Our client was buying a rental property with an existing tenant, closing mid-month. His realtor had some basic tenant questions.

Question: If the rent is paid on the 1st of the month and the deal closes on the 15th, does the buyer get the rent for the last half of the month? 

Answer: Yes. The buyer is entitled to the rent for the last half of the month. This comes through a credit (price reduction) to the buyer on the Statement of Adjustments prepared by the seller's lawyer. 

Question: The existing tenant is month-to-month on a verbal lease. Can the buyer require the tenant to sign an actual month-to-month lease? Can the buyer convert the month-to-month lease into a fixed-term lease?

Answer: The buyer has to accept the tenant and their current lease situation. So, if the tenant is on a month-to-month verbal lease, that lease remains in effect. The buyer cannot make the tenant sign an actual written lease. If the tenant is on a month-to-month lease, written or verbal, the buyer cannot force the tenant to sign a fixed-term lease. The buyer may agree to change their lease terms, but they cannot be forced. 

These questions can be tricky, so if you are not comfortable with the nuances of how the regulations work, refer your clients to their lawyer. 

Coming up next issue: What if the buyer does not want to keep the tenant? Is there anything the buyer can do?

Protect yourself.

Cheers,

Barry