Question on renewing a lease with a pending sale

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Question on renewing a lease with a pending sale

Andy SabischPro Member
Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes

We have a property that is under contract to sell by 07/09/2025 and has a tenant that has been there for several years and is a solid tenant.  Their lease expires at the end of July 2025.  We provided leases to the buyer for both units (the other side's lease runs until April 2026).

Question - would you renew the lease (we usually renew the month before) as the tenants want to stay of allow the new owner to determine if a rent increase is desired?

Thanks . . . 

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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
1y

I wouldn't do anything without  closely reading your sale contract and discussing it with the buyer. They buyer might want to renew or not but it seems fair to let the buyer decide. You contract may specify what you are allowed and not allowed to do regarding leases. 

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    1y

    I wouldn't do anything without  closely reading your sale contract and discussing it with the buyer. They buyer might want to renew or not but it seems fair to let the buyer decide. You contract may specify what you are allowed and not allowed to do regarding leases. 

    3Reply
  • Payton HaightBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2021 · 124 posts · 86 votes
    1y

    Hi Andy, I would not renew the lease in this situation. The buyer is purchasing the property based on the information you shared with them, which is one lease ending July 2025 and one lease ending April 2026. Renewing either tenant's lease prior to closing would be a material change to the conditions of the deal. Maybe the buyer is OK with it, maybe they aren't. If the deal falls through for some reason, you will still have time to renew the lease.

    [email protected]380-324-0445
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  • Warren LizoBusiness Member
    Property Manager · Boston, MA · Member since 2017 · 32 posts · 14 votes
    1y

    @Andy Sabisch I would highly recommend you do not renew the lease. 1. You dont know what the new owners intentions may be. Doing so could tank your sale if it runs afoul of their plans, 2. It doesnt matter to you. If the sale falls through then you can renew them, and 3. The lease likely self renews month to month under state law anyway so the tenant is in no immediate jeopardy. 

    side note: As a professional property manager, I recommend you start lease renewals 120-90 days out from lease expiration. If you have questions about this, just reach out and I'd be happy to talk with you. 

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    1y

    At a minimum, we give the buyer a heads up and include them in the decision-making process. As a buyer, we normally write in the contract that the seller CANNOT enter into any leases without the buyer's permission.

    [email protected]239-339-3969
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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    1y

    Adding my two cents:

    I would reach out to the “possible buyer”. The lease ends this date, you knew/know that already, obviously. Do you want it renewed at my preference of MTM or a year, at a rate I determine? Or. Do you want them non-renewed or offered a rate/term you determine? If you make the decision and the unit goes vacant. I will require 2 months of rent from you to make up for my losses/increased costs if the sale falls through. 

    This gives the buyer the option to make it vacant to move in, renovate, or raise rents. Or have it occupied paying rent day one. 

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  • Andy SabischPro Member
    OP
    Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes
    1y

    Appreciate the feedback . . . confirms what we thought and while personal issues derailed us from renewing earlier, we are where we are.  We let the buyer know that the lease expires at the end of July and wanted to let him decide if we should renew and if so, at what terms.  We will let the tenant know by the end of June so they are not jammed up if a move is in the cards.

    Once again, great input from the BP family!

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  • Isadore Swartz
    Member since 2025 · 45 posts · 47 votes
    1y

    Having bought homes with tenant in place, as the buyer I would want to adjust the lease to my terms at its expiration. As the seller, I understand your wanting to protect the tenant. The one time I had a seller want to renew the lease, I worked with the seller and the tenant to come up with the new lease as part of my purchase contingencies. 11 years ago now , still have that tenant.

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  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    1y

    Recommend notifying the buyer IN WRITING and giving them a deadline to respond, telling them you will proceed with renewal unless you hear otherwise from them.

    Of course, you'll also have to keep the tenant in the loop.

    Logical Property Management4.9454 Reviews
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