Common Problems of Buying a House with Tenants
Under both Massachusetts law, and federal law, a tenant has rights when the place they are living in is sold to new owners. Someone cannot simply buy a house and expect any existing tenants to move out right away. If the current tenants have a lease, it is a legal and binding contract that must be honored. Even without a lease, the new owner may have to go through the process of evicting the current tenants before they can take full possession of the home. These laws are set in place to protect the tenant from being suddenly thrown out of their homes. As any experienced real estate lawyer can tell you, they are not so good for the buyer, however.
Here are some common problems associated with purchasing a home which has tenants.
All Packed Up With No Place To Go
If you are buying the house as a primary residence, you may want to look for one that does not have tenants. Unless the current lease will be up before your closing date, you could end up with no place to go. If you have scheduled your closing date and time to move for around the same time that the tenant’s current lease will be up, or current home will be sold, then waiting until the current tenants in your new home move out could be a serious problem.
Your Payments Could Be Higher Than The Tenant’s
If you have decided to buy a house as a secondary residence, or as a rental property to make a little cash of your own, you must be very careful. This is one of those times that the expertise of an experienced real estate attorney can be priceless. Just small things that you may miss in the wording of your sales agreement could leave you with financial hardships that you never saw coming. For example, if it is not specified in your agreement that he or she is not allowed to do so, the seller could lower the rent on the current tenant before closing. This could leave you with a mortgage payment that is actually higher than the rent you will now be obtaining from the current tenant.
You Will Have to Pay the Security Deposit Back
If there is a security deposit included in the current tenant’s lease agreement, then you could be stuck paying it back if other arrangements aren’t made prior to closing. When the lease is up, if you or the tenants do not decided to renew, then you may end up having to pay them their original security deposit back. This is something that your closing lawyer should negotiate with the seller during the sale. If you need to speak with a closing attorney about buying a home with tenants, or any other real estate issue, give us a call today.