How do I buy a home that already has a tenant?
I have just found the perfect home and I really want to buy it. But the home already has a tenant in place. What now? – Trevor
Hi Trevor, the lease agreement is legally binding and was in place before, so it still stands – regardless if the owner of the home decides to sell.
The lease agreement goes with the home. Essentially this means that purchasing the home automatically makes the new owner a landlord, whether they planned to be or not. If the property is being bought as an investment or as part of a rental portfolio, the fact that the home is occupied might be seen as a drawcard.
However, if the property has been purchased as a primary residence and you intend to live there, it could be a problem. You will only be able to take occupancy of the home once the lease agreement has expired and the tenant vacates the property. For this reason, it is best for you to go over the details of the lease agreement and see how long the tenant can stay in occupation before you decide whether it is worth your while to purchase the home.
There are respective obligations imposed on both the lessor and lessee in a lease agreement, so it is important for you to understand the implications of buying the home from the outset. For example, if there was a security deposit paid at the initiation of the tenancy, this will need to be refunded back to the tenant at the end of the lease. You must ensure that you get this money back from the seller. Otherwise, you will find yourself out of pocket.
Another aspect to check is whether the landlord is required to pay back any money that the tenant has paid for improvements to the property during the tenancy – this is money that should also be recovered from the seller during the sales process.
If all goes according to plan, you as the new owner will only have to wait until the lease expires to move into your new home. However, this is provided that the tenant plays along and vacates the property when they are supposed to do so. There are cases where the tenant has refused to move out, even once the lease agreement has run its course. Apart from having to deal with the delay, you may also have to take legal action to have the tenant removed, which will cost money.
If possible, before purchasing the property it is advisable to speak to the tenant and see what their intentions are, as this could save both time and money in the long run. A communicative, obliging tenant will make the process far smoother and pleasant.
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Who is Adrian Goslett?
Adrian Goslett is the regional director and CEO of RE/MAX of Southern Africa