Do I have to honor prior owner's contract with tenant?

[Ian Briggs]

Hello everyone! I'm new to BP, and love the forums.

My question is this: I'm looking to purchase an owner occupied multifamily property. Many of the properties are fully rented already. My question is this: once I close on a property, do I have to wait until the tenant's current lease is up in order to move into the property? Or do I have to look for properties that aren't at fully rented? I'm not trying to put the current tenants into a bad situation or anything. Does it vary state to state? I'm in Texas.

Thanks for your help!

[Account Closed]

Mehran: I think you might be referring to the federal law that applies to tenants after foreclosure. Indeed, if the buyer at foreclosure sale intends to move into the property then they can give 90 days notice to the tenant per federal law. Additionally there are some rent controlled and rent stablized areas in CA where an owner can legally terminate the tenancy in order for them (or their family) to occupy the property.

As Jon Holdman says, leases remain in place after a regular sale. Are any of the currently tenants month-to-month? If not, are any tenants nearing the end of their current lease? You could negotiate first with the seller to have them serve a notice now to terminate the tenancy. That way the process is started sooner than later. And everything is negotiable. If it's a good deal, you may be able to buy out a tenant and pay them to move.

Make sure you are not in a rent controlled area. If you are, you'll probably need legal help. Terminating tenancies in those areas is a technical, costly, and sometimes lengthy process.