WHAT HAPPENS WHEN THE PROPERTY YOU ARE LIVING IN GETS SOLD?
FOUR STEPS TO TENANTS FINDING THE BEST POSSIBLE SOLUTION
You’re a tenant in a multi-family home and you’ve just received notice that the property is going to be sold. You know that real estate prices are through the roof and it’s very likely the new owner will look to raise rents to cover that higher mortgage and come in line with market rental prices that have also spiked recently. What is going to happen to you and your family? What are your options? What recourse might you have? This reality is becoming more and more common and it’s important that you have a game plan.
STEP 1: GATHER INFO…REREAD YOUR LEASE
As soon as you receive notice that the property has been sold, you need to look at your lease to see when your term ends. Typically lease terms are 12-months or month-to-month. If you signed a 12-month lease, that contract extends to the date you agreed to regardless of who owns the property. Finding out what that structured lease date is will be step one in best understanding your situation and how long you are protected. Importantly, the landlord cannot increase your rent at any time during that term and they cannot terminate the lease without cause. If the new owner says the lease no longer matters because they didn’t sign it, they’re wrong. Legally, they are binded to that signed document until the term ends. In essence, the tenants and the legally documented commitments the previous landlord made to them, come with the property.
If you are living under a month-to-month lease, unfortunately the landlord can either raise your rent or terminate your tenancy at the end of that month. With a month-to-month lease, you really have no flexibility. You’ll want to reread your lease so you understand how much time you are entitled to.
[ Learn More: ARE YOU AN ACTIVE LANDLORD…OR MORE LIKE A SLUMLORD? ]
STEP 2: TELL THE REALTOR WHERE YOU STAND
Although there may be a recent trend in sellers forgoing realtors, almost all real estate transactions with investment properties include realtors. That gives you a point person that should be accessible. Regardless of your lease term situation, you should let the realtor know what your plans are. “I’ve been here for two years, my kids go to school here…can you please tell the new owner”. Or, you might want to move, and that should be communicated as well. In that case you’d give proper notice and be on your way when the time comes.
But if you want to stay, absolutely get a hold of the realtor and speak up. As experienced buyers’ agents, we know this goes a long way. Smart, prospective buyers will really appreciate it. They don’t want a vacancy. Their priority is paying tenants who are on time, respectful, and appreciate the property. If you can convey that like the example above, it’ll go a long way toward helping your cause. Not only does your reaching out add a human element to your tenancy for the buyer, it also gives you the opportunity to let him or her know that keeping you will be good for the property. It’s a huge step that is so often overlooked and it’s a shame for both parties!
STEP 3: RENT RELIEF OPTIONS
If you’re in a situation where it looks likely that the rent will be raised (i.e. you have a month-to-month lease) you may be able to take advantage of some of the options that are out there. Many of them could be temporary, as lots of these programs were state level responses to Covid, but nonetheless, there are options that could help you bridge a gap until you can solidify a long term plan.
If you feel like you can’t make your rent payments or it seems certain you’re going to fall behind, apply for rent relief ASAP. Different states have different guidelines and terms (see below) but generally these programs will assist with your whole balance for anywhere between four months to 18 months.
WHEN NO RENT RELIEF EXISTS, you will need to make plans immediately. Do not drag your feet because you do not want an eviction on your record. Repeat…you do not want an eviction on your record. It is not worth the short term debt relief you might envision.
Similar to Step 2, communicate openly and honestly to let the owner know that you can’t afford the rent and will likely need to leave. Having a conversation along the lines of, “I just can’t afford $1200 a month, but I can do $1000” might do the trick. REMEMBER, landlords do not want vacancies. When a unit is vacant, they receive $0 in rent…so communicate openly and honestly while you look for a more affordable option. Attempted negotiation is never a bad idea.
But do not get evicted. That record will stay there for life, or until you pay it off, but that rarely happens, and by the time you do you’ve got interest and other fees to deal with. When you finally go to buy a home of your own, you’ll need to apply for a mortgage and that eviction will be front and center, making it extremely difficult for you to get the loan you need.
Avoid eviction at all costs by exploring rent relief options, trying to negotiate with your landlord, and having a plan that includes moving out as soon as possible if need be.
STEP 4: NEGOTIATE A NEW LEASE
In Step 1 we talked all about how your lease is your biggest shield against unwanted rent increases or lawful removal from the unit. With that in mind, attempting to negotiate a new lease is a great way to try to plan for the future. Remember that negotiations work because they’re based on compromise. So you’ll likely be agreeing to higher rent, but hopefully at a rate that is affordable to you and won’t force you out. By finding a number you can work with and offering a long term structured lease term, you’re showing the owner that you value and respect the property, which offers a lot of value on his or her end. This value is what you’re counting on so he or she will agree to a rate that is lower than what they think they could get should they simply opt to remove you and find a new tenant.
[ Learn More: THE IMPORTANCE OF A RENTAL LEASE AGREEMENT ]
The new realities of the real estate market are throwing a wrench in what we’ve all come to accept as normal. While properties of homes have skyrocketed, rents have increased as well to keep up. Depending on where you are in your lease, this could put you in the crosshairs of a new owner looking to maximize their profits…but you have options!
Effective communication and knowing what programs exist for your benefit are critical to extending your tenancy and avoiding having to move or a dreaded eviction. Plan ahead and think in terms of what is best for the landlord to best inform any negotiation efforts.
And as always, reach out to our team if you have any questions or are seeking advice. At Nexus Property Management®, our goal is to revolutionize the property management landscape. Our clients are property owners but this vision begins with better informed tenants and owners who respect them.
WHAT OTHER PEOPLE ARE READING:
- THE BEST PROPERTY MANAGERS PLACE TENANTS…NOT SIGNS
- WHAT TO DO AS A LANDLORD IF TENANTS ARE DOING DRUGS
- THE BEST STRATEGIES FOR HANDLING TENANT PARKING DISPUTES
Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
Your Property, MANAGED®
The Real Estate Investing Authority®
Connecting You To Better Living®
You Could Own A Nexus Property Management® Office For Less Than You Think!