Legal Help ! Have a house under contract

13 Replies

Hi i have a house under contract.

The tenant occupying is on a month to month with no lease.  However, he had a lease 2 years ago which stated he had a right to refusal on who buys the property.  This is cause he wants to purchase the building.  I got the house under contract but now they are saying that the tenant has legal right of refusal and he can buy the house.  He has no lease his previous lease ended but he did pay the rent.  They are saying since he has been paying the rent the old lease holds up and is still valid.  Has anyone ever heard of his?

Please help they are making me sign and addendum today to put the house under contract in his name.  He has 30 days to close now.

@Neil P. you should definitely consult your lawyer about this, but since you asked I will be happy to give my non-professional speculative 2 cents. if his original lease stated that it turns into a month to month agreement after the two year term then I would think all of the terms of the lease are still valid which includes first right of refusal.

I don't understand why the seller didn't go to the tenant first and offer the property to the tenant at a certain price before listing it for sale. It seems strange that the seller (and sellers agent) would accept an offer before offering to the person that has first right of refusal. I wouldn't sign anything without talking to a lawyer.  They are probably trying to get you to sign the addendum because they know they never should have allowed you to get the property under contract in the first place without offering it to the tenant first.

@Neil P. also not a lawyer, but it seems like the seller and their agent stepped in it. 

Questions: 

Do you have an agent? 

Do you have any idea if they resident has the ability/desire to purchase the property or if this is a formality? 

What is the stated reason for you signing this addendum and not just canceling your offer? 

If the resident can't close would you still want to buy the property?

They can't make you sign anything. I'd treat all of this like rumor and operate under the assumption that I still had a valid P&S until proven otherwise.

This seems like a CYA measure for the agent and seller who entered into a contract with you without fulfilling the obligations of a prior contract. I'd take some time before I signed anything and talk to someone who is knowledge about RE in you area, either a broker or maybe an attorney. 

Can’t see the harm.....if it goes worst case and the tenant wants to/can buy the property, and you end up in court, the tenant would prevail anyway. I’d surely get a copy of their lease/right of first refusal agreement though first.
As part of the addendum I’d want to be compensated for any actual cost involved.
We also don’t know what your contract says.

What kind of house? What’s the chance that the tenant can come up with the money to close?

How good is the deal? I’d give the tenant 5k to decline his option.

Or maybe the tenant is worried about getting booted and just wants security. Talk to him/her maybe a long term lease will do.

@Shawn M. He wont talk to us i tried talking to him he refuses.  He owns a bar downstairs there are 6 units upstairs that are empty.  He put 100k reno into his bar.  He was on a month to month.  

I got an update from the broker.  He has till june 30th to come up with the money. Apparently he does. 

@Wayne Brooks in his lease there is a small paragraph that states the first refusal agreement.  The lawyer states this will hold up in court.

@Bill F. I have an agent.  In his lease in 2014 he it states he has the right to purchase.

The broker said you can cancel the offer or sign the addendum.  IF they dont close by june 30th i can get the property.  Yes i want this property very badly.

This is what the addendum states:  

Pursuant to the attorney review addendum, Seller’s attorney requests the following

Addendum:

A review of the existing lease indicates a right of first refusal exists in favor of the present

Tenant.

This Commercial Real Estate Purchase Agreement executed on May 30, 2018 is contingent

upon Seller obtaining a release of any right of first refusal to purchase the property from

the present tenant on or before July 31, 2018.

If Seller is unable to obtain such release by the above date, this agreement is null, void and

terminated without any penalty.

My broker said theres nothing you can do.  There was a 3 day attorney review period and they found this lease and this tenant has the first right for refusal. Lease again was in 2014 and ended in 2014.  However he has been paying his monthly rent payments on time. 

Do i have any legal claim here?  I feel like i got played.  The tenant knew the property was listed for sale and now his 30 day period kicks in when i go and put the house under contract?  This just doesnt make any sense to me.

@Josh Dillingham In his original lease it does not say anything about it will turn into a month to month.  Supposedly in order to end a lease there needs to be a written note given to the tenant that the lease is over, if he remains in the building and is paying month to month the previous 2014 lease holds up.  Its just non sense to me.  I haven't signed anything yet.  Can i go at seller for damages for this?  

I didn’t catch you were in NJ, where apparently they have the “attorney review period” clause. It’s a get out of jail free card, either party can cancel for no reason, that’s the way it is.
But, I don’t like the provision whereby they have to get a release from the tenant. He likely won’t do it even if he can’t buy. The seller should be willing to give the tenant proper notice and if the tenant doesn’t perform timely, sell it to you.

@Neil P. I wouldn't sign the addendum unless it spells out some compensation for you and your time based on their oversight if you can't execute the P&S. I'd change the last line to:

"If Seller is unable to obtain such release by the above date, this agreement is null, void and terminated with the seller giving the buyer a a sum of $500.00 no later than 3 Aug to an account designated by the buyer and communicated to the seller's attorney no later than 30 July,2018"

But that's just me. On the legality, I can't add anything; not a lawyer.

Talk with your attorney. Even if the the ROFR is valid, I would want to know if the seller has made any representations, warranties or covenants in the purchase contract that would result in a breach and, if so, what remedies are available to you. If there is a breach, I would hope the contract gives you as buyer the ability to seek reimbursement of your actual out of pocket expenses (in addition to a return of any deposits made).

Appreciate all the help.  I ended up losing the house had an attorney as well.