Seller signed a new 12-month rental agreement post-offer accept
Hello. We're supposed to close today, and I probably should have noticed this sooner (as should have my agent probably)...
I'm buying a duplex. One unit is vacant, the other is occupied at below market rent (850 vs ~1150/month...although the unit needs some rehab, so that's arguably closer to fair market given its current condition).
Offer was accepted (e-signed, etc) on 8/7.
Buyers agent verbally indicated that the existing lease ran through March of next year.
The seller forwarded us the lease agreement on Monday - I'd been asking for it for more than a week. I just noticed that it was e-signed 8/14 (the day before he sent it) and is a 12-month least that runs Sep1 2022->Aug31 2022.
so it looks like the seller signed a new lease agreement with the existing tenants after the offer was accepted. They are not supposed to do that, correct?
They're decent tenants. They've been there 7 years. I'm not at all opposed to them staying. My plan (not yet communicated to anyone) was to rehab the lower unit and then ask them if they'd like to move down there, possibly keeping the rent the same through the end of their contract and then going to market value. I have an existing arrangement with my lender that as soon as I'm done rehabbing both units I can cash-out to 80% of the ARV by increasing the loan amount (they'll just fwd me the funds)...so I'd like to not drag this out any longer than necessary.
how would you handle this?
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Yeah, this is the tuition you are paying on this transaction. @Brad L. has it right - I always have my attorney include that provision in the contract. Here are all of the items my attorney includes:
- Seller will complete the certified rent roll provided by Buyer to Buyer.
- Seller will deliver an Estoppel certificate provided by Buyer and completed by each tenant and signed by both tenant and by owner for each rental unit.
- Seller agrees that it shall not enter into any new Leases, modify any of the existing Leases or change monthly rents without the prior written approval of Buyer prior to closing.
- Seller shall provide full and complete copies of all written Leases to Buyer.
- Seller agrees to provide updated and unexpired Residential Occupancy Permits for all units to Buyer at time of closing.
- Seller will execute and provide written assignments of all leases to the current tenants at the time of closing.
- Seller will provide notice to current tenants as to the transfer of ownership any any security deposit to new owner.
- Seller will provide one year (previous 4 billing periods) of water/sewer bills to Buyer.
- Buyer will not be obligated to collect any rent due and owing by tenants prior to closing and Seller shall be obligated to credit all rent due to Buyer at closing regardless of whether collected by Seller at the time of closing.