You’ve found the house of your dreams. It’s for sale and the price is right, but it comes with one unexpected twist: it also has a tenant. Depending on your point of view and the specifics of the situation that may be positive or negative. Maybe you were looking for an investment property or chose the house because it has a separate apartment that provides a way to help you afford the mortgage – if that’s the case, then you’re probably thrilled to already have it occupied and generating income.

Or maybe you meant for the house to be your primary residence and you have to wait the tenant out, in which case you’re disappointed. One way or another, purchasing a property with a tenant means that there are additional legal documents involved, and your purchase means that you are suddenly a landlord. This scenario makes it essential to know your rights and your obligations, so bringing in an attorney is highly recommended.

The main legal aspects that you need to be aware of when you purchase a property occupied by tenants. They are:

Let’s look at them one at a time:

Tenant Rights

From a legal perspective, the terms of a tenant’s lease don’t change when the property they’re renting changes ownership. You as the buyer are purchasing the property ‘as is’ when it comes to tenants — you can’t change the lease, up the rent, or break the lease unless you’re looking for legal trouble.

There are some modifications you might be able to make or ways around an existing lease. You can negotiate with the seller so that they break the lease or get the tenants to modify the lease. You also have the option of trying to renegotiate with the tenants, but they are the ones who hold the power, as they have an existing contract for the rental, and you risk losing if they sue you for wrongful eviction.

Landlord Obligations

If you purchase a property that has a tenant, then you automatically become the landlord and that means that you’re responsible for all the duties that were originally included in the lease. You need to know what those specific duties are, but in most cases they include line items such as maintaining a safe and clean environment in common areas; keeping the structural aspects of the property safe and intact; making sure all systems (electrical, plumbing, HVAC, water; etc.) are operating and well maintained; exterminating rodents and vermin; adhering to local laws.

Having an attorney review the terms of the lease can answer key questions regarding early termination, owner move-in eviction terms, and more. They can also assist you with factors such as securing special insurance for rental properties, prepaid rent and security deposits and determining the condition of the property before your tenant moved in so that you can assess whether any damage has been done. When you hire Legalty to help you with this type of purchase, you can be certain that you are going to pay a low, set fee and get the legal expertise that you need.

Contact us today for more information.