General information, not legal or tax advice

Selling a House With Tenants in Coffee County, Tennessee

Some of the Manchester and Coffee County owners who call me about selling have a tenant living in the home. Maybe it was your first house and you kept it as a rental, maybe you inherited a home with a tenant in place, or maybe you own a small rental you are ready to let go. You can sell a home with a tenant in it, but the lease, the tenant's privacy and the timing all need a plan.

This guide covers the questions I hear most: which Tennessee landlord law applies in Coffee County, what to read in the lease, how showings and access work, notice, disclosures, deposits and taxes. It is general information from the Tennessee Code, the US Census Bureau, federal lead paint rules, the IRS and HUD. It is not legal or tax advice. Landlord and tenant questions turn on the exact lease and facts, so please talk with a Tennessee attorney about your situation.

Which Tennessee landlord law applies in Coffee County

Tennessee landlord and tenant rules come from more than one chapter of the Tennessee Code, and one of the biggest depends on the county.

The Uniform Residential Landlord and Tenant Act (URLTA), Tennessee Code chapter 66 28, has detailed rules on deposits, access, notices and more. But TCA 66 28 102(a) says the chapter applies only in counties with a population of more than 75,000 according to the 2010 federal census.

Coffee County is well under that line. The US Census Bureau's county population file shows Coffee County at 52,796 in the 2010 Census, and the 2020 Census count was 57,889. So, based on the statute and those Census figures, the URLTA does not govern rentals in Coffee County, including homes in Manchester and the Coffee County part of Tullahoma.

What does apply here is the general Leases chapter, TCA chapter 66 7, other Tennessee law and, most of all, the written lease itself. Some sections of that chapter even say so directly: TCA 66 7 109(g) says that section does not apply to rental property in counties governed by the URLTA, which means it does apply in counties like Coffee.

Start with the lease

Because the detailed URLTA rules do not apply here, the lease does a lot of the work. Before you list, pull out the signed lease and any renewals and look for:

The end date. Is it a lease for a set term, or has it rolled to month to month?
What it says about a sale. Some leases address what happens if the owner sells. Many do not.
Entry and showings. Does the lease let you enter to show the home to buyers, and with how much notice?
Notice to end the tenancy. How much notice does the lease require from each side?
Deposit terms. How much was paid, where it is held and what the lease says about returning it.
Renewal or option terms. Does the tenant have a right to renew, or an option to buy?

One statute matters for long leases. TCA 66 7 101 says a lease for more than three years must be in writing, and to be valid against anyone other than the landlord, the landlord's heirs and devisees and people with actual notice of it, it must be proved and registered as the recording chapters require. If your tenant has a long lease, tell me and your attorney early.

Whether a buyer takes the home subject to the current lease depends on the lease and Tennessee law, so ask your attorney how your lease affects the sale. In practice, sellers usually choose one of two paths:

Sell with the tenant staying. The buyer takes over as the new landlord. This can suit a buyer who wants a rental, but the buyer will want copies of the lease, the rent history and the deposit details, and the purchase contract should say how rent and the deposit are handled at closing.
Sell after the tenant moves out. You wait for the lease to end, or you and the tenant agree in writing to end it early, and you sell the home vacant. This opens the home to buyers who plan to live in it.

A buyer who plans to live in the home usually needs it vacant. For example, HUD's FHA rules say at least one borrower must move in within 60 days of signing the mortgage. Talk with me before you list so the possession date in your contract matches what the lease allows.

Showings and access

In URLTA counties, TCA 66 28 403 says a tenant shall not unreasonably withhold consent for the landlord to enter to show the home to prospective purchasers, and it limits other entry. That section is part of the URLTA, so it does not govern a Coffee County rental. Your access rights here come from your lease and other Tennessee law, so read the entry terms closely and ask your attorney if the lease is silent.

Whatever the lease says, showings go better with cooperation. A few things that help:

Talk with your tenant before the sign goes up. Explain the plan and the likely timeline.
Set showing windows in writing and give as much notice as you can.
Protect their privacy and belongings. Ask the tenant to put away valuables and medications, and keep photos of their personal items out of the listing.
Consider a thank you. Some owners offer a rent credit or help with moving costs in exchange for cooperation. Put any agreement in writing.

Notice and ending a tenancy

TCA 66 7 109 sets notice periods for a landlord ending a residential tenancy for the purpose of eviction in counties like Coffee:

14 days' notice is enough when the reason is unpaid rent that is due and in arrears after demand, damage beyond normal wear and tear, or certain violent or dangerous behavior. If the tenant fixes a remediable breach before the date in the notice, the rental agreement does not end.
30 days' notice is required for all other defaults in the lease.
3 days' notice applies in narrow cases, such as violent acts or drug related criminal activity in counties not governed by the URLTA, and for unauthorized occupants who refuse to leave.
The section does not apply to tenancies with a rental period of less than 14 days.

Those periods are about lease defaults and eviction. Wanting to sell is not a lease default, so ending a tenancy to sell usually comes down to the lease term, the notice the lease requires and what you and the tenant agree to. Removing a tenant who will not leave is a court matter. Please talk with a Tennessee attorney before you give any notice.

Disclosures when you sell a rental

Selling a rental does not change your disclosure duties as a seller. Under TCA 66 5 202, the owner of residential property covered by the Tennessee disclosure law gives the buyer either the residential property disclosure statement, covering material defects known to the owner, or a disclaimer statement, which is allowed only when the buyer waives the disclosure. If you have not lived in the home for a while, ask your tenant about anything they have reported or noticed, and keep repair records handy. My seller disclosure guide explains the form.

If the home was built before 1978, the federal lead based paint rule at 40 CFR 745 Subpart F applies to both sales and leases of target housing. Under 40 CFR 745.107, before a buyer or tenant is obligated under the contract, the seller or lessor gives an EPA approved lead hazard pamphlet, discloses any known lead based paint or hazards and provides available records and reports. If you gave your tenant those records, give them to your buyer too. My lead based paint disclosure guide covers the details and the exceptions.

Security deposits and rent at closing

The URLTA's deposit rules, in TCA 66 28 301, include a separate account and inspection steps, but like the rest of that chapter they apply only in URLTA counties. In Coffee County, the lease and the purchase contract carry more weight. If the tenant is staying, the contract should say whether the deposit and any prepaid rent are credited or handed to the buyer at closing, and whether rent for the month of closing is split. If the tenant is leaving, follow your lease and talk with your attorney about returning the deposit.

For taxes, IRS Publication 527 says not to include a security deposit in income if you plan to return it at the end of the lease, but if you keep part or all of it because the tenant did not live up to the lease, include the amount you keep in income that year. It also says that if a tenant pays you to cancel a lease, that payment is rent, and a deposit meant to be used as a final month's rent is advance rent.

Taxes when you sell a rental

How a sale of rental property is taxed depends on how you used it:

A home that was only a rental. IRS Publication 527 points to Publication 544 for figuring the gain or loss on the sale of rental property.
A former main home you rented out. Publication 527 points to Publication 523. Publication 523 says gain allocable to periods after 2008 when the home was not your main home may not be excluded, with exceptions, including the time after you last lived there as your main home, within the 5 years before the sale.
Depreciation. Publication 523 says you cannot exclude the part of your gain equal to depreciation allowed or allowable after May 6, 1997, which must be recaptured.
Exchanges. Publication 527 mentions like kind (section 1031) exchanges of rental property and points to Publication 544. Publication 523 says a home you got through a like kind exchange in the past 5 years is not eligible for the home sale exclusion.

My capital gains guide covers the main home exclusion in more detail. Please bring your rental records to a tax professional before you list.

Fair housing

HUD explains that the Fair Housing Act protects people from discrimination when they are renting or buying a home, because of race, color, national origin, religion, sex, familial status or disability. That applies to how you treat your current tenant during the sale and to how the home is marketed to buyers. I market every home the same way to every buyer.

How I help

I do not give legal advice and I do not manage rentals. What I do is help you choose between selling with the tenant in place and selling vacant, set up showings that respect your tenant, market the home to the right buyers, write the possession, rent and deposit terms clearly into the contract and keep the sale on track with your attorney and the closing company.

Keep reading:

Fair housing note: I work with every buyer, seller and tenant and follow the same steps for everyone.

This guide is general information from public sources, not legal or tax advice. Laws and lease terms change, so read your lease and ask a Tennessee attorney and a tax professional about your situation.

Selling a rental in Manchester?

I can help you plan the timing around your lease and your tenant and get the home sold. Call or text me at (615) 497 1658, or request a free home value report below.

Common questions

Does the Tennessee Uniform Residential Landlord and Tenant Act apply in Coffee County?

Based on the statute and Census figures, no. TCA 66 28 102(a) says the act applies only in counties with more than 75,000 people according to the 2010 federal census. The Census Bureau shows Coffee County at 52,796 in 2010, and the 2020 count was 57,889. The general Leases chapter, TCA 66 7, and your written lease apply instead.

Can I sell my house while a tenant is living there?

Yes. You can sell with the tenant staying, so the buyer becomes the new landlord, or sell after the tenant moves out. Whether a buyer takes the home subject to the lease depends on the lease and Tennessee law, so ask a Tennessee attorney how your lease affects the sale.

Does my tenant have to let buyers in for showings?

In counties governed by the URLTA, TCA 66 28 403 says a tenant shall not unreasonably withhold consent to show the home to buyers. That act does not govern Coffee County rentals, so your access rights come from your lease and other Tennessee law. Read the entry terms and ask an attorney if the lease is silent.

How much notice do I give a tenant in Coffee County?

It depends on the reason and the lease. TCA 66 7 109 sets 14 days for unpaid rent, damage or dangerous behavior and 30 days for other lease defaults when the goal is eviction. Selling is not a lease default, so ending a tenancy to sell usually depends on the lease term and any agreement. Talk with an attorney first.

What happens to the security deposit when I sell?

If the tenant stays, the purchase contract should say whether the deposit and any prepaid rent go to the buyer at closing. If the tenant leaves, follow your lease. For taxes, IRS Publication 527 says a deposit you plan to return is not income, but any part you keep because the tenant broke the lease is income that year.

Do I owe tax when I sell a rental house?

Possibly. IRS Publication 523 says you cannot exclude gain equal to depreciation allowed or allowable after May 6, 1997, and gain tied to periods after 2008 when the home was not your main home may not be excluded, with exceptions. Publication 527 points to Publication 544 for rental property sales. Ask a tax professional.

Matt Sargent is a Tennessee licensed affiliate broker with Keller Williams who helps buyers and sellers in Manchester and Coffee County. Call (615) 497 1658 or send a message.