Buying Property With Tenants in California: Leases, Deposits, Rights
When you buy a house or small apartment building with tenants in California, the tenancies come with it: the leases, the rent history and the security deposits all stay in place, and the sale does not end a tenancy on its own. To move in yourself or take the property vacant, you need a lawful ground, usually an owner move-in that meets Civil Code section 1946.2, plus any stricter local rule. Sonoma County’s ordinance, for example, requires termination notices to say that the sale of the property is not a valid ground for eviction.
Tenant-occupied homes and buildings come up often in investment, estate and bank-owned sales. This guide is written for the buyer who will become the landlord: what you inherit, how deposits and notices transfer, when you can and cannot recover a unit, and how to write the purchase contract so you don’t promise yourself something the law won’t allow. If you plan to live in a single-family home you are buying, also read our guide to buying a tenant-occupied home, which focuses on owner-occupant timing and loans.
What transfers to you at closing
You step into the seller’s position as landlord. California’s just cause statute defines “owner” to include a predecessor in interest, so the tenancy’s history counts as if you had been there all along. In practice you inherit:
- Every lease and its terms. A fixed-term lease runs to its end date at the agreed rent, and any renewal options or written promises in it bind you.
- The rent history. Under AB 1482, a covered unit’s next increase is measured from the lowest rent charged in the prior 12 months, including months before you owned it. Our AB 1482 guide for landlords explains the cap and the exemptions.
- The seller’s notices and mistakes. A missing exemption notice, an improper rent increase or a defective termination notice is now your problem.
- The security deposits, covered in the next section.
Whether a unit stays exempt can also change with you. The single-family exemption from AB 1482 is not available if the owner is a corporation, a REIT or an LLC with a corporate member, so how you take title matters; see LLC vs. personal title for rentals.
Security deposits: who owes them after the sale
Civil Code section 1950.5 sets out what happens to deposits when a landlord sells:
- Before closing, the seller must give the buyer a written statement of the remaining security for each tenant, any lawful deductions and which option the seller has chosen (subdivision (j)).
- Within a reasonable time, the seller must either transfer the remaining deposits to the buyer and notify each tenant by personal delivery or first-class mail, or return them to the tenants with an accounting (subdivision (i)).
- If the seller does neither, the buyer is jointly and severally liable with the seller for repaying the deposits, and cannot demand a replacement deposit until it makes restitution or gives an accounting (subdivision (k)(1)).
There is a protection for careful buyers: a successor who, after inquiry and reasonable investigation, believes in good faith that the deposits were transferred or returned is not liable for the untransferred security or the bad-faith penalty (subdivision (k)(3)). That penalty can reach twice the deposit plus actual damages. So get the statement, have escrow credit or transfer the funds, and keep the tenant notices in your file.
If you collect a new deposit from a future tenant, the general limit is one month’s rent. A natural person, or an LLC whose members are all natural persons, who owns no more than two residential rental properties with no more than four units in total may take up to two months’ rent (subdivision (c)).
Tell the tenants who you are within 15 days
Civil Code section 1962 requires a new owner to give tenants, within 15 days of taking over, the name, phone number and street address of the property manager and of the owner or agent who accepts legal notices, plus who receives rent, where and how it can be paid. Until you comply, you cannot serve a three-day notice or evict for nonpayment of rent that accrued during the gap, though the tenant still owes the rent.
Local rules can add to this. In Petaluma, landlords must give tenants the city’s Notice of Tenant Rights within 30 days of acquiring a property. Plan the letters before closing so they go out the first week; a property manager can handle it, and our guide to property management in Sonoma County covers what to expect from one.
Can a new owner evict a tenant to move in?
Sometimes, and only by following the rules. Under section 1946.2, once a tenant has lawfully occupied a unit for 12 months, the owner can end the tenancy only for a just cause stated in the notice. Owner move-in is one of the no-fault causes, with conditions:
- The person moving in must be the owner or the owner’s spouse, domestic partner, child, grandchild, parent or grandparent, and must intend to live there as a primary residence for at least 12 continuous months.
- For leases entered into on or after July 1, 2020, the cause is available only if the tenant agrees in writing or the lease allows the owner to end it for an owner move-in.
- It does not apply if the intended occupant already lives in a unit on the property or a similar unit there is vacant.
- The notice must name the intended occupant and the relationship, and tell the tenant they may ask for proof.
- The occupant must move in within 90 days after the tenant leaves and stay 12 consecutive months. If not, the owner must offer the unit back at the same rent and lease terms and reimburse reasonable moving expenses beyond any relocation already paid.
For any no-fault termination, the owner must pay one month’s rent within 15 calendar days of serving the notice or waive the final month’s rent in writing, and a notice that does not strictly comply is void. An owner who violates the section can owe actual damages, attorney’s fees and, if willful, up to three times actual damages. Our guide to just cause eviction rules covers the other causes.
Local rules that change the answer
A city or county ordinance can apply instead of, or on top of, the state rules. In Diamond’s markets, these are the ones buyers most often meet:
| Where | When protection starts | No-fault relocation | Other points for a buyer |
|---|---|---|---|
| Unincorporated Sonoma County (Ordinance 6496) | From the start of the tenancy | The greater of HUD Fair Market Rent or the tenant’s actual monthly rent | Copies of termination notices served on or after January 1, 2025 must be filed on the county portal within three days of service |
| Petaluma (Municipal Code Chapter 6.60) | From the first day of the tenancy | 250% of one month’s rent or $9,000, whichever is less | Owners of three or fewer units who are not a REIT, corporation or LLC with a corporate member are exempt if they give the required written notice |
| San Francisco (Rent Ordinance) | Just cause covers units first certified for occupancy after June 13, 1979 as well as older ones | Check the Rent Board’s current rules | Buyout agreements must follow Section 37.9E, including Rent Board filing |
| Elsewhere | State law: after 12 months, if covered | One month’s rent, or a waiver of the last month | Check the city: Bay Area ordinances vary widely |
For more detail by market, see our pages on Sonoma County multifamily and buying an apartment building in San Francisco.
“Delivered vacant”: what it takes
A listing that promises vacant delivery is only as good as the seller’s lawful path to get there. The seller cannot use its own owner move-in to clear a unit for you, and the sale is not itself a just cause. In practice a unit becomes vacant at closing in one of four ways: the tenant leaves voluntarily at the end of a lease, the seller ends the tenancy for a valid cause with full notice and relocation, the seller ends a tenancy that no just cause rule covers with proper notice, or the parties sign a negotiated move-out agreement.
That third path applies only where neither state nor local just cause rules cover the tenancy, such as a house or condo whose owner gave the AB 1482 exemption notice, in a city or county without its own ordinance. For a month-to-month tenancy like that, Civil Code section 1946.1 requires at least 60 days’ written notice, or 30 days if the tenant has lived there less than a year. A fixed-term lease still runs to its end date.
Section 1946.1(d) also allows 30 days’ notice for a sale if all of these apply: the home can be sold separately from any other unit; the owner has contracted to sell it to a buyer who is a natural person and intends in good faith to live there for at least a full year after the tenancy ends; escrow is open with a title company, licensed escrow agent or broker; the notice is given within 120 days of opening escrow; and no earlier notice was given under the section.
Negotiated agreements are common and lawful when done properly; see our guide to cash for keys in California. In San Francisco they are regulated as buyouts, with a pre-negotiation disclosure, a 45-day rescission period and Rent Board filing.
If vacancy is a condition of your offer, tie it to an executed move-out agreement or the tenant’s actual departure, and give yourself a right to cancel if it doesn’t happen. Bank-owned homes have their own occupancy issues; see investing in REO properties.
Due diligence and contract checklist
- Rent roll and ledgers for each unit, showing every increase in the past 12 months and the lowest rent charged.
- All leases, addenda and side agreements, including any AB 1482 exemption notice and whether it is in the rental agreement.
- Tenant estoppel certificates confirming rent, deposit, term and any disputes; see our estoppel certificate guide.
- The seller’s deposit statement under section 1950.5(j), and an escrow instruction to transfer or credit the deposits.
- Every notice served in the past two years: rent increases, terminations, entry notices. In unincorporated Sonoma County, ask for the county portal filings.
- Local records: in San Francisco, Rent Board petitions, decisions and filed buyout agreements; elsewhere, any city registry.
- Your own plan: if you intend to move in, check the lease date and the owner move-in conditions before you remove contingencies.
Then run the numbers at today’s rents, not projected ones; our rental property analysis guide shows how.
This is general information, not legal advice; talk to a California landlord-tenant attorney before you serve any notice or sign a contract that depends on vacancy.
Questions people ask
Can I buy a house with tenants and move in?
Possibly. Under state law, a covered tenancy can end for an owner move-in only if the conditions in Civil Code 1946.2 are met, including, for leases signed on or after July 1, 2020, a lease clause or the tenant’s written agreement. Local ordinances can add requirements.
Does a lease end when the property is sold in California?
No. The lease and the tenancy continue with the new owner. Sonoma County’s ordinance requires termination notices to state that the sale of the property is not a valid ground for eviction.
Who returns the security deposit after a sale?
The seller must transfer the deposits to the buyer and notify the tenants, or return them with an accounting. If neither happens, the buyer can be jointly liable with the seller, unless it reasonably and in good faith believed the deposits were transferred or returned.
What if the tenant has no written lease?
The tenancy still transfers to you, on the terms the seller and tenant actually agreed. Whether you can end it, and on what notice, depends on whether state just cause or a local ordinance covers the unit, so check before you plan around vacancy.
Can the seller evict the tenant before closing so I get it vacant?
If just cause rules cover the tenancy, only with a lawful cause, such as a valid termination with full notice and relocation, or a voluntary move-out agreement. The seller’s owner move-in can’t be used to clear a unit for a buyer. If no just cause rule covers the tenancy, a month-to-month tenant can be given 60 days’ notice, or 30 days in some sales to a buyer who will live there (Civil Code 1946.1(d)).
How much relocation do I owe for an owner move-in?
Under state law, one month’s rent within 15 days of the notice or a written waiver of the last month’s rent. Unincorporated Sonoma County requires the greater of HUD Fair Market Rent or actual rent, and Petaluma requires the lesser of 250% of a month’s rent or $9,000.
Do I have to notify tenants after I buy?
Yes. Civil Code 1962 requires a new owner to give tenants the owner, manager and rent-payment details within 15 days. Petaluma also requires its Notice of Tenant Rights within 30 days of acquiring a property.
If you are looking at a tenant-occupied home or building, we can help you request the right documents, read the rent roll against local rules and structure an offer that reflects the tenancies as they are. Start with our investment property services or contact us about a specific property. Diamond may refer you to partners we work with, such as property managers or attorneys; you’re free to choose any provider.
Sources & notes
- California Public Law: Civil Code section 1946.2 (just cause, owner move-in, relocation)
- Justia: Civil Code section 1950.5 (security deposits, transfer on sale)
- California Public Law: Civil Code section 1962 (owner and manager disclosures)
- County of Sonoma: Ordinance No. 6496, Residential Tenancy Protections (September 17, 2024)
- County of Sonoma: Residential Tenancy Protections Ordinance, information for landlords
- City of Petaluma: Tenant rights
- City and County of San Francisco: Partial exemption for newly constructed rental units
- City and County of San Francisco: Tenant buyout agreements (Rent Ordinance Section 37.9E)
- California Public Law: Civil Code section 1946.1 (notice to end a periodic tenancy; 30-day notice on sale)
Last reviewed October 2026 by Matthew Martinez.
