Existing Tenants
I'm going to go see a property tomorrow, the seller has tenants in there and their lease expires Jan. 31. The seller is moving out of state Jan.15. I had a few questions on this potential deal:
1. If tenants refuse to leave after their lease is up, does this go through a standard eviction process? Or can I have them out quicker, since this is not due to late payment. If I do need to evict, how would that work since they never signed a lease with me??
2. Am I at all liable for the tenant's security deposit, or am I completely out of the picure?
3. The seller currently has the place listed with an agent. However she contacted me on her own. Is it ok to see her before she cancels her agreement, or will this cause problems?
4. Anything else I should be aware of in this type of situation?
Tenants can give you problems if you want them to move. You will have to give them 30 days notice to vacate. The owner can also give 30 notice before the closing. You can ask them to move at the end of the lease as long as it is 30 notice. All that needs to be included is that the owner wishes not to renew the lease and desires you to move. A horror story is that I bought a house and the tenant had not paid the previous owner for months. The tenant convinced a JURY that he had paid the rent to the other owner and I did not even own the house because I was Ted Jr and Ted Sr was the actual owner. I lost and had to keep him another 60 days without collecting rent and had to refile again. After another free month he finally moved.
You should be getting a credit at the closing for the tenants deposit so you can return it to the tenants if they deserve a refund. I believe the seller is liable for the Realtor fee if she signed an exclusive right to sell agreement and it is still in force. She may be able to get a discount if she sells to you.
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
You have some good questions.
1. If you have a residential property in many states the lease becomes month to month with the other terms of the lease in place. As owner of the property you are assuming the lease position of previous owner (i.e. the tenant is not penalized just because you bought the property). Question: why do you want tenants to leave if they are paying rent and conforming to the conditions of the lease?
2. Normally, security deposits are transferred to you in escrow when you purchase a property. Again since you are assuming position of the previous owner, you would be responsible for the security deposit.
3. On this one I am going to respond with common sense and perhaps someone else can give you a more definitive answer. It seems that if the seller has contacted you that she is in danger of breach of contract with her RE agent unless she has an exclusion on people she contacts. This is unlikely. I doubt that she can unilaterally cancel the agreement easily. If she sells to you immediately after cancelling her contract would almost certainly lead to the RE agent demanding commission. I am almost sure that the law is on the side of the agent.
I hope that this is of some help.
As long as the seller gives 30-day notice to the tenants about not renewing their lease, you should be fine. So, if you want them out Feb 1st, just have the seller give them notice by the end of this year.
As far as eviction goes, the process is still very much the same as if they don't pay rent, but you better consult an attorney on the specifics.
As far as RE agent involved, ask the seller if they have an exclusive right-to-sell agreement or just exclusive agreement with RE agent. RE agent will only be entitled to commission if they have exclusive right-to-sell. Now, most RE agents do want to sign exclusive right-to-sell agreements, but it can vary, so that's why you have to ask.
For us:
Property with tenents all security deposits are transferred to us the buyers upon closing.
Each Tenant are given a letter of change of ownership with thier info included (no blanket form letters) with the following:
1. Leases currently in good standing stay in effect but when they expire are not extended beyond date of expiration and new application for consideration and lease if application is acceptable (ours) must be signed with in 30 days prior to expiration of exisiting lease if the current tenants are staying. (notice of date of each lease expires is sent in letters.
2. Any tenant not in good standing is sent a letter of default and 3 day notice to pay or deliver, current lease is void new application and lease must be signed to stay. (this means new terms, deposit, may increase rent etc....)
3. New address for mailing rents, name of manager of area property phone # ect....
Now this may also depend on the terms of the original lease. You must read the leases carefully.
One must be careful when purchasing property with existing tenants. Suggest you make sure you have walked through the property (each unit if multi) and inspect condition. Ask for list of items that need attention, ask for history of rents and most of all ask for copy of Lease agreements, ask to speak with tenants alone BEFORE closing.
Make offer and closing contingent on things like : rents current, taxes paid, insuranse verification, lease terms agreeable to your way of business (also ask for any variations the previous owner had agreed upon with tenent that are not in the lease terms).
In many states verbal as well as written agreements may or maynot be enforced so make sure there are no odd agreements (I suggest you speak with the tenants prior to your purchase and then verify info with owner).
The best option is when leases are expiring soon after your purchase then you can gain control and pick your own tenants. I find a lot of property for sell that people have with tenants are usually not good tenants and that is one reason why the owners want out.
We will not purchase a property that has a auto-renewal on a lease if there is not enough time between the accepted offer and possession to send notices.
We require the owner to notify the tenants the their leases are not being renewed and if they intend to stay they must contact us if the property is with in a thirty or fourtyfive day limbo period from our offer to closing.
This may vary from state to state (and even county to county) depending on your laws for rental. We have bought property with tenants and learn the hard way so check out your state laws and with your RE atty for advise.
Good Luck! "
As for the agent check the agreement terms. Here if it is listed the realtor gets paid whether the contract is canceled or not for a period of time after cancellation. If it is expiring as long as you did not deal with the realtor and you wait til after the expiration to discuss this further or make an offer you may be able to go without dealing with the issue.
We will include the agent after an agreement is signed (using a standard RE agreement if your state has one) and figuring in thier commission, regardless of the matter.
This is becuase we want local realtors to work for us as our area is small and if they get a commission they really did not have to work for they are inclined to bring you real deals directly before the home reachs the MLS (just a tactic to consider).
Besides then you have complete control of the offer and terms and what the realtor gets on the commission (because it is based on sales price of home) and the realtor has no time to interfere and try to get the seller to up their offer, which in our experience is exactly what they tend to do.
< [ Edited by Dreamin on Date 12/18/2003 ]
There's much good advice here. I'd only add that you should offer the tenant some sort of inducement for vacating the property at the end of January. I tell them that I want the place for my son (the son I never had). No reflection on them.
I offer cash to help them with the moving expenses. If they want to dig in their heels, you could have a long, hard, costly battle on your hands. The carrot beats the stick.