must existing leases for current tenants be upheld when purchasing a new property?

Question

I'm about to close on a 9 unit building. There are currently 3 tenants with leases. I'm wondering if I have to abide by these existing leases or if I can terminate them at any time? The leases are for a contract agreed to by the current owner and the tenants so in theory I don't have to honor them, right? Or because the lease grants the tenant rights to use the property that means I have to abide by them until the initial lease term is up? If the leases are month-to-month by now then I would only have to wait 30 days anyway, right?

thanks

Account Closed · Answer

@Brandon McCombs

Also look into having the leases assigned to you. If you are inheriting tenants and their leases, their agreement is with the previous owner.

As others have said, you need to research laws and rules in your jurisdiction but you could make it a condition of your offer on the place that the leases get assigned to you at time of closing. Don't be afraid to meet your tenants and introduce yourself to them and ask them for information about themselves. You may be stuck with them for the period of their lease but at least you can screen them so that you know who you're dealing with.

I'm assuming too that you have / are doing due diligence on all the tenants e.g. got copies of their leases, asked for statements on rent received for each unit (find out if they're paying late, on time or not at all), etc before purchase.

Brandon McCombs · Answer

Sorry for the late replay but thank you for all your responses. They have been very helpful.

Dave Toelkes · Answer

Here is an excerpt from WVA State Code

§37-6-1. Rights of parties on transfer of land or reversion.

An heir, devisee, grantee or assignee of any land let to lease, or of the reversion thereof, and his heirs, personal representative or assigns, shall enjoy against the lessee, his personal representative, devisees or assigns, the like advantage by action or entry upon any condition or forfeiture, or by action upon any covenant or promise in the lease, which the grantor, assignor, or lessor might have enjoyed.

§37-6-2. Rights of lessee against transferee of reversion. A lessee, his personal representatives, devisees or assigns, may have against an heir, devisee, grantee or alienee of the reversion, or of any part thereof, or of any estate therein, his heirs, devisees, or assigns, the like benefit of any condition, covenant, or promise in the lease, as he could have had against the lessors themselves; except the benefit of any warranty, in deed or law.

I interpret these two sections to say that leases convey with the property and the obligations of the landlord and the tenant under the terms of a lease are not affected by a change in ownership.  I am not an attorney, so you may want your own attorney to interpret this for you and in the context of your deal.

David Krulac · Answer

@Brandon McCombs

Here in PA, the new owner has to honor the existing leases.  always review leases before signing a contract, sometimes the leases are sweetheart deals to friends and family.

Here monthly to moths can be terminated without cause with 30 days written notice by EITHER party.  and verbal leases are presumed to be month to month.

Check with a local WVA REIA group or a WVA real estate attorney for the definitive answer.

Dave Toelkes · Answer

Excellent suggestions from @Wendy Noble

I would add that you want to have each tenant certify the amount of security deposit they gave their current landlord, the rent rate and the due date.  Ask your attorney about an estoppel letter you can ask each of the to-be-inherited tenants to sign.  You want to make sure your purchase agreement requires that the tenants' security deposits and prepaid rents are transferred to you and that you get a credit for current rents prorated from your settlement date.

Brandon McCombs · Answer

I haven't seen this question in WV's state code, hence the question on here. WV's landlord/tenant law is very sparse (which is good, it gives flexibility) as opposed to a state like CA. I wasn't needing clarification regarding month to month leases. The focus was the fact that the existing leases will be from another company/owner. I referenced 30 days because that is what WV defaults to unless otherwise stated in the leases but I'm assuming the leases also state 30 days. I'll find out for sure when I take ownership.

thanks for the answers.

Robert Leonard · Answer

@Brandon McCombs

you really need to get up to speed on your state's landlord/tenant laws.  The answers given so far are what applies most places.  The answer for how to deal with month to month leases is a state specific question.  Do your homework and get the answers before you take any action.

Dave Toelkes · Answer

In most circumstances, landlord-tenant law requires you to honor the existing leases and to follow the landlord tenant law on notification timelines if you decide to terminate the leases or increase rents.  When the current leases expire, you can offer to rent to these existing tenants using your own lease agreement, your terms, and your rental rates.

Dawn Brenengen · Answer

Leases follow the property so a new owner will have to uphold them. If it's month to month, you can give them a 30 day notice