Key Takeaways:
- ✓ Colorado law allows you to sell rental property with tenants in place—the lease transfers to the new owner
- ✓ You have four main options: wait for vacancy, sell occupied, negotiate early termination, or sell to a cash investor
- ✓ Notice requirements vary from 21 to 91 days depending on tenancy length
- ✓ Investor buyers actively seek tenant-occupied properties for immediate cash flow
Transparency Note: We are real estate investors who purchase occupied rental properties. We are NOT licensed real estate agents or brokers. This content is informational only—consult a Colorado attorney for specific legal advice about your situation.
Ready to get a no-obligation cash offer for your tenant-occupied rental? Request your offer here or call us at 720-730-5674.
Can You Sell a Rental Property with Tenants in Colorado?
Yes, Colorado landlords can legally sell rental property even with active tenants in place. The existing lease transfers to the new owner, who must honor all terms until the lease expires. Tenants cannot be removed solely because of a property sale—the new owner simply becomes the new landlord.
Yes—The Lease Transfers to the Buyer
When you sell a rental property in Colorado, your tenant's lease doesn't disappear. Instead, it transfers to the new owner automatically. This process is called "lease assumption," and it's standard practice.
The new owner steps into your shoes as the landlord and must:
- Collect the same rent amount
- Maintain the property to the same standards
- Follow all lease terms and conditions
- Provide proper notice for any changes allowed under the lease
What Transfers to the New Owner
When selling a tenant-occupied property, the buyer assumes several obligations:
Financial Transfers:
- Security deposit (new owner becomes responsible for return)
- Any prepaid rent from tenants
- Outstanding maintenance obligations
Legal Obligations:
- All lease terms (rent amount, duration, rules, pet policies)
- Section 8/Housing Choice Voucher contracts (must honor until lease expiration)
- Any verbal or written agreements with tenants
Under C.R.S. § 38-12-801, the new owner must provide tenants with a copy of the lease agreement within 7 days of taking ownership, along with their contact information for maintenance requests and rent collection.
Colorado Tenant Rights When Property Sells
Understanding tenant rights is essential before selling your rental property. Colorado law provides specific protections that both you and the buyer must follow.
Lease Stays in Effect
The type of lease your tenant has determines what happens after the sale:
- Fixed-Term Lease: If your tenant has a 1-year lease with 6 months remaining, the buyer must honor that lease for the full 6 months
- Month-to-Month Tenancy: These can be terminated with proper notice; the new owner can continue or provide notice to end it
- At-Will Tenancy (No Written Lease): Tenants require 7 days' notice before termination
Notice Requirements Under Colorado Law
| Tenancy Length | Notice Required | Statute |
|---|---|---|
| Less than 6 months | 21 days | C.R.S. § 38-12 |
| 6-12 months | 91 days | C.R.S. § 38-12 |
| 12+ months | 91 days | C.R.S. § 38-12 |
| At-will (no written lease) | 7 days | C.R.S. § 38-12 |
| Fixed-term lease | Cannot terminate until expiration | — |
Boulder Special Requirements
If your rental property is in Boulder, pay close attention. Boulder requires 60 days' notice before terminating a lease due to sale—compared to the standard state requirements. You must also disclose existing tenants to all potential buyers and provide copies of all lease agreements.
H.B. 1098 (2024)—New Colorado Eviction Rules
Colorado passed House Bill 1098 in 2024, significantly changing how landlords handle lease renewals and terminations. Key changes include new "for cause" and "no fault" eviction categories, and landlords now being required to offer lease renewal in many situations. These changes don't prevent you from selling, but they affect what the new owner can do after purchase.
Understanding Colorado Security Deposit Law (CRS 38-12-103)
When selling a tenant-occupied rental property in Colorado, properly handling security deposits isn't optional—it's required by law. Under C.R.S. § 38-12-103, when you sell rental property, you must either:
- Transfer the full security deposit to the new owner at closing, OR
- Return the deposit to your tenant (minus any legal deductions)
You cannot simply pocket the security deposit as part of the sale proceeds.
Key Requirements:
- Standard return timeline: 1 month after tenant vacates
- Extended timeline: Up to 60 days if specified in the original lease
- Itemized statement required: All deductions must be documented in writing
- Penalty for violations: Willful withholding can result in treble damages (3x the amount) plus attorney fees
Note: If you're searching for "CRS 38-12-801," you may have found references to the wrong statute—801 covers manufactured housing agreements. CRS 38-12-103 is Colorado's security deposit law.
When selling to Terra Capital, we coordinate security deposit transfers as part of our standard closing process, ensuring you remain compliant with Colorado law.
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Get My Cash Offer →Your Options for Selling a Rental with Tenants
You're not locked into a single path. Here are your four main options, each with trade-offs worth considering.
Option 1: Wait for Lease to Expire
How it works: Allow the current lease to run out, then sell the property vacant.
Pros:
- Largest buyer pool (owner-occupants + investors can bid)
- Potentially higher sale price
- Easier showings without scheduling around tenants
Cons:
- Time delay (could be months or years)
- Carrying costs continue (mortgage, taxes, insurance)
- Risk of tenant renewing or going month-to-month
Option 2: Sell with Tenant in Place
How it works: List the property as a tenant-occupied rental and market to investor buyers.
Pros:
- No waiting—list immediately
- Tenant provides rental income during sale process
- Proves cash flow to investor buyers
- Minimal disruption to tenant
Cons:
- Smaller buyer pool (investors only)
- May need slight price adjustment
- Scheduling showings requires tenant coordination
Option 3: Negotiate Early Lease Termination
How it works: Offer your tenant an incentive to leave before the lease expires ("cash for keys").
Pros:
- Can convert to vacant faster than waiting
- Tenant leaves voluntarily (no legal action)
- Often less expensive than months of carrying costs
Cons:
- Additional out-of-pocket expense (typically 1-2 months' rent)
- Requires tenant's agreement—they can say no
Option 4: Sell to a Cash Investor (Like Terra Capital)
How it works: Sell directly to an investor buyer who specializes in purchasing tenant-occupied properties.
Pros:
- Close in as little as 7-14 days
- No waiting for lease expiration
- No need to coordinate showings with tenants
- Sell as-is without repairs or cleaning
- Certainty of close (no financing contingencies)
Cons:
- May receive offers below full retail market value
- Selling without traditional agent representation
Comparison: Your Selling Options
| Factor | Wait | Sell Occupied | Cash for Keys | Cash Investor |
|---|---|---|---|---|
| Timeline | Months-years | 60-120 days | 30-90 days | 7-14 days |
| Buyer Pool | All buyers | Investors | All buyers | Direct |
| Your Effort | High | Medium | Medium | Low |
| Price Potential | Highest | Medium | Medium | Competitive |
How Investor Buyers Handle Tenant-Occupied Properties
If you're wondering who actually buys rentals with tenants in place, the answer is: investors like us.
Why Investors Buy Occupied Rentals
- Immediate cash flow: Rental income starts on day one of ownership
- No vacancy carrying costs: No mortgage payments without offsetting income
- Proven rental history: We can verify actual rent collection, not projections
- Less competition: Many buyers avoid occupied properties, reducing bidding wars
- Value-add potential: Below-market rents can be adjusted after lease expires
How Terra Capital Approaches Tenant-Occupied Purchases
- We honor existing leases: Tenants experience a smooth ownership transition
- No disruption: Tenants aren't pressured or harassed
- Professional management: We have systems for proper tenant communication
- Seamless process for you: We handle all the complexity
Selling a Property with Section 8 Tenants
Have a tenant using a Housing Choice Voucher (Section 8)? You can still sell. The lease transfers like any other, and the new owner must complete paperwork with the housing authority to continue receiving payments.
Why Some Investors Like Section 8 Properties
- Guaranteed payment portion: The housing authority's portion arrives consistently
- Long-term tenants: Section 8 tenants often stay for years, reducing turnover
- Government-backed income: Provides additional payment security
Tax Considerations When Selling Rental Property
Depreciation Recapture
If you've claimed depreciation deductions on your rental property, those deductions are "recaptured" when you sell. This means previous depreciation claimed becomes taxable income at a federal tax rate of up to 25%.
Capital Gains Tax
Any profit from the sale is subject to capital gains tax:
- Long-term capital gains: Apply if you held the property for more than 1 year
- Colorado state capital gains: Colorado has NO additional state capital gains tax
- Federal rates: Depend on your income bracket (0%, 15%, or 20% for most)
1031 Exchange Option
Want to defer taxes entirely? A 1031 exchange lets you roll your proceeds into a new investment property without immediate tax consequences. Key requirements include a 45-day identification period and 180-day completion deadline.
Frequently Asked Questions
Do I need to tell my tenants I'm selling?
You're not legally required to notify tenants before listing, but it's highly recommended. Tenants will learn about the sale during showings anyway. Early communication builds cooperation and avoids surprises.
Can the new owner raise the rent after purchase?
Not during an active fixed-term lease—they must honor the existing rent amount until the lease expires. For month-to-month tenancies, the new owner can adjust rent with proper notice, following Colorado law.
What if my tenant refuses to allow showings?
Review your lease agreement. Most leases include a provision allowing landlord access for showing property for sale with reasonable notice. If no provision exists, try negotiating—offer a rent credit or work around their schedule.
Can I sell if my tenant is behind on rent?
Yes, you can sell regardless of rent collection status. However, the delinquency will likely affect your sale price. Investor buyers will factor in any outstanding amounts. Disclose the situation honestly to potential buyers.
What happens to the security deposit when I sell?
Security deposits transfer to the new owner at closing. You're required to transfer the full deposit amount, and the new owner becomes responsible for returning it per Colorado law when the tenancy ends.
Can I offer my tenant cash to move out?
Yes. "Cash for keys" agreements are legal in Colorado when purely voluntary. Typical offers range from 1-2 months' rent equivalent. Any agreement should be in writing, signed by both parties, and clearly outline the move-out date and payment terms.
Do tenants get first right of refusal in Colorado?
Colorado does not have a statewide first right of refusal law for residential tenants. Some local ordinances or individual lease agreements may include such provisions, but they're not required.
Next Steps: Selling Your Tenant-Occupied Rental
Selling a rental property with tenants in Colorado doesn't have to be complicated. You have options—from waiting for vacancy to selling directly to an investor buyer who wants the property exactly as it is.
Here's what we know after working with Colorado landlords: Many tired landlords just want a clean exit. They don't want to wait months for a lease to expire. They don't want to coordinate dozens of showings. They don't want to wonder if a buyer's financing will fall through.
If that sounds like you, selling to a cash investor might be your fastest path forward. Get your no-obligation cash offer today or call us at 720-730-5674.
About the Author: Eric Osakue is the Managing Member of Terra Capital LLC, a Colorado real estate investment company. With hands-on experience purchasing tenant-occupied rentals across the Front Range, Eric helps landlords navigate the sale process while respecting tenant rights and Colorado law.
Disclaimer: This information is for educational purposes only and does not constitute legal, tax, or financial advice. Every situation is unique—consult a qualified Colorado attorney or tax professional for advice specific to your circumstances. Terra Capital, LLC is a real estate investment company, NOT licensed real estate agents or brokers.
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