landlord sells property

What Happens to a Lease if the Landlord Sells the Property?

Those who rent a home, apartment, or commercial space usually have a written lease with the landlord. For residential properties, the term of the lease is typically a year or maybe two or three years. With commercial properties, it is not uncommon for landlords and tenants to enter into a multi-year lease. This is often in the best interests of both parties as this arrangement provides more certainty and stability.

During the midst of a lease, circumstances can change, and a substantial change in circumstances could cause the parties to revisit the terms of the lease. One of the most common examples of this is when a tenant falls on hard times financially and can no longer afford the payments.

There are also times when a landlord’s situation changes to the point where the tenant’s continued occupation of the property is in doubt. And one thing that comes up fairly often is when a landlord decides to sell the property.

Can a Landlord Break a Lease to Sell the Property?

A landlord has every right to sell their property, but they might not be able to terminate the tenant’s lease at the time of the sale. This depends on the terms and conditions of the lease. For example, if a landlord sells a house that is being rented and the tenant still has several months left on their lease, then the new owner would inherit the existing lease unless there is a clause in the agreement to the contrary.

Some leases have a clause in them that allows the parties to break the lease with enough advance notice. For example, the contract might allow either party to break the lease with a 60-day notice. This would presumably be enough time for the tenant to find a new place to rent, and the closing on the sale could be scheduled up to 60 days out in order to coincide with the tenant vacating the property.

The lease could have a specific “lease termination due to sale” clause that addresses this specific situation. This type of clause could be included in the contract if the landlord is considering selling the property sometime in the near future. But usually, a tenant will be aware that such a clause exists.

For tenants who are in a situation where they are not sure if they can continue to occupy a property after the landlord sells it, it is very important to carefully review the lease agreement and pay close attention to any clauses that address early termination in the event of a property sale.

If there is a clause like this in the contract, it should provide some insight into what would happen if the property is sold. For example, the landlord will typically be required to provide the tenant with ample notice to vacate the property even if there is still time left on the lease. If you are confused about what will happen to your lease if the landlord sells the property, it is best to speak with an experienced attorney to discuss your legal rights and options.

Landlord-Tenant Negotiations When the Landlord is Selling

The landlord may or may not have the legal right to terminate a tenant’s lease when they sell a property, depending on the specific terms and conditions of the contract. But as a practical matter, landlords need the cooperation of their tenants to ensure a smooth and successful sale. In situations like this, it is generally in the best interests of all parties to try to negotiate an arrangement that works for everyone.

Here are just a few of the solutions that landlords and tenants may be able to work out when a landlord is selling the property:

  • Lower the Rent: If a landlord wants to terminate the lease early in order to sell the property, they might be able to get the tenant to agree with enough advance notice and a break in their rent. For example, the landlord could offer to lower the tenant’s rent by 20% for the remaining months until the new owner takes possession of the property.
  • Cash for Keys: Cash for keys is an incentive that is used in a number of situations to persuade an occupant to vacate a property. In a case like this, the landlord could offer the tenant some extra cash to cover moving expenses and a deposit on a new rental in exchange for leaving before their lease is up.
  • Month to Month Lease: If a landlord is considering putting a property up for sale but they are not sure exactly when, they could switch their tenant to a month-to-month lease when the tenant’s current term comes up for renewal.
  • Sell the Property as a Rental: If there is still a lot of time left on the tenant’s lease (e.g., more than six months), the landlord might consider putting the property up for sale as a rental with the current lease carrying over to the new owner. Some real estate investors might prefer a property that already has a reliable tenant in place, especially if the rent they pay generates positive cash flow.

Contact Our Reputable Southern Alabama Real Estate Attorneys

Landlord-tenant issues can start to get complicated, especially when circumstances change and either of the parties needs to significantly alter the terms and conditions of the lease. When this situation comes up, it is wise to consult with a skilled and knowledgeable real estate lawyer.

For strong legal guidance with landlord-tenant disputes and any other real estate matter in southern Alabama, Stone Crosby, P.C. is here to help. Call our Daphne, AL office today at (251) 626-6696 or message us online to schedule a consultation with a member of our legal team.