Can the seller do this? Cancel leases?

16 Replies

Hi BP gang,

I find myself in a strange predicament. We are under contract for a house that had an advertised rent with an advertised rented out period. "Fully rented until 2016!"  Yeah - I know - should have seen it coming. We asked for leases and assurances on the addendum to the contract stating that the actual rent was x. The lease is close to expiring and we received a copy of the next 12 month lease in which the rent was significantly lower.  We had the lawyer send out a letter stating that the rents were obviously lower and we asked estoppel letters and for a credit for the rent difference for the duration of the 12 month lease (rather than renegotiate purchase price). 

Now the seller is stating that he never delivered the signed future lease to the tenants and we could either assume the lease as is or kick out the tenants and negotiate our own lease since he says it's not actually fully executed or legally binding - even though we have a copy of the signed lease. ...  We met the tenants at inspection and it's clear that they signed a lease for next year and expect to stay.  Not quite sure what to do or make of it. 

Was it wrong to ask for a credit of the rent difference? Is this as slimeball a move by the seller as it seems? My gut reaction is to say goodbye and walk away.  The numbers fall quite a bit with the newer rent amounts. 

I would refuse to deal with this person.   I heard a quote once and it essentially said "Don't think you are going to get a good deal from a bad man."

You may actually be better off. Now you can vet your own tenants. I looked at a couple of properties recently, and the tenants should probably be in a state hospital.

I was also curious what the tenant rights were in this case as well. I mean, they did sign leases in good faith.  And up to this point it's only his word (which doesn't mean much) saying that the lease isn't really valid. 

Has anyone had a tenant sign a lease then cancel it?

Originally posted by @Ceril S. :

I was also curious what the tenant rights were in this case as well. I mean, they did sign leases in good faith.  And up to this point it's only his word (which doesn't mean much) saying that the lease isn't really valid. 

Has anyone had a tenant sign a lease then cancel it?

 Once the lease is signed it's a valid lease, a change in ownership won't void it.  Whoever owns the property has to honor the lease unless you can get a mutual termination from the tenant.  

I would talk to a lawyer?

What does the lease say? Is there any selling "clause" as California leases have that in it as standard practice?

This would make me very nervous. I personally would not go through until I had independent verified council of my choosing regarding this issue. It is a VERY good chance you are stuck to it.

If you are AND you still want the deal. I would take the rent decrease out of the sales price!

Originally posted by @Patrick L. :
Originally posted by @Ceril S.:

I was also curious what the tenant rights were in this case as well. I mean, they did sign leases in good faith.  And up to this point it's only his word (which doesn't mean much) saying that the lease isn't really valid. 

Has anyone had a tenant sign a lease then cancel it?

 Once the lease is signed it's a valid lease, a change in ownership won't void it.  Whoever owns the property has to honor the lease unless you can get a mutual termination from the tenant.  

 The owner says that yes he signed the lease but he never gave the signed copy to the tenants and claims that it's not valid therefore. Our lawyer says that technically it's correct that if both parties don't have signed contracts.... But we have a copy of the signed contract!

Originally posted by @Ceril S. :

The owner says that yes he signed the lease but he never gave the signed copy to the tenants and claims that it's not valid therefore. Our lawyer says that technically it's correct that if both parties don't have signed contracts.... But we have a copy of the signed contract!

 Are you sure you're willing to take the owner's word?  It sounds like he/she doesn't have a great track record for telling the truth.  I suppose technically your lawyer is correct, and that if the owner has not delivered the signed contract, he can change his mind and tear it up.  

BUT, YOU have a copy.  Do other potential buyers have a copy?  How many copies are floating around out there?  If the tenant were to sue and find the signed contract during discovery, you could be hosed.

If you're willing to take the risk, go for it.  If not, get concessions or walk away.  Personally, I don't like the appearance of the seller's ethics based on what you've posted.  I'd walk away.

So, now the seller is asking whether we want to negotiate for 2015-2016 ourselves or if he should execute the lease. To me it sounds like a trap. If we decide either way, he will say it was our choice and whatever he stipulated previously is now a moot point.... (Therefore relieving him of our request for a concession on this point)

I understand the thought of walking away - he is unethical. 

The problem for me is here - and I know the pitfalls even as I'm saying it - but I'm posting it here to be able to see it hopefully more clearly: is a bird in the hand better than 2 in the bush?  ie. Is the lower lease locked in better than a hypothetical future lease or am I getting too attached to this property?  The numbers go from pretty good to just ok, but there is the hope that rents could be higher next year? (Yes I see this....looking for outside confirmation)

I would be wondering why the rent was lowered. That rarely happens, unless there's something wrong, that maybe wasn't wrong before. Have you spoken to the tenants and gotten their side? I would not consider this sale, unless I've found out where they stand.

Was a disclosure given? He's obviously gotten caught in a lie - either, as advertised, there's a fully executed lease to 2016 and he's lying now or there isn't and he was lying then. Is that something you can pressure him with?

Are you in a position to talk to the tenants directly and get their side of the story?

If you're ethically not allowed to contact them, what if you were parking on their street and just so happen to walk by their house while they were coming or going? Since you're met, it would be very impolite to not say 'hello' and talk about the weather and whether they have a lease.......

If the tenant has a signed and dated lease for this year then consider it valid. Fair Housing will most likely agree.

Assuming this is the case, be sure to request the security deposits from the current landlord. That responsibility becomes the new lanlord's responsibility.

Lease can only be terminated if tenants breach it or you both mutually agree.

If you are having to question legalities at all then you need to get a lawyer. Not worth the risk of being wrong.

The deal is that it's a group of students. The way the lease reads is There is a "base" rent for a "base"number of students and for each additional person up the the max allowed - the rent goes up.  It looks like once (2-3 years ago) where the max number of people lived there and that was the rent $ advertised. (So theoretically, you could get that rent). My theory is that it was a fluke and that level of rent is actually unsustainable.  The lease also gives the option for the current tenants to renew the lease which this group did. 

Incidentally, we did see them and as far as they know they think they have a lease (since they signed it) and they fully expect to live there next year.   Really nice group of kids. (See? Too attached?)

If you do buy the property, you will be stuck with the lease that was signed. I call ******** on all he said. You can't renegotiate with the tenants, they've signed a lease in good faith and their current landlord is not acting in good faith. If you try and renegotiate or kick them out after closing, you'll get hammered in housing court.

I'd walk away. If you really don't want to, I would renegotiate the price... significantly. If it makes the numbers better, you could reconsider but otherwise walk away.

Since these are students, chances are after another year, they're going to end the lease anyway and you can then decide whether to keep on renting to students. I would also get a lawyer to rewrite that lease, the lease seems to allow for variability of rent. 

In RI even if the landlord did not return the lease if it signed by one party it would be valid. Check NJ law.  As a student lease you have all the students and their parents to deal with. I would bet that lease is valid as it stands. If the advertisement clearly represented a higher rent I would ask for the credit or walk.  You are not going to do well renegotiating with the tenants.  My student leases are based on the number of bedrooms. I can tell you it is impossible to police the number of occupants even if it was worth my time.  The girlfriends are over ,  friends from out of town. 

In the end if the current rent does not support the purchase and he won't do a credit I would not purchase it. If it is say a 4 bedroom and they are paying the rate for 3 bedrooms you can probably get the rent up down the road however if he is figuring the rent on 2people/room and that is not customary in the area I would definitely walk if the single occupancy doesn't support meet your profit margin.  

you have a lawyer what does he say  it sounds like you are getting a good deal otherwise you would have walked away already What is the cash difference between the leases, play some hard ball with the landlord to get some concessions 

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