Tenant Just Signed Lease Before Closing
Hello — I am closing soon on a 3-family house in the s. slope where I have lived for some time. Although we have been inching towards closing for several months (it is a short sale), the owner just wrote up a year lease for one of the other tenants, claiming that he ‘had to’…
Hello — I am closing soon on a 3-family house in the s. slope where I have lived for some time. Although we have been inching towards closing for several months (it is a short sale), the owner just wrote up a year lease for one of the other tenants, claiming that he ‘had to’ after the tenant demanded one (after not having had a lease for years). The tenant probably figured that the closing was imminent, and possibly the current owner was doing him a favor since I have made it clear that I don’t want the tenant there. In any case, am I now stuck with this tenant for another year? The apt is not RS/RC. Also, the tenant is not currently paying market rent. Thanks for your help!
Tricky because buyer is negotiating with bank, not owner. Usually in these situations, lease or no lease, the bank finds it needs to offer something to all the current occupants to get them to leave without a fuss — such as moving costs, promises not to destroy credit, etc.
OP mentioned in one of the posts that the tenant is a “friend (of sorts)” of the current owner. It seems to me that the tenant likely knew that the current owner was selling and colluded in what sounds like a contractually prohibited action. I think that the personal relationship between current owner and tenant might be sufficient to get the lease canceled. Talk to the lawyer.
^ True, $3600 estimated shortfall from market rent is not that much in the big picture, and a much smaller hit than the seller and the bank are taking. Real issue is OP wanted the apartment, not the rental income. He can complain about the contract violation & try to extract a concession or hem and haw about closing to delay & reduce the time between closing and end of lease, when he can get possession of the apartment.
wait $300/month for 12 months is $3600 bucks
that seems small in the scheme of things (ie buying an entire building)
what’s the real issue?
. . . which brings us back to my earlier point. You now have a contract violation by seller. It may or may not be sufficiently material to justify terminating and getting your deposit back, but you may not want that anyway. Short sale may preclude any concession, but you would be within your rights to have your lawyer express disatisfaction about the violation and hem and haw a bit about closing to see what you can wrangle out of this. Again, discuss with your lawyer, but you’ve had some value taken away and it may be worth a try to recoup something. It’s all about negotiating leverage — if you’ve got some, use it.
Not so sure about “lease will not stand up legally”. Your best advice will come from your lawyer (not the brownstoner peanut gallery). I think the the lease may stand up legally, the issue is that it violates your sale contract, and again that’s not the tenants fault. You may be able to walk from the deal because the seller didn’t abide by the contract in which case (again depending on the contract) your remedy may be to get your deposit back. You may or may not be able to sue to enforce the ‘no new leases’ clause and attempt to require the the seller to terminate the lease. The tenant could refuse, and ask for a buyout if he wanted to be difficult.
just a quick follow-up, for the sake of completeness: we did find a ‘no new leases without written approval from the buyer’ clause in the sale contract rider signed by both the seller and buyer (me), so the 11th hour surreptitious lease will not stand up legally. Thanks again for all of your input and advice!
Slopefarm — Indeed, it’s the seller who put me in this position, but at this point I wouldn’t even look funny at the short sale contract since it took so long (> 1 year!) to work out the approvals (manhattenite, yes, it is with the bank primarily — house was in the process of foreclosure). I will look to see if there is legal guidance within the purchasing agreement, but otherwise it is what it is, and we’ll just make the best of it.
My comments are subject to Manhattanite’s queastion of how short sale affects the equation. Concession may not be possible.