A week of gap in leases?

7 Replies

If all goes well, I will close on a property on 2/23. The property already has tenants, who I am going to screen, and (hopefully) keep. I will get their rental applications later this week. Should I get leases in place with them before I close? That doesn't seem legal. How do I handle the gap between closing and 3/1, when I would collect a first month's rent from them?

Amanda,

Are they month-to-month now?  I'm assuming that's a yes.  

You get paid on the terms of the existing leases.  If it says you get paid on the 1st of the month then that will still be the case after you close just notify the tenants where the checks go.  

Once you have a property under contract you have a legal interest in it.  So it's not outlandish to try to put new leases in place prior to close however it's very unusual.   

If it was important to you it should have been negotiated prior to finalizing the terms of the contract.  

I've been informed that in the state of Georgia that leases do not transfer, so they need to have new leases from me. Clearly this must not be typical, because I don't see a lot of conversation here on BP about this issue. There are a few days between closing and the first of the month. I'm trying to figure out what the legal situation is during that period. I hope they are covered by the terms of their previous leases, but it isn't obvious.

Any existing lease transfers with the sale of the property. If there is no written lease, then it's safe to consider them on a month-to-month verbal agreement. Either way, you are covered.

However...I personally recommend you and/or the Seller provide the tenants with written notice that a new lease will be required on the day of closing when you become the new owner. Let them know the terms you require such as rent rate, deposit, length of term, etc.

If a written lease agreement is already in place, it transfers with the sale and the terms cannot be changed without all parties agreeing.

Originally posted by @Amanda Gust :

If all goes well, I will close on a property on 2/23. The property already has tenants, who I am going to screen, and (hopefully) keep. I will get their rental applications later this week. Should I get leases in place with them before I close? That doesn't seem legal. How do I handle the gap between closing and 3/1, when I would collect a first month's rent from them?

 My question to you is, unless the title is in your name, what kind of legal right do you have to screen the tenants. You are a prospective buyer, not an owner yet.  You may find yourself in hot water if you are screening and someone takes objection to this. I would never screen someone else' tenant.  Maybe you can ask the landlord to do the screening and provide you with the information as a part of due diligence. 

To answer your question directly,  the difference can be settled at the settlement, or you can just have the seller write you a check for the difference post settlement. Nothing should change for the new tenants. They should write the next check to you on 3/1.  That's the only thing should change

Good luck.

You should have an estoppel letter from the current owner prior to closing stating all relevant information on tenants, including security deposits, monthly rent, who pays what utilities, copies of existing leases (if any) etc.

At closing, you should receive rents pro-rated to the date you close, and transfer of security deposits held by seller or manager. 

Before  closing, we send a letter and hand-deliver to tenants to confirm the info from the owner's estoppel letter, and tell the tenants to contact us immediately if there are any questions or misunderstandings.  

Example:  seller says there is no security deposit, tenant says there is.  Proof of that deposit would be required; copy of lease stating receipt of deposit or receipt of payment. 

We once had a seller tell us that the tenant didn't pay rent one month and seller used the security deposit as rent, so there is no security deposit.  Don't buy it--rent is rent, security deposit is security.  If the seller allowed the tenant to remain there, tenant still has a security deposit.

Let tenants know that a new lease will be offered to them immediately following closing. Hope this helps you.

Marc Winter, Real Estate Agent

@Marc Winter , thanks. I have their current leases, what I didn't include in my letter to the tenants is the amount the seller says he has for their deposit. I'm going to hand write that on them now.

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