Purchasing or selling a property can be a daunting task, even under the easiest circumstances. When you add a tenant into that mix, the complexities increase significantly. In this blog post, we delve deep into the intricacies of dealing with tenanted properties, unraveling what both buyers and sellers need to consider to ensure a smooth transaction.

Tenant Rights and Types of Leases

When it comes to tenanted properties, understanding tenant rights is the key starting point. There are typically two types of leases: fixed term leases, such as a one-year lease and month-to-month leases. With fixed term leases, the tenant has the right to stay until their term ends, which means the buyer cannot move in until the lease period is completed. On the other hand, a month-to-month lease offers more flexibility as the property owner can issue a 60-day notice if they plan to sell.

Challenges with Tenanted Properties

One of the significant challenges when dealing with a tenanted property is the unpredictability of the situation. For instance, even if you’ve set a closing date months in advance, issues may arise if the tenant refuses to leave. In such cases, the buyer is faced with three options: assuming the tenant, canceling the purchase, or negotiating for an extension on the closing date.

Cash for Keys: A Controversial Solution

A controversial yet sometimes necessary solution is the practice known as “cash for keys.” This involves compensating tenants to vacate the property, thus avoiding long legal battles or expensive delays. While this may expedite the process, it comes with its own set of ethical and financial dilemmas, making it a contentious strategy. VERY IMPORTANT TO ONLY TAKE THIS PATH WITH THE HELP OF AN EXPERT

Expert Advice for Buyers

If you’re considering buying a property that’s tenanted, make sure you’re clear about the type of lease the tenant holds. Request to see signed agreements such as an N11 or an N9, which show that the tenant has agreed to vacate. This reduces the risk involved and ensures a smoother transaction.

Tips for Sellers

For sellers, addressing the tenancy issue before listing the property might save a lot of headaches. Guidance from a real estate professional suggests having a candid discussion with the tenant well in advance, so they are aware of the impending sale and have time to find alternative accommodation. Sellers should aim to deliver the property vacant unless they are prepared to lower the selling price or face potential difficulties during the sale process.

Conclusion

Buying or selling tenanted properties demands an added layer of caution and planning. By understanding the rights of tenants, the type of leases involved, and the nuances of negotiation within this context, both buyers and sellers can mitigate risks and ensure a smoother transaction. Whether you are a buyer or a seller, being well-informed and prepared to handle tenant-related issues will facilitate a successful real estate experience.