“Buying property as a residence occupied by tenants”
When the house you want to purchase for a home is occupied by tenants there a few points that need to be discussed. Keep in mind I am not an attorney… If you have specific issues you should consult an attorney who works in your specific area.
Tenants have rights
When parties enter into a lease they are effectively signing a contract and as most of you know, a contract is an exchange of value. The tenant acquires some of your property rights such as, ‘Quiet Enjoyment’, in exchange for money. Of course the landlord’s value acquisition is the money for which they give up some property rights.
Landlords have obligations
The primary obligation of a Landlord is to maintain the property, utilities, structures and appliances in normal, safe working condition. Most municipalities require the Landlord to eradicate rodents when they become an issue. Local ordinances may require special assurances, so be sure you are familiar with these laws.
Leases run with the property
When tenants occupy a property being purchased, their lease does not evaporate at closing. It’s important that your Real Estate adviser acquire a copy of the current leases prior to your ability to terminate the transaction. Written leases are absolute and are followed to the letter when reviewed by the courts.
So you are going ahead with the purchase. The aforementioned leases should be carefully reviewed. When you make an offer to purchase a tenant-occupied property, the offer should clearly state that the owner is to deliver the property vacant and unencumbered at closing.
The challenge is that the tenants may not move out… At this moment you will have to decide if you want to move forward with your purchase or forego the deal. Moving forward (closing) means you are the new Landlord and the tenant holdover issue is now yours… Not terrible, just inconvenient. Be sure your arrangement transfers any and all Security Deposits with your purchase.
A quick note about Security Deposits; they belong to the tenant and can only be absorbed by the Landlord according to the lease.
This is a whole other blog… Basically it’s a process outlined by your County government…
In the end, buying a property as a residence which is occupied by tenants requires some additional vetting. Understanding the current lease before you purchase is paramount. Consult with a Real Estate professional like the ones from Origins Real Estate to get the lay of the lease.
Jim Cameron, President Origins Real Estate