Selling a Rental House With a Tenant in It: Maryland's Right of First Refusal

Can I sell a rental house while a tenant lives in it?

Yes. A sale does not end a lease. Maryland’s People’s Law Library says that if a landlord sells a property and the buyer knows it is rented, “the lease remains valid, and purchaser must honor the provisions of the lease.” The tenant keeps the same rights and duties with the new owner.

What changed in recent years is the step before the sale. Under Real Property 8-119, you must give a qualifying tenant a written chance to buy the home before you list it. This guide explains who is covered, what the notice must say, and how the timeline works. It also covers showings, a buyer who wants to keep the tenant, and a buyer who wants the house empty.

Real Property Management Gold manages rentals for owners in St. Mary’s, Calvert and Charles counties and southern Prince George’s County. The firm does not give legal advice. Use this page to plan your questions, then confirm the steps with a Maryland real estate attorney before you act.

What is the tenant’s right of first refusal?

It is the tenant’s right to make the first offer on the home you plan to sell. The section is called a “right of first refusal” in everyday use. See the right of first refusal glossary entry for a short definition.

The Maryland Department of Housing and Community Development (DHCD) puts it in one sentence: “Under state law, landlords who plan to sell a property with 3 or fewer residential rental units must provide the current tenant(s) the first opportunity to make an offer to purchase the property.”

Two parts of that sentence matter:

1. The property size. The statute covers a “tenant-occupied rental property for residential use with three or fewer individual dwelling units.” A single-family rental, a duplex and a triplex are covered. A building with four or more units is exempt.
2. The timing. The right comes before the sale. You cannot list the home first and tell the tenant later.

Which tenants qualify?

Not every person in the home counts. The statute defines a tenant as “an individual who has occupied a residential rental property for at least 6 months and who is a named lessee in the written lease.”

If your lease has two named tenants, send the notice to each. When you are unsure whether a tenant qualifies, ask your attorney before you skip the notice.

What must the written notice say, and how do I send it?

The notice must follow the form set by DHCD and must reach the tenant in a trackable way. Section 8-119(c) lists the requirements:

1. Use the form in the Secretary of Housing and Community Development’s regulations.
2. Deliver it by first class mail with a certificate of mailing, or by a delivery service that gives tracking and confirmation.
3. Include the material terms you would accept in a contract of sale with the tenant. Material terms include the sales price, the settlement date and other contingencies.
4. State in a conspicuous way that the notice asks for an offer and is not a binding contract of sale.
5. State any deadlines for the tenant to submit an offer, including the length of the tenant’s exclusive negotiation period.
6. Send a copy to the Office of Tenant and Landlord Affairs (OTLA).

The terms must be “commercially reasonable and made in good faith.” They may not include limits on financing methods or on the tenant’s right to inspect.

DHCD offers a portal for this step. Its page says: “Landlords can use the Right of First Refusal Portal to fill out and print the forms you are required by law to send to your tenant(s).” Forms submitted through the portal do not also need to be mailed or emailed to OTLA. For help with the portal, DHCD lists OTLA at otla.dhcd@maryland.gov and 301-429-7598.

What is the timeline after I send the notice?

The statute sets short deadlines on both sides. Count carefully, and keep proof of delivery for each step.

When the tenant’s offer has the same or better material terms than your notice, you must accept it and notify OTLA. When the offer differs, you send a counteroffer that explains how the offer deviates from your notice. If the tenant does not answer a counteroffer within 5 days, the counteroffer is treated as rejected. A tenant may also decline in writing at any point before the offer deadline, and then you may list the home.

If more than one tenant or group of tenants sends a timely offer, you may choose the more favorable one without liability to the others.

Does the tenant get a second chance later?

Sometimes. Section 8-119(d) gives the tenant a right of first refusal again in two cases:

• You intend to accept a third-party offer that is at least 10% lower than the lowest price you offered the tenant in any earlier notice, offer or counteroffer.
• You receive an offer from a third party before you ever offered the home for sale to the public or to anyone else.

In the second case, you cannot accept the third-party offer until you give written notice of the tenant’s right and the tenant has 30 days to respond. The notice must carry the same sales price as the third-party offer. If the tenant matches that price in a timely written offer, you must accept it.

A third party who delivers an offer must also be told of the tenant’s right.

Which sales are exempt?

The statute lists transfers that do not trigger the right. They include a transfer to a family member of the owner, a transfer to a business entity wholly owned by the owner, court-ordered transfers, foreclosure and tax sales, transfers through an estate or trust, transfers to a government or to a public housing authority, and properties with four or more dwelling units.

“Family member” is defined in the statute and covers a spouse, former spouse, domestic partner, child, stepchild, parent, sibling, in-law, grandparent and grandchild, among others. Read the definition in the statute before you rely on this exception. A sale to a friend or a business partner is not a family transfer.

What are the penalties for skipping the notice?

An owner who violates the section “is subject to a fine of not more than $1,000 per violation.” After closing, liability for failing to give the notice “is restricted to the owner and may not attach to the residential rental property.” A tenant who sues after closing may not file a notice of lis pendens, which is a filing that warns the public about a dispute over a property.

The fine is not the only risk. A missed notice can start a dispute with the tenant before closing. Sending the notice first is the safer path, and the 30-day window is short.

Can I show the house while the tenant lives there?

Yes, with proper notice. The People’s Law Library lists “showing the unit to potential buyers, tenants, or contractors” among the reasons a landlord may enter. The rules for entry are:

• Give at least 24 hours’ written notice, except in an emergency.
• Include the date, an approximate time and the specific reason for entry.
• Enter only between 7:00 a.m. and 7:00 p.m., Monday through Saturday, unless the tenant agrees in writing to another time.

A tenant may agree in writing to shorter notice. Your lease and your county may add rules, so read both.

Showings go better when the tenant helps. Offer a fixed showing window, give the tenant notice of open-house plans, and ask the listing agent to confirm each visit in writing. A tenant who feels respected is more likely to keep the home clean and to allow photos.

What if the buyer wants to keep the tenant, or wants the house empty?

Most buyers of tenant-occupied homes are investors who want the rent to continue. A signed lease with a stable payment history can raise the value of the house to them. Gather the lease, the rent ledger, the security deposit amount and any addendums so the buyer can verify them. Ask your attorney and your title company how the security deposit will pass to the buyer, and put that in writing. See our security deposit guidelines for the Maryland rules on holding and returning a deposit.

A buyer who wants to live in the home cannot simply cancel the lease because the house sold. The lease remains valid. Ending a tenancy early requires the tenant’s agreement or a lawful ground, and the notice rules depend on the lease type. Talk to your attorney before you promise a buyer that the house will be empty at closing. Our guide to Maryland landlord-tenant law gives an overview of notices and terminations.

Should I sell, or rent the house out instead?

Selling with a tenant in place is one option. Another is to keep the home as a rental. If you are weighing the two, a free rental assessment gives you a number to compare with a sale price. You can read about renting out your home and the fees before you decide. For terms used on this page, see the rental license entry, the security deposit entry and the holdover tenant entry.

This page is general information, not legal advice. Laws change; check the linked official source or talk to a Maryland attorney.

Next step

If you own a Southern Maryland rental and are weighing a sale or a long-term rental, request a free assessment at /contact-us or call (301) 392-2172.