What to Look for When Buying or Selling Tenant Occupied Real Estate

We want to alert you of what to look for when buying or selling tenant occupied real estate.  If you are selling real estate and your property is currently occupied by a tenant, you need to find a buyer that is happy with a tenant occupied property and a buyer that is willing to buy that property subject to the tenant’s rights.

The buyer inherits all of the seller’s obligations and duties under the terms of any lease agreement in place at the time of the sale whether the buyer likes the terms or not.  For instance, let’s say the seller entered into a lease agreement with its tenant in January for twelve months.  The seller then decides to sell the property in February.  The buyer purchases the property in March.  The buyer is obligated to honor the terms of the lease through the end of the year.

Of course, the buyer can always attempt to re-negotiate the terms of the lease agreement with the tenant after he purchases the property.  The buyer can also get into some kind of agreement with the tenant prior to buying the property, whereby the tenant will either agree to leave the property after the sale or agree to pay more money. But absent such an arrangement, the buyer has to be agreeable with taking the property subject to the tenant’s rights.

In connection with that, there is a very important document that is often missed. It is called a Tenant Estoppel Letter. That is just a fancy way of saying that it is a formal document that basically lays out what the tenant pays, what the landlord is holding in a security deposit, whether or not there are any claims pending against the landlord or any other issues that the buyer wants to be aware of, and it also notifies the tenant that once that transaction closes, the old owner is no longer their landlord and that they have a new landlord.

As a buyer of tenant occupied real estate you also want to make sure that you inherit and receive all of the security deposits.  Moreover, you also want to make sure that the tenant has adequate insurance in place to protect the landlord in the event of an incident of some kind.

These are just part of the things that you need to make sure when you are buying or selling tenant occupied real estate in order to ensure that you have a smooth real transaction and that you know what you are getting into.

So if you have any questions regarding tenant occupied real estate or any other real estate issues, feel free to give us a call, we are here to help.

ABOUT THE AUTHOR.  Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff.  He is the 2017 Dade County Bar Association’s Legal Luminary Award winner.  He was also named to the Best Lawyers in America in Real Estate related litigation.