Selling rental property in California means eight rules most states don't have: a Transfer Disclosure Statement you can't waive, a Natural Hazard Disclosure, entry and notice rules that protect the tenant through the sale, AB 1482's just-cause limits, 3 1/3% withholding at closing on FTB Form 593, a state tax that treats the whole gain as ordinary income (up to 12.3% for 2025, plus 1% above $1 million), FTB Form 3840 if you exchange out of state, and a Prop 13 reset that raises the buyer's property tax. None of them stops a sale. Each one changes your timeline, your buyer or your net.
You own a rental house in California, most likely in the Sacramento area, and you want to know which state and local rules apply when you sell it, before you sign a listing agreement.
California rental property sale rules at a glance
| Seller disclosure | Transfer Disclosure Statement (Civil Code 1102); waiver is void |
|---|---|
| Buyer's cancel window for late disclosures | 3 days after delivery in person, 5 by mail or electronically |
| Showing notice | Written; 24 hours presumed reasonable (Civil Code 1954) |
| Notice to end a tenancy | 60 days, or 30 if under a year or under the sale exception (Civil Code 1946.1) |
| State withholding at closing | 3 1/3% of the price unless exempt (Form 593) |
| California tax on the gain | Ordinary income rates; no lower capital gains rate |
| Out-of-state 1031 exchange | Annual FTB Form 3840 |
| Buyer's property tax | Reset to their purchase price (Prop 13) |
What's different about selling rental property in California
The steps of a rental sale are much the same everywhere: lease, valuation, listing, escrow, closing. The step-by-step guide to selling a rental lays them out in order. What California changes is the rules inside those steps, and almost all of them fall on the seller.
| California rule | What it means for you | Source |
|---|---|---|
| Transfer Disclosure Statement | You disclose what you know about the house, even as an absentee owner | Civil Code 1102 |
| Natural Hazard Disclosure | A separate statement on flood, fire and earthquake zones | Civil Code 1103.2 |
| Entry notice | Showings need notice and normal business hours | Civil Code 1954 |
| Notice to terminate | 30 or 60 days, with a narrow sale exception | Civil Code 1946.1 |
| AB 1482 | Just cause after 12 months unless the house is exempt | Civil Code 1946.2, 1947.12 |
| Deposit transfer | Pass it to the buyer with notice, or return it | Civil Code 1950.5 |
| Withholding | 3 1/3% of the price held at closing | FTB Form 593 |
| Ordinary income tax | No lower state rate for capital gains | FTB |
| Out-of-state exchange | California tracks the deferred gain every year | FTB Form 3840 |
| Prop 13 | The buyer's tax starts from their price | California Constitution, Article XIII A |
California seller disclosures for a rental property
California asks the seller to tell the buyer what they know, in writing, on set forms. A landlord who hasn't lived in the house still has to fill them in. You answer from what you know, which includes what tenants have told you about leaks, pests or repairs.
The Transfer Disclosure Statement for a rental house
Civil Code 1102 applies the disclosure rules to the sale of any single-family residential property, and section 1102.6 sets out the form: the Real Estate Transfer Disclosure Statement. It walks through the house's features and systems and asks about defects and other problems you know of. Section 1102 says any waiver of these requirements is void. The exemptions in section 1102.2 cover sales such as court-ordered and probate sales, foreclosures and some trustee sales, not an ordinary landlord's sale. If the statement arrives after the buyer's offer is signed, the buyer has three days after delivery in person, or five after delivery by mail or electronically, to cancel (section 1102.3).
The Natural Hazard Disclosure for a rental property
Civil Code 1103.2 sets out a separate Natural Hazard Disclosure Statement. It tells the buyer whether the property sits in mapped hazard areas such as flood zones, very high fire hazard severity zones and earthquake fault or seismic hazard zones. The whole Natomas Basin, for example, is FEMA Zone A99; see Natomas rental sales and flood disclosure. Most sellers order a report from a disclosure company to complete it; the information comes from public maps, which matters for a house you haven't visited in a while.
Lead-based paint disclosure on an older rental
For most housing built before 1978, federal rules require the seller to disclose known lead-based paint and lead-based paint hazards before the buyer signs, and to allow a 10-day window for a lead inspection unless the buyer waives it. Keep a signed copy for three years. Many Sacramento rentals are old enough for this to apply, and if you gave a lead disclosure to your tenants, the same records go to the buyer.
Deaths on the rental property in the last three years
Civil Code 1710.2 says a seller doesn't have to disclose a death on the property that happened more than three years before the buyer's offer. A death within three years can be a material fact. If a tenant died in the house recently, talk to your agent about how to disclose it.
Tenant rights during a rental property sale in California
A sale changes the owner, not the tenancy. The tenant's lease, rent and deposit carry on, and the law limits how you use access and notice while you sell. These rules apply whether the house is in the City of Sacramento, Elk Grove or anywhere else in California. The wider rules are mapped in California landlord-tenant law for owners.
The lease survives the rental sale
The buyer takes the house subject to the tenant's lease. A fixed-term lease runs to its end date under the new owner; a month-to-month tenancy continues until someone ends it with proper notice. That's why most buyers of occupied houses are investors who want the rent, and why a buyer who wants to move in usually asks for the house vacant at closing.
Showing a rental under Civil Code 1954
You can enter to show the house to buyers, appraisers and inspectors, but only during normal business hours, after reasonable written notice (24 hours is presumed reasonable), and without abusing the right of access to harass the tenant. After a written notice that the house is for sale, later showing notices can be oral for 120 days, as long as you leave written evidence of the entry inside.
Ending the tenancy before the rental sale
Under Civil Code 1946.1, an owner gives 60 days' notice to end a month-to-month tenancy, or 30 days if the tenant has lived there less than a year. There's also a 30-day option for a sale, but only if every condition is met: you've contracted to sell to a natural person who intends in good faith to live there for at least a year, escrow is open with a licensed escrow holder, title company or broker, the notice is given within 120 days of opening escrow, and no earlier notice was given under that section. The California notice to vacate guide covers the details, and cash for keys agreements are the voluntary alternative.
Security deposit transfer on a rental sale
Civil Code 1950.5 gives you two ways to handle the deposit when you sell: transfer the balance to the buyer and notify the tenant of the transfer and the buyer's name, address and phone number, or return it to the tenant with an itemized accounting. Before closing you give the buyer a written statement of the deposit and your choice. If you skip this, the buyer can end up liable alongside you for the deposit.
AB 1482 and Sacramento rules for a rental property sale
State law sets the floor for rent and evictions, and some cities add their own rules on top. For a house in the Sacramento area, the state rules usually decide what you can do.
AB 1482 just cause on a rental house
Once a tenant has lived in a covered house for 12 months, Civil Code 1946.2 requires just cause to end the tenancy, stated in the notice. Selling the house isn't one of the listed causes. The no-fault causes include an owner or close relative moving in for at least 12 months; since April 2024, that person must move in within 90 days of the tenant leaving. A no-fault termination also requires relocation help equal to one month's rent, paid within 15 days of the notice, or a written waiver of the final month's rent.
The single-family AB 1482 exemption
A house that can be sold separately from any other unit is exempt from both the rent cap and just cause if the owner isn't a REIT, a corporation or an LLC with a corporate member, and the tenant was given the written exemption notice in the wording of Civil Code 1947.12(d)(5). For tenancies started or renewed since July 1, 2020, the notice belongs in the lease. If it's missing, the exemption doesn't apply. Housing with a certificate of occupancy issued in the last 15 years is also exempt. The AB 1482 exemption rules for Sacramento houses cover both.
Sacramento's Tenant Protection Program and a rental house
The City of Sacramento's Tenant Protection Program (City Code chapter 5.156) has its own rent cap of 5% plus inflation, capped at 10%, and its own just-cause rules. Section 5.156.030 exempts single dwelling units and units in condominiums, as well as units built after February 1, 1995, so most rental houses fall under state law instead. A duplex built before 1995 is a different case. The page on City of Sacramento landlord rules covers what the city requires of owners.
California taxes on selling a rental property
Federal tax on a rental sale works the same in every state. California adds its own income tax on the gain and collects part of it at closing. This is a summary, not tax advice; a CPA can apply it to your numbers.
California taxes rental property gains as ordinary income
The Franchise Tax Board says it plainly: California doesn't have a lower rate for capital gains, and all capital gains are taxed as ordinary income. For 2025 the state's brackets run from 1% to 12.3%, and a separate 1% Behavioral Health Services Tax (formerly the Mental Health Services Tax) applies to taxable income above $1 million. A large gain can push you into the top brackets for that year, which is one reason to time a sale with your CPA. The federal and state capital gains math guide combines the federal and state math.
Form 593 withholding of 3 1/3% on a rental sale
When California real property is sold, the escrow holder generally withholds 3 1/3% of the sales price and sends it to the FTB with Form 593 by the 20th of the month after closing. It's a prepayment of your state income tax, claimed on your return. Instead of the flat rate, you can elect the alternative withholding calculation, which applies your tax rate (12.3% for an individual) to the estimated gain worked out on the form.
Form 593 exemptions for a rental property seller
Withholding doesn't apply if the price is $100,000 or less, if you have a loss or zero gain for California purposes (worked out on the form, not because you get no cash from the sale), or if the sale is part of a qualifying 1031 exchange. The principal residence exemptions don't cover a house whose last use was as a rental, unless it still meets section 121's two-of-five-year test. You sign Form 593 under penalty of perjury and hand it to escrow before closing.
FTB 3840 when you exchange a rental out of state
California follows federal 1031 exchanges, but it keeps a claim on the gain. If you exchange California property for property in another state, you file FTB Form 3840, an annual information return, so the state can collect its tax when you eventually sell the replacement property. The 1031 exchange guide for California covers the deadlines and the intermediary.
Prop 13 and the buyer of your California rental property
How Prop 13 resets the rental's property tax for the buyer
Under Proposition 13, property tax is based on purchase price, not current market value. The rate is limited to 1% plus voter-approved debt, and the taxable value rises by 2% or inflation each year, whichever is lower, until the property sells (BOE; Legislative Analyst's Office). If you've owned the house for years, your tax bill is probably well below what a buyer will pay. An investor works out the rent against their own tax bill, based on their purchase price, so a low tax bill you enjoy doesn't add to what they'll offer. Price the house on what it's worth to the buyer.
A checklist for selling rental property in California
- Check the lease and the AB 1482 notice. Is the house exempt, and has the tenant stayed 12 months?
- Order the Natural Hazard report and pull your repair records for the Transfer Disclosure Statement.
- Find out the build year. Before 1978 means a lead-based paint disclosure.
- Decide vacant or occupied, then give any notice the law allows, in the right form.
- Send a written for-sale notice to the tenant so later showing notices can be oral.
- Get a tax estimate that includes California at ordinary rates, and decide on Form 593's alternative calculation.
- Plan the deposit: transfer to the buyer with notice, or return it with an accounting.
- If you're exchanging out of state, put the annual FTB 3840 filing on your calendar.
If speed matters more than price, a sale with the tenant in place to an investor, or an offer from a cash buyer, skips the vacancy wait; the cash offer vs listing comparison shows what that costs. Justin can price a California rental both ways before you choose. Start with selling your rental in Sacramento.
Selling rental property in California: common questions
How much tax do you pay when you sell a rental property in California?
You pay federal capital gains tax (0%, 15% or 20% on most gains), up to 25% on the gain from depreciation, possibly the 3.8% net investment income tax, and California income tax on the whole gain at ordinary rates, which run from 1% to 12.3% for 2025, plus 1% on taxable income above $1 million. Escrow withholds 3 1/3% of the price toward the state tax.
How do I avoid capital gains tax when selling a rental property in California?
A 1031 exchange into other investment real estate defers federal and California tax, though California tracks gain moved out of state on FTB Form 3840. If the house was your main home two of the last five years, section 121 may exclude up to $250,000 or $500,000. Holding it until death gives heirs a stepped-up basis. An installment sale spreads the gain over the years you're paid.
How much notice does a landlord have to give when selling the property in California?
Selling doesn't end the lease. To show the house, you give reasonable written notice (24 hours is presumed reasonable). To end a month-to-month tenancy, you give 60 days, or 30 if the tenant has lived there under a year or the narrow sale exception in Civil Code 1946.1(d) applies. If AB 1482 covers the house and the tenant has stayed 12 months, you also need just cause.
Do I have to fill out a Transfer Disclosure Statement for a rental?
Yes, in most sales. Civil Code 1102 applies to the sale of single-family residential property, which includes a rental house, and says any waiver is void. You answer from what you know, including problems tenants have reported. Exemptions cover sales such as court-ordered, probate and foreclosure sales, not an ordinary owner's sale.
Can a tenant stop the sale of a rental property in California?
No. A tenant can't block a sale, but the tenant keeps their lease, and you must respect their right to notice before entry and to quiet enjoyment. A tenant who's unhappy can make showings harder, which is why most landlords explain the plan early and schedule showings in set windows. The buyer becomes the new landlord at closing.
What happens to the tenant's security deposit when I sell?
Under Civil Code 1950.5 you either transfer the remaining deposit to the buyer and notify the tenant with the buyer's name, address and phone number, or return it to the tenant with an itemized accounting. You also give the buyer a written statement of the deposit and deductions before the transfer. If you don't, the buyer can be liable with you.
Does Sacramento's rent control apply to a single-family rental?
Usually not. The City of Sacramento's Tenant Protection Program (City Code chapter 5.156) exempts single dwelling units and condominium units, as well as units built after February 1, 1995. A house in the city still falls under California's AB 1482 unless it qualifies for the single-family exemption, which needs an individual owner and the written exemption notice.
Sources
- California Civil Code 1102 (disclosures on transfer of residential property)
- California Civil Code 1102.2 (exemptions)
- California Civil Code 1102.3 (delivery and termination rights)
- California Civil Code 1102.6 (Transfer Disclosure Statement form)
- California Civil Code 1103.2 (Natural Hazard Disclosure Statement)
- California Civil Code 1710.2 (death on the property)
- US EPA: real estate disclosures about lead-based paint
- California Civil Code 1954 (entry)
- California Civil Code 1946.1 (notice to terminate; sale exception)
- California Civil Code 1946.2 (just cause)
- California Civil Code 1947.12 (rent cap and exemption notice)
- California Civil Code 1950.5 (security deposits)
- City of Sacramento City Code chapter 5.156, Tenant Protection Program
- FTB: 2026 Instructions for Form 593
- FTB: real estate withholding
- FTB: capital gains and losses
- FTB: 2025 Form 540 personal income tax booklet (rate schedules, Behavioral Health Services Tax)
- FTB: 2025 Instructions for Form FTB 3840
- IRS Topic 409: capital gains and losses
- IRS: net investment income tax
- California State Board of Equalization: decline in value and Proposition 13
- Legislative Analyst's Office: Common Claims About Proposition 13 (2016)
Reviewed by Justin Vierra
Justin reviewed this page for accuracy on October 28, 2026. Figures come from the sources listed above. Our research process.
Justin Vierra is a Sacramento Realtor® with GUIDE Real Estate and Principal of the Vierra Group who sells rental homes for their owners, with tenants in place or vacant. He spent six years in Midtown property management before he began selling homes in 2010.
- Since 2010Licensed in California, DRE #01880488
- 6 yearsManaging Midtown rental property before he sold homes
- 447Vierra Group team sales on Zillow, 26 in the past 12 months
- 440+Career sales, as reported by Justin
- Six years in property management: Midtown Sacramento: older buildings, multifamily property, maintenance and tenants
- Principal, Vierra Group: His team at GUIDE Real Estate, 3001 I Street, Sacramento
- Sacramento Real Producers: Top 250 agent for 2025, as reported by Justin
Realtor®, DRE #01880488. Vierra Group, GUIDE Real Estate, 3001 I St, Suite 200, Sacramento, CA 95816. General information, not legal, tax or financial advice.
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