How to Sell an Apartment to Your Tenant and Avoid Mistakes

Selling an apartment that is already rented out can be done in several ways. The owner can offer to purchase the property directly to the tenant or sell it to a third party. It is important to consider the rules governing the right of pre-emption, the validity of the lease agreement, and possible tax implications.

How to Sell an Apartment to a Tenant

In many cases, selling the property to the current tenant is the most convenient option. This method allows you to avoid multiple showings of the apartment to strangers, reduce the cost of real estate agency services and significantly simplify the entire transaction process.

However, Italian law provides for certain procedures that protect the rights of the tenant.

The main stages of the sale

1. Formal Offer to Purchase

If the owner intends to sell the apartment at the end of the first term of the lease (for example, after the first four years of a 4+4 lease), the tenant may have a pre-emptive right to purchase (right of first priority).

In this case, the owner is obliged to send a formal notice by registered mail or by certified electronic mail (PEC), indicating:

• the sale price;
• the terms of the transaction;
• the deadline for making a decision.

2. Response Deadline

After receiving the notice, the tenant has 60 days to notify whether they will exercise their right to purchase.

If the answer is yes, the notarization of the transaction usually occurs within the next 30 days.

3. Free Sale

If the first term of the contract has already expired or the tenant has officially refused to purchase, the owner has the right to freely sell the apartment to any buyer.

However, nothing prevents the parties from agreeing to sell to the tenant at any time on mutually beneficial terms.

4. Termination of a Lease

If a tenant purchases an apartment as their primary residence, they can benefit from tax benefits for their first property.

Once the purchase agreement is signed, the lease terminates automatically because the tenant and the owner become the same person.

What happens to the lease after the apartment is sold

If the apartment is sold to a third party, the existing lease agreement is not terminated.

According to Article 1599 of the Italian Civil Code, the new owner automatically becomes a party to the contract instead of the previous owner.

This means that:

• the tenant retains the right to occupy the apartment until the end of the lease;
• the rent remains the same;
• the terms of the agreement cannot be changed by the new owner unilaterally;
• the new owner has the right to receive rent and returns the deposit at the end of the lease.

When a lease agreement may not be renewed

The owner has the right to refuse automatic renewal of the agreement only in cases provided by law.

For example, if he:

• intends to use the apartment for his own residence or the residence of close relatives;
• does not own other residential real estate (except his own home) and intends to sell the apartment.

In this case, the tenant must be notified at least six months before the end of the contract. It is in this situation that he has a pre-emptive right to purchase.

Unregistered lease agreement

If the lease agreement is not registered with the Italian Tax Agency or the lease is carried out illegally, such an agreement has no legal force with respect to third parties.

After the sale, the new owner has the right to demand that the apartment be vacated, and the person living in it will not be able to benefit from the usual guarantees provided by law.

Does the tenant always have a pre-emptive right to purchase?

It is a common belief that the tenant always has the first right to buy the apartment. In practice, this is not true.

According to Law No. 431/1998, the pre-emptive right arises only if certain conditions are met.

There is no right of first refusal if:

• the apartment is sold during the lease agreement;
• the agreement has already passed its first renewal;
• the owner has other residential real estate;
• the apartment is transferred to a spouse or relatives up to the second degree of kinship;
• there is a gift, inheritance or sale of the entire building as a whole.

In all of the above cases, the owner is free to sell the real estate to anyone to the buyer.

Selling an apartment to a third party

Selling an apartment with an existing tenant has its own characteristics.

Decrease in market value

An occupied apartment is usually cheaper than a vacant one.

The average discount is from 15 to 30%.

The amount of the reduction depends primarily on the remaining lease term:

• if the contract ends soon, the discount is relatively small;
• if there are several years left before the lease ends, the buyer usually demands a significantly lower price.

Capital Gains Tax

The amount of tax depends on how much time has passed since the purchase of the apartment.

If the owner has owned the apartment for more than five years

Income from the sale is exempt from capital gains tax.

If the apartment has been owned for less than five years

If you sell for more than the purchase price, you must pay tax of 26% on the profit received.

Sale to the current tenant

Advantages

• you can get almost the full market value of the property;
• there are no costs for real estate agency services;
• there is no need to conduct multiple showings of the apartment;
• the buyer is well aware of the condition of the property, so the risk of subsequent claims is minimal.

Potential difficulties

The tenant can use their position to negotiate and achieve a lower price, arguing that it is more difficult to sell an apartment with a tenant.

In addition, the transaction often depends on obtaining a mortgage loan. If the bank refuses financing, the sale may fall through after several months of waiting.

Sale to a third party with an existing lease

In this case, potential buyers are mainly investors.

Advantages

• the property already generates a stable income;
• the seller continues to receive rent until the notarized agreement is signed.

Disadvantages

Investors usually demand a significant discount.

Furthermore, the tenant may make it difficult for potential buyers to view the apartment. In some cases, problems with rent payment arise, which can complicate the sale.

Payment of compensation to the tenant for early departure

Sometimes the most advantageous solution is an agreement with the tenant on early termination of the contract.

The essence of such an agreement is that the owner pays the tenant a certain amount for voluntarily vacating the apartment.

This is not a legal requirement, but is a voluntary agreement between the parties.

This option is especially justified if the cost of the vacant apartment is significantly higher than the cost of housing with a current lease agreement.

For example, if the sale of an occupied apartment leads to a decrease in the price by 25,000 euros, then the payment of compensation to the tenant in the amount of 5–7 thousand euros allows you to preserve most of the property's market value.

Furthermore, this approach helps avoid lengthy waits for the lease to end or legal eviction proceedings, allowing you to complete the transaction much faster.