What happens with the lease if I buy a tenanted property?

Question

Hey all, quick question:

If I purchase a tenanted with a lease in place, what is the process of having that lease be transferred in my name? Is it something I would need a lawyer for?

Jeff B. · Answer

All existing tenants have rights until the lease expires.

Steve Osowicz · Answer

@Alain Perez-Majul The lease should attach to the property and not to the owner, so those funds should come to you. I can only speak for our contract here in Kentucky, there is a line with the verbiage: "All leases, if any, shall be assigned to buyer; all rental collections, if any, shall be prorated between Buyer and Seller, based on the date of deed; and all security deposits, if any, shall be transferred to Buyer at closing."

So, if your contract does not specifically address this, I would add something similar as an addendum (unless prohibited by law). That way you receive prorated rent and the security deposit at closing. You should get the tenants information, application and lease at closing as well to ensure you have their contact information.

Douglas Snook · Answer

The tenants get a letter that you are the new owner and where to send the checks or who to make them out to. If tenants pay the old landlord and it could happen if they don't update automatic payments quick enough, there should be an agreement with the seller to send that money on to you.

Your  name won;t appear on the lease until the current ones expire and you have them resign

Troy Meyer · Answer

The security deposits (as per FL) must be placed in an escrow acct, they should transfer those funds to you at closing. Have them bring a certified check to the closing and you can create your own acct if you do not already have one with it.

Troy Meyer · Answer

Make sure you take possession of the the escrow security / last month deposits at closing.  You will have to honor those as per the current lease.

Account Closed · Answer

The lease should have an attornemnt clause where the Lessee agrees to pay successors. All leases are different and you should read each lease as part of your due diligence. I've seen al kinds of clauses included in leases... You should never assume.

Adrian Mata · Answer

I'm not a lawer. This is not legal advice.

-Meet the tenants and talk to them in person. Tell them you'd like to put them on your lease.

-If they say YES, then they sign and they're under your rules

-If they say NO, you have to honor the rules of the current lease. Reasons for no usually fall under time frame. Tenants typically want the flexibility and they'll look forward to the end of a lease.

If the lease is in place either way, just contact the tenants and let them know how you want to handle payments or what the new address is.When it comes to the deposits, this can be tricky. Most owners won't want to come off the cash so they'll try to credit it to you at closing. This won't help you much since you'll still have to come up with the money. On our second deal , we communicated with the seller that we wanted a check at closing. On the closing day at the title company, we had to sign all the paperwork then the title agent left the room and the seller gave us a check.

Not a lawyer. Not legal advice.

Tom Ott · Answer

Hello Alain,

That is a great question! We have seen that many times with our company. As long as they are up to date on their rent payments, and have a written lease, then you must honor it.

Sometimes it can be a rough situation when you have to follow someone else's lease on a property you own! Those tenants sign a legal document that expires on a specific end date. After the lease expires you may offer the tenants you own lease have them sign it.

After that they are fully yours and must follow your lease. Hopefully their lease is near the end of its term when you acquired them.

Please let me know if you have any questions.

Andreas W. · Answer

@Alain Perez-Majul

At closing make sure that the seller assigns the lease to you. It is a 1 page document both parties sign. With this doc and the current lease, you can go to the tenants and let them know where to send the rent to. Your lawyer will happily write the doc for you for a fee or your bring your own.

What happens with the lease if I buy a tenanted property?

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