to explain how professional management of investment properties works. Thanks to many years of experience on the real estate market, we at FLAT SERVICE can offer you services of the very highest standard.
