A topic of common confusion I deal with is buying or selling a house where there is a lease and a tenant in place. Most buyers think that the tenants automatically have to leave the premises when the house transfers to the new owner, but that’s hardly the case. The reality is that even if the property sells, the tenants are protected with their lease. Some landlords will write into leases that tenants have to move out if they sell the house or something to that effect, but that is not the norm.
The proper way to handle this situation is to draft an assignment of lease, so that the lease will transfer to the new owner and the tenants are protected. The only thing that will change is now their security deposit will transfer to the new owner and their monthly payments will need to be made to the new owner after closing. This ensures a legal transfer and it also protects the tenants. Often the tenants get scared thinking they are going to be forced out or that everything will change if there’s a new owner in place. If our management company is handling the rental for the first owner and then the second owner buys it, nothing changes for the tenants – it’s very convenient.
A lot of investors love the fact that a house is already rented out. They jump on the opportunity to buy that type of property because they know they won’t have to have their property sit empty without getting them a return on their investment. The goofy thing about commercial verses residential real estate is that the price of a property really doesn’t go up. If a house is worth $300,000 with tenants in it or without tenants in it, it’s the same price for the house. If there’s a small building that’s vacant and it’s worth $300,000, that same building occupied by a business will be worth significantly more.
Just last week we were trying to get a buyer approved through the management office of a gated community. The buyer was buying a condo with a tenant in place. The management company told us that if the buyer bought the place, the current lease would be null and void and we’d need a whole new lease. That’s when we had to go in and explain to them the concept of a legal assignment of lease. It took a while, but they eventually understood it. If professionals are confused about this topic, I know a lot of other people are!
Gabe Mellein was voted a Top Real Estate Agent – Exceptional in Service and Overall Satisfaction by Gulfshore Life Magazine in 2012. He is the broker of Gulf Pointe Properties, Inc and has over 8 years experience in the SW Florida Real Estate Market. He is a member of The Naples Area Board of Realtors, Bonita Springs – Estero Association of Realtors, Realtor Association of Greater Fort Myers and the Beach, The Florida Association of Realtors, The National Association of Realtors, and is nationally certified in Feng Shui for Real Estate. Need real estate help? Please contact Gabe at: 239.825.2234, Gabe@GulfPointeProperties.com or www.GulfPointeProperties.com