When you sell your rental property, you release the prior year passive loss carryovers. This allows the passive losses to be taken in the year of sale. Passive loss carryovers from other rental properties would stay with those other rental properties.
The passive losses are released and taken on Form 1040. They do not go against the capital gains (or losses) you may have had on the rental property. You must sell 'substantially all" of the property, which means if you aggregated your multiple rental properties into one and sold just one, you may not take the prior year passive losses. If you have multiple properties and they are separate on the tax return and you sell one, you may take the passive losses for the sold property but not the passive losses on the other properties.
You can see more here and here.
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