Selling a property that has tenants in it is a different exercise from selling an empty one. The tenants have rights, the buyer has questions and you still have obligations until the sale is complete. Some sellers evict tenants to get vacant possession, which can be slow and costly; others sell to an investor who wants the rent. Either way, planning and clear communication make the sale smoother. This guide is general information; take legal advice before you act.

Check what the tenancy says

Start with the agreement. What is the term? When does it end? What notice is required? Are there clauses that bind a new owner? In many cases, a tenancy continues when the property is sold, and the buyer takes over the landlord's rights and duties. Do not assume you can end a tenancy because you are selling. How to screen tenants and write a tenancy agreement lists the clauses to look for in future agreements.

Decide: vacant possession or sell with tenants

Selling vacant can attract owner-occupiers and sometimes a higher price, but means waiting for the tenancy to end properly and losing rent. Selling with tenants appeals to investors who want income, and a good tenant paying on time makes the property more attractive. Think about timing: a lease that ends soon may favour vacant sale, and a long one favours an investor sale.

If you need vacant possession

Follow the proper process. Give the notice the agreement and the law require, in writing, and keep proof. Discuss the plan with the tenant early and, if possible, agree an end date and a handover. Offering some flexibility, such as a short extension, often avoids conflict. Never lock out a tenant or remove their belongings. Ending a tenancy: notice, handover and deposit refund covers the steps.

Handle the deposit

A tenant's deposit belongs to the tenant, subject to lawful deductions. On a sale, it must either be refunded when the tenancy ends or transferred to the buyer, with the tenant informed. Agree in the sale contract how the deposit is dealt with, and keep records. Rent receipts and tenant deposits explains what to record.

Show the property fairly

Viewings require notice to the tenant and their cooperation. Agree times, keep them reasonable and respect the tenant's privacy. Offering to compensate for disruption, or a small rent concession, can encourage cooperation. A tenant who feels respected is more likely to keep the place tidy for viewings.

Prepare the information buyers want

Investors will ask for the tenancy agreement, the rent and payment history, the deposit held, repair records and the tax position. Put these in a file. The rental property and tenant register and your receipts show the history, and records every landlord should keep lists the documents. Be honest about any arrears or disputes. Hiding them can lead to claims later.

Rent and apportionments

Agree in the sale contract who receives the rent for the month of completion and how it is divided. Make sure tenants are told whom to pay after the sale. Keep issuing receipts until the transfer is complete. Notify the tenant in writing of the change of landlord and the new payment details.

Know the costs and the process

Selling involves legal fees, agent commission, possible valuation and taxes. Follow the transfer process; land transfer process in Kenya, step by step lists the stages, and stamp duty on property transfers explains the buyer's duty. Check that the title is clean and ready; land due diligence checklist before you buy shows what buyers will check.

Tax on the sale

The gain on selling property is subject to capital gains tax, calculated on the price less the cost and allowable expenses. Use the capital gains tax calculator and read selling a property: capital gains tax steps and capital gains tax increased to 15 percent. Keep the purchase documents and receipts for improvements. Rent received up to the sale date remains taxable income; file your final rental return, as in how to file a monthly rental income return.

Complete the paperwork

After the transfer, give the buyer all documents, update your records and file your returns. Cancel insurance and utilities in your name when appropriate. Keep the sale file for at least five years. A tenanted sale can go smoothly when everyone knows what is happening, the paperwork is ready and you treat the tenants fairly.