With rental markets being so hot given the rising prices of real estate, many people are finding it profitable to rent out property they own. But while that property is being rented, the market is getting hotter and hotter. You may decide that you want to sell your property, even though there is a tenant in there, renting the property out. Can you do that?
Can You Break the Lease?
There is no way to break a lease with a tenant just because you want to sell your home. However, some leases do have provisions where the landlord can, for no reason, break the lease, often with at least 60 days’ notice to the tenant (unless, of course, there is less than 60 days remaining on their lease).
You may be able to negotiate with the tenant, where you provide less than 60 days’ notice–but you will have to have done that at the inception of the lease, and had such a provision in the lease at the time it was entered into.
The Tenant Stays
You also may be able to convince the buyer to keep the tenant, and then remove the tenant when the lease ends–in other words, to close on the home while the lease is still in effect, and the tenants are still in the property.
However, this may require some financial considerations, in the event the tenants cause damage to the property that the buyer did not anticipate. One incentive could be the new owners’ being able to keep the rent paid by the tenant until the lease is up, or money that is put in escrow by the seller, to protect the buyer in case property is damaged, or in case legal action is needed to get rid of the tenants.
Just Wait to Close?
In most real estate cases, buyers may be willing to wait the necessary 60 days for your tenant to leave. The problem becomes two-fold:
- The first problem is that the buyer will likely want an additional inspection when the tenants move out, and a period of time when they can back out, or demand repairs, in the event that the tenant does not leave the property in good shape. This can add time, and uncertainty, to your real estate closing.
- The other problem is holdover tenants. What if your tenant just does not leave? You could lose the deal, because it will take some time to evict the tenant. Depending on why the tenant is remaining, you could offer the tenant money or other incentives, to get them to leave the property, if the deal with the purchaser is so good that you just do not want to lose it.
Contact our New Jersey real estate law attorneys at The Law Office of Agnes Rybar LLC for help today in your real estate matters.