If I Sell My House, Will the Tenant Have to Move?

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Real Estate Agent with Keller Williams Realty

If I Sell My House, Will the Tenant Have to Move?

I was recently asked this question and it is a very good question.  As a property manager, I am often sold by prospective tenants, that the reason that they are moving is because the owner is selling the home.  Of course, if they complete an application with me, I'll do my due diligence and make sure everything jibes.

But from a seller and buyer perspective, they both need to know that if a tenant occupied house is sold, then the new owner, by law, has to honor the existing terms of the lease.  In other words, if the tenant's lease does not expire for another 6 months, and the purchaser is an owner occupant purchaser, then by law (at least Alabama law), the new owner must honor the terms of the existing lease.  In which case, the new owner could not move in to the home until the tenant moved out at the end of the lease term.

The alternative would be if the tenant and the owner (current or future) have come to an agreement with regard to the tenant vacating the property sooner than the end of the lease.

Buyers and sellers should tread very lightly when it comes to making arrangements with the tenant to have them move out early.  Consultation with an attorney would be advisable, so do your due diligence.  If you are currently a buyer or seller in this situation and your real estate agent has not brought up the subject or informed you of existing landlord/tenant laws of your state, then you should bring it up yourself.

Chances are that everything will work out find, but it's best to be prepared and informed.

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Rainmaker
302,592
Terri Poehler
Realtor - Coral Springs, FL
Coral Springs Real Estate Agent

That's the way the law is here in south Florida as well. Leases have to be honored.

 

Sep 16, 2011 03:09 PM #1
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Brenda Mullen
RE/MAX Access - Schertz, TX
Your San Antonio TX Real Estate Agent!!

That is always a concern of tenents and you are completely correct, owners need to be very careful in telling tenents to vacate.  God it's hard to sell tenent occupied homes!  I don't envy anybody that one!  Terriific post Charita!

Sep 16, 2011 03:48 PM #2
Rainmaker
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Gene Mundt, Chicago-area Mortgage Lender - www.genemundt.com
NMLS #216987 - New Lenox, IL
708.921.6331 - 37 yrs experience

Excellent points Charita.  The answers might lie in local law ... so proper research better be done to discover the correct answer to this question.  Definitely proof that true professionals need to be acquired for any transaction.  And of course, in Birmingham, Alabama ... that's you!

Gene

Sep 16, 2011 04:10 PM #3
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Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Terri my guess is that it's universally. But that just my guess.

Thanks Brenda and believe it or not, it doesn't have to be hard. It depends on the tenant and the relationships that have been established.  I know there are nightmare tales, but there are some good stories too.

Of course Gene.  Of Course! -:)

 

Sep 16, 2011 04:26 PM #4
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Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

Charita, I have a listing that's rented. Thankfully she's going month to month right now so it shouldn't be an issue.

Sep 16, 2011 04:28 PM #5
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Alison Shuman
Appraisal IQ LLC | (512) 585-4758 - Austin, TX

What a good thing to blog about. I have a potential listing that is considering leasing instead of selling, with plans to sell later when the market in her neighborhood has improved (which, of course, we all hope it will!). You have reminded me to make sure she knows that leasing might complicate selling the property later if the tenant doesn't want to vacate early for an owner occupant.

Sep 16, 2011 06:52 PM #6
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Anna Banana Kruchten
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana of Real Estate!

Excellent post Charita.  This is something a lot of folks are unclear about.  And to top it off we've got some major issues with foreclosures and tenants in place.  Tenants, if a lease is in place and payments are made stay in the home.  I just had a call the other day where the new owner told tenants they had to vacate in 5 days. Not so!

 

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Sep 16, 2011 08:05 PM #7
Rainmaker
599,116
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Charita - It's a different world here on the left coast.  New owners don't have to honor existing lease agreements.  Heck, in some cases, the current owners don't even have to honor existing leases.  There are laws though that sufficient notice must be given and the amount of notice depends on the length of tenancy.  Having said that, the term "sufficient notice" is a bit of an oxymoron

Sep 16, 2011 11:50 PM #8
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Marge Piwowarski
Phoenix AZ Horse Property - Phoenix, AZ
Phoenix AZ Horse Property, LLC

That is a sticky wicket for sure.  The lease is valid but it is an unpleasant situation for everyone.  I try to avoid showing tenant occupied property unless my buyer is an investor. 

Sep 17, 2011 01:12 AM #9
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Christine Smith
Buyers Brokers Only LLC - www.BuyersBrokersOnly.com - Canton, MA
Exclusive Buyer Agent & Attorney, Canton, MA
It is important for buyers to get all the details up front so they can determine if the tenant can stay or go.
Sep 18, 2011 09:58 PM #10
Rainmaker
687,011
Sussie Sutton
UTR Texas Realtors - Pearland, TX
UTR TEXAS Realtors - Rep for buyers and sellers.

Very good question and one I did not know. I don't do many rentals.

Sep 18, 2011 11:04 PM #11
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Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Connie it's not always an issue, and I hope that this will not be an issue either.  Best wishes.

Allison it's an essential converation.  I would be sure to put it at least an email to owner/seller just so your advice is documented and doesn't come back to haunt:-).

Anna you mean I've got the "Tude"?  Thank you for the feature.

Donne that just makes me go "hmmmmmmm?"  There obvious is some good news and bad news about that (at least in California).  In Alabama, the law favors (make that highly favorss) tenants so that would never fly here.

Marge I understand completely but I hope you're still giving the buyer the option particularly if the lease is near it's end.

Without question Christine.  That's why it's important for selling agents to know their State's landlord/tenant laws.

Sussie but it's good to keep up with the law just in case.

 

 

Sep 19, 2011 08:19 AM #12
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Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Charita - LOL  Landlords here often say that CA tenant laws favor tenants because by law tenants are entitled to "sufficient notice".  If landlords had their way, there wouldn't be any law preventing landlords from evicting anyone at any time they (the landlords) feel like it.  Many landlords feel like it's a violation of their rights not to be able to eviction someone whenever they want at a moments notice.

With my borrowers purchasing tenant occupied property as an owner-occupied borrower, I always advise them that it's best to get proof of eviction having already been served prior to making the offer because tenants vacating the property is almost always a PTF condition.

Sep 19, 2011 04:41 PM #13
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Charita Cadenhead

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