Leases Part Of Rental Purchase?
I am purchasing a rental SFR already occupied with month to month tenants. The seller says they all signed a lease but has not given the lease to me yet. Is the lease legally transfered as part of the sale or not? Can I have them sign new lease right away or do I have to do it at the end of their 30 day after my purchase date?
The real question might be: if a lease contractually binds an owner and teneant, does it transfer from the seller to the buyer or not (when not specifically written into any part of the sale documents)?
Thanks in advance for any insightful replies.
[ Edited by jatkinson on Date 12/08/2003 ]
Your purchase is subject to the existing lease. You must honor the terms and conditions of the lease. You can not require the tenant to sign a new lease until the current lease expires.
At settlement, make sure you receive an assignment of security deposit(s) too. Your contract should have a provision permitting you to inspect the lease, since you have to honor the lease after you purchase the property.
You will also want a letter signed by the tenant certifying his lease amount, lease term, and amount of security deposit. Ask your attorney to draft an estopple letter on your behalf. Make receipt of an estopple letter a contingency of your contract.
Also make sure that your contract has an indemnity clause to protect you should a dispute arise over the security deposit. This indemnity clause needs to survive settlement. Your attorney can assist you.
Dave T tells it like it is- perfectly. Follow his advice. I think you may be confusing the payment modality (once a month) with the lease's term which will be defined in the lease document.
DaveT
THANK YOU!
Clear and simple and much appreciated.
Jatkinson
Also, don't forget to pick up your prorated portion of the current months rent. IE. if you close on the first, That rental payment is yours, even if your 1st payment is not due til the 1st of the following month. I like to close on the first with my payment due 45 days later or on the 15th. That way I get the rental as pure profit, although the odd days interest is calculated in.
Good Luck,
Shawn(OH)
jatkinson,
Shawn makes a good point.
You are entitled to a credit for your prorated portion of all of the "scheduled" rents, even if some of the rents have not been collected by the seller.
Jatkinson
Each state has different laws. But, generally, a sale does not change the terms of the lease. The new owner and tenant are bound by it. To be bound, you need a copy of it. If the seller won't help, contact the tenant. Explain it is in their interest -- to make sure their deposit is not lost.
Establish they are on a month to month and the deposit is transferred to you, I don't think I'd pay an attorney to confirm this --- unless the attorney was the one doing the closing. Tell the closer of the deal: attorney or escrow officer about the problem. They will then ask the seller fto confirm the deposit and rent amount -- as they have to make sure rent is prorated.
Deposits are refundable, but sometime landlords take cleaning fees and pet fees which are not refundable. These should also be transferred to you.
If you close near rent day -- make sure the tenant is not paying the seller rent. Ask them to pay it into escrow if there's a problem.
Prior to close, know what appliances, window coverings etc are being transferred to you.
Next offer you make: Include words to the effect that " Seller to transfer all leases, deposits, fees to you at closing and offer is subject to you review an approval of these within 3 days" Also words to include appliances, window coverings,in the sale at no additional cost.
If seller took a deposit, usually (in WA state) a written condition repost should be completed. Get that also -- or you'll not know what damages were already done.
[ Edited by archarrell on Date 12/06/2003 ]
My god great stuff, Just follow the little printed instructions.
The only thing I can add is in my experience you want to sit down with the friendly renters and make it friendly and let them talk. Just in case there are any oral contracts lurking in the air. Now is the time to settle them up. Little things, like. The old owners told us we could keep the washer and dryer when we move. The old owners never paid us for the roof repair we had to do when he fixed the chimmny. All the junky little things that really plotch up the future relationship. Do we still have to feed the old owners cow? You know that kind of thing. You might also explore any little problem that has been unreported. Like you know the hot water makes a funny fizzeling sound when it rains, Why does the water turn red in summer. Etc. etc.
Cheers Lucius
Thanks to you all for the great replies. I closed on Friday and got and read a copy of the lease and got the prorated rent and the security deposit.
I admit I am a tad nervous about meeting the tenants as the new landlord. (Maybe they are nervous too?) Meeting them first in a casual stop by to say hello sort of visit sounds like a winning idea. Then I can set up a time to come by later with a new lease and rules, payment coupons etc. They are month to month and I would like to use my lease instead of the one the had before.
They are not bad tenants, so I want to keep them on a month to month basis, until I can see how it goes. But there have been a few red flags, but I might be over-reacting. There are 4 tenants. A 17 yo pregnant girl, her 20 yo boyfriend, her mom and her mom's girlfriend (not sure of the exact relationship between them.)
I have been warned by the old owner that they want to bring a cat into the house, they already have a dog, even though the lease does not allow it. He also advised me to deal with the boyfriend for most stuff and the girl tends to be immature. I am considering a Section 8 tenant, and giving these folks their notice for the end of January. Any insights or suggestions?
Thanks for the kind sharing of knowledge.
I'd suggest tthree things:
1. You are the NEW owner. Act like it. You should send them a letter of introduction and include a stamped enveloppe for a meeting time and "friendly" discussion. Don't keep them in the dark.
2.Read the entire posts again. I ALREADY TOLD YOU follow DaveT advice-now I'm telling you again. If
they have leases you are bound by them. While you can renegotiate the leases with a willing tenant, I wouldn't.
3.If you're not going to renew the lease with the pregnant teeney, do it before she's too far along.