PURCHASING AN OCCUPIED PROPERTY
When you buy a property it is subject to the existing lease. The new owner steps into his shoes and assumes the landlord’s obligations under the lease. If the tenant had made deposits (i.e. last month rent and security deposit ) the new landlord is liable to the tenant for those deposits. The buyer does not have the right to terminate the tenancy or change any of its terms. Telling the tenant he has to move out because the house has been sold could be deemed unlawful eviction and punished by a fine of 3 month’s rent.
A buyer must require the seller to provide an estoppel letter signed by the tenant verifying the amount of the rent and security deposit and the lease terms. The seller should provide the tenant’s social security number and date of birth so you can obtain a non-military status affidavit on-line in the event you have to evict the tenant. If you do not have this information, you must have a factual basis for swearing out an affidavit that the tenant is not active duty military in order to obtain a default judgment.
The buyer should receive prorated the rent and credit for the deposits from the seller on the closing statement.
The seller must disclose in the sales contract the property is subject to an existing lease, or the buyer could sue for failure to deliver possession at closing.
How does the filing of a foreclosure against the rental property affect the tenancy? Legally the foreclosure does not affect the tenancy until the foreclosure auction has taken place. Foreclosure auctions can be cancelled at the last minute, so the parties should check the court docket online to verify the case status. Until then, the lease is fully enforceable. If the tenant does not pay the rent, they can be evicted. A foreclosure in progress is not a defense to the non-payment of rent.
Post foreclosure: Any lease that is junior to the mortgage is subject to being foreclosed. The tenant should be named as a party defendant and served. Check the docket of the foreclosure case. If the lease was entered into after the lis pendens of foreclosure was filed it is subject to the foreclosure. A buyer may obtain a writ of possession directly on application to the Clerk of Court, or by filing a motion for a writ of possession depending on the language in the judgment of foreclosure. You can obtain a copy of the judgment of foreclosure from the Clerk of Court’s website.
The Federal Law (Protecting Tenants Under Foreclosure Act) requiring a 90 day notice to move expired December 31, 2014.
The buyer may solicit the tenant to sign a new lease, or to stay as a month to month tenant until the buyer can re-sell the property. If you accept a rental payment from the occupant you have created a new month to month tenancy. Month to month tenancies may be terminated by providing a notice of non-renewal at least 15 days before the next monthly lease term. Once you have created a new tenancy, you must file an eviction to obtain possession rather than get a writ from the foreclosure judge.
Be careful on REO purchases as the bank puts a waiver in the sales contract that they do not guarantee possession at closing. In fact, the bank may claim to have no knowledge as to who is living in the property, or if they are the former owner, a former tenant, or a trespasser. Unless a new tenancy was created post foreclosure, you may obtain possession by applying to the foreclosure court for a writ of possession.
Be absolutely sure that the seller obtained a condominium estoppel letter. The banks are very sloppy about paying delinquent condo dues and their title companies equally sloppy about obtaining estoppel letters. If you close without a condominium estoppel letter, you may end up liable for the delinquent condominium dues.
LANDLORD’S FAILURE TO PAY ASSOCIATION DUES.
In condominiums, if the landlord is not paying the association dues, the association may seize the rent by sending a written demand to the tenant. If tenant has already paid the rent, the tenant must provide evidence of such to the association within 14 days. The payment of the rent to the association is a defense to any claim from the landlord for non-payment of the rent. The association is entitled to evict the tenant for non-payment of rent (although one would wonder how that would benefit the association, other than generating a legal fee for their attorney ). The association has no obligation to perform repairs.
In some cases, the non-payment of dues has become so rampant that the condominium put the delinquent units into court receivership. In this instance the receiver has the power to enter into new leases, collect rents, and incur significant expenses against the unit. Be sure the seller has an estoppel letter from the receiver and has paid these charges. You may be stuck with the new tenancy, so be sure there is no receiver before you close.