honor current lease or hike rent?

Question

Hi, I bought a house with a tenant who has a lease with past owner. This is in NJ. As a new owner am I legally obligated to honor the lease and not increase the rent or is the lease not valid anymore because its not between me and the tenant but the past owner? The rent was unchanged for past several years. Please advise. Thanks.

Kenny Dahill · Answer

@Vidyadhar R., ditto what others stated before.  You must honor the lease.

However, leases can always be amended but it needs to be mutually agreed and not threatening.  And if they say no, you cannot retaliate.  If the property needs a lot of work to get the market rates you desire, talk to the current tenant and see if they would be interested in changing the lease based on certain renovations.  Who knows, they may prefer to stay and willing to pay more for a better rental.

If the property is already in prime condition for market rates, this probably will not work.  It can be costly to replace a tenant; definitely ask the current tenant first so you avoid any vacancy.  Consider rent bumps over 3-6 months if they need an adjustment period.

Nathan Gesner · Answer

The others are 100% correct. All existing contracts transfer with the sale of the home unless otherwise agreed to by all parties.

Find out if the existing leases are term leases (set to expire on a specific date) or month-to-month leases. If they are term, you must wait until the expiration date to start a new lease (you can set it up early so it goes into effect on the first day after termination). If they are on a month-to-month in New Jersey, then you can give them notice of termination or require them to sign a new lease with just 30 days notice (confirm your state laws).

I would draw up the new lease and give them one week to accept your terms or give 30-day notice of termination. If you don't hear from them after a week, then you should give them a 30-day notice of termination and start fresh.

Theresa Harris · Answer

You have to honor the current lease until it is up.  If it is month to month, find out how much notice is required to increase the rent and if there is a cap, then let the tenant know in writing.  If it is an annual lease, same thing, but you will be at the current rent until the lease expires.

Joe Martella · Answer

I am not an attorney, but am pretty sure that you have to honor the lease until the term that it ends.  You should have been made aware the existing lease prior to the purchase.

As for assuming tenants, this is what I did with a property I purchased in July, 2021 that was rented for $850 a month. The purchase price took the low rent into account. The market rent is $1,200. the tenant (single mom) was living there for 6 years and tenant had kept the property in great condition. I made sure to go to inspection prepared with prospective leases. I gave her a 3-month lease for her current rate of $850 that ended in September and then gave her a 12 month lease that started in October for $900 a month. I told her that she should expect a $25 to $50 a month increase per year until it gets her to market rent.