Rental Agreement On Property That I Have Not Closed On!

Comments(5)

• 
  JohnMichael6th December, 2004

  If you have not taken title to the property you are placing your self at a great deal of legal risk.
  
  What if you do not close on the property?
  
  The only way around this may be taking control of the property under say a temporary sub 2 deal or lease option with the option to sub lease.
  [addsig]

• 
  InActive_Account7th December, 2004

  Pam;
  
  This would be a great time to engage an attorney to get their opinion. Probably a few options available that need to be evaluated. Let them guide you on this.
  
  Good luck, Mark

• 
  commercialking7th December, 2004

  Actually I do this all the time and the risk is pretty minimal but you have to take the correct steps to protect yourself.
  
  This is done via a contingency clause in the lease agreement. "This lease is contingent on the Lessor's successful purchase of the premises under that certain Purchase and Sale agreement (real estate contract, whatever the title of your agreement is ) between The Seller and Lessor."
  
  If I use a form lease, or if the lease is a multi year one and I think I may sell the property before the end of the lease period I execute the contingency agreement as a seperate letter agreement and append it to the document. In this way once the deal is closed and the tenant moved in I can simply remove the contingency document and dispose of it as no longer relevant.
  
  This is actually my favorite acquisition strategy. Find a tenant who wants a certain kind of property. Find a seller who has that kind of property which is currently vacant and where the price reflects that vacant status. Execute a Purchase Contract with the seller with a mortgage contingency (my lender won't lend on vacant property). Execute a contingent lease with the tenant. Take both documents to the bank, they appraise mostly using the capitalization method based on the new rent.
  
  Yes sometimes these deals fall apart. If you have disclosed the nature of your ownership and have acknoweldgement of that in writing via the contingency clause your exposure is pretty minimal.

• 
  pampammer7th December, 2004

  commercialking,
  
  Excellent answer. That is exactly what I was looking for,
  
  
  thanks, Pam

• 
  PassingThru7th December, 2004

  In addition to the lease contingency, I put an addendum to my sales contract stating that I have the right to lease the premises and collect all rents and security deposits beginning on the date the contract is signed. If the deal falls through you need only give the security deposit to the current owner to return to the tenant.