Buying Tenant Occupied Property ^NEW^
Whether the property is occupied or vacant at the time of purchase, as a landlord you have certain responsibilities and obligations to meet. Landlords in most states are required to maintain a safe and habitable property. Among other things, this list generally includes:
buying tenant occupied property
You may have already decided to sell your rental property or are weighing the possibility of it. However, if your property is occupied, you need to be aware of tenant rights when a house is for sale as they pertain to your area, as well as the specific terms of your lease agreement.
Beyond being polite and giving them a chance to tidy up the space, a heads-up to enter the property is legally required. Most states require that the tenant be provided with at least 24-48 hours notice.
Other cities have different policies, with higher assistance amounts based on the size of the property. In Portland, Oregon, a tenant could receive up to $4,500 to relocate from a 3-bedroom unit, and the landlord is required to pay all of it.
In some rare cases, the owner can evict existing tenants if they or a direct family member plans to occupy the property as a primary residence using an owner move-in (OMI) eviction notice, but some cities have restricted this workaround.
Unless the tenant agrees to renegotiate, they have the right to live on the property with the original terms they signed to. That means if the original lease allowed certain exceptions, the new owner will have to permit them as long as the lease is still in place.
The owner may count on a tenant to pay rent while the property is on the market, but if the owner neglects duties, the tenant may be able to withhold a portion of the rent, or even break the lease, depending on local rental laws. If an owner fails to maintain the property, a tenant may also be able to file an action in housing court.
With the stress of a property sale, a relationship can break down between owner and tenant, and an owner may react with something like a rent hike or by taking away services around the property, such as laundry or security. However, owner retaliation is illegal in almost every state.
Violating tenant rights when a house is for sale can lead to legal and financial headaches, not to mention a strained relationship with a tenant. Selling a tenant-occupied property, as such, calls for a certain amount of sensitivity. For you, this might just be an investment property, but for someone else, this place is home.
As you navigate this delicate situation, it will be beneficial to hire a real estate agent experienced in selling tenant-occupied properties who can bring years of experience to the table and help ease communications for everyone involved.
If you buy a rent-controlled unit in San Francisco and wish to evict the current residents, you must intend to live there and not use the place as an investment property. If you do intend to live there, you can move in after giving the tenants proper notice. Note, however, that people who live in rent-control units in San Francisco generally have a lease. So if you buy a property in San Francisco that has a tenant in it without a lease, chances are the unit is not under rent control.
Banks seem to have a hard time understanding that when they obtain title to property through a foreclosure sale that they not only own the property but have taken on themselves all the obligations that an owner has. If the property is occupied by tenants, the bank-owner is automatically the new landlord and the law imposes duties on landlords. The law also requires owners not to let their property become a nuisance. But this simple legal truth is repeatedly resisted by some banks. This rule extends to any entity that is the legal owner of the property and that includes the trustee of residential mortgage-backed securities that purchases the property at a foreclosure sale.
The Maryland Court of Appeals ruled in Hector v. Bank of New York Mellon, 473 Md. 535, 251 A.3d 1102 (Md. 2021), that a lender that becomes a property owner by buying property at a foreclosure sale becomes subject to the municipal housing code, including its provisions that make owners liable for harms negligently caused to tenants by lead paint in the apartment.
The offer should require that the seller confirm that there are no lawsuits, regulatory agency actions, or other claims pending against the property related to previous or current tenants not previously disclosed in writing and require a warranty that the seller has complied with federal and state lead laws and other potential contaminants. It should require that the seller provide copies of required disclosure documents for existing tenants under federal, state, and local laws and copies of all inspection reports conducted by state and local agencies for health and safety requirements. You should also request copies of current fire safety and building code inspections as well as other inspections or requirements by subsidized housing assistance programs such as Section 8. The purchase offer contract should require that the seller provide copies of documentation related to complaints by other tenants, neighbors, and government agencies regarding any tenant.
The most important documentation in buying tenant occupied property is to request copies of all rental documents, including lease agreements; security deposits accounting, rental rules and regulations; other policy statements issued by the seller to tenants; rent payment histories; application forms, screening reports, and move-in checklists. If the property currently has a resident manager, the employment contract and associated lease agreement as well as instructions and policy statements related to management should be requested.
Some leases may include clauses that allow the landlord to sell the property. In contrast, others may require the landlord to give the tenants notice or even the opportunity to purchase the property themselves.
If you are selling the property with the tenants still in place, you may need to negotiate the terms of the sale with the buyer, such as whether the tenants will be required to move out or whether the buyer will assume the lease.
Tenant occupied means that a tenant currently lives in the property and has a lease agreement with the landlord. It is common for real estate listings to specify whether a property is a tenant occupied or not, as this can be an important factor for potential buyers.
Selling a rental property with tenants can be a challenge, but it is possible. Landlords should review the lease agreement to see if there are any provisions regarding the sale of the property and consider the rights of the tenants, including their right to quiet enjoyment and privacy.
An estoppel certificate will usually memorialize the date the lease began, the duration of the lease, monthly rental amount, security deposit, renewal options, whether any modifications to the lease have been made, etc. It will also certify whether rent is in arrears or up to date, whether any subleases are in place, whether there are any oral agreements with the landlord or promises made by the landlord, etc. Additionally, estoppel certificates give tenants the option to explain any claims they might have against the landlord. In some circumstances, a tenant estoppel certificate can also require that the tenant certify whether it has used any hazardous substances on the premises or whether it has violated any environmental laws. By signing this statement, the tenant is prohibited from taking a contrary position in the future. This allows prospective purchasers to fully assess the economic benefits they will gain by purchasing a tenant-occupied property as well as potential liabilities they may face after assuming ownership.
Tenants are not required to sign an estoppel certificate unless mandated to do so by the terms of their lease. Luckily, most commercial and residential form leases contain clauses requiring tenants to sign estoppel certificates when requested by the landlord. If a tenant fails to sign an estoppel certificate as requested, it may be considered an affirmation of the facts contained therein or it may be used as a basis for evicting the tenant for breach of the lease. It is therefore important to thoroughly review all leases affecting tenant-occupied property as part of your due diligence before closing.
Start with the date, the tenant names, and the property address. This identifying information is necessary to ensure that the tenant gets the right form that has been specifically created for them and their property.
Next, let the tenant know what will be happening. Will there be showings? When will the property go on the market? Is there anything that they will be responsible for doing while the property is on the market?
If possible, let the tenant know how much notice you are legally required to give them when you schedule a property showing. This will give them an idea of what type of notices and show situations they can expect through the sale process.
Before you take any action, be sure to familiarize yourself with your local and state laws regarding tenant-occupied property sales. It is up to you to ensure that you know what the current codes are.
Some tenants will assume that they have to move out because you are selling the property. In most cases, that is not the case, and you may not be legally allowed to ask them to move out. If a tenant is in a long-term lease and you are selling during the lease, it may be necessary to find a buyer that will take over the lease.
For example, tenants on a year-long lease cannot be forced to move out early unless the property is going to be moved into by you, the owner, or by a direct family member who is purchasing the property. Even in this case, local laws may require you to allow the tenant to finish their lease.
If, however, the tenant is on a month-by-month lease, the lease can be ended with property notice of the upcoming. Depending on how long the tenant has rented the property, this can range anywhere from 60 days up to 120 days. 041b061a72