Can the seller do this? Cancel leases?

Question

Hi BP gang,

I find myself in a strange predicament. We are under contract for a house that had an advertised rent with an advertised rented out period. "Fully rented until 2016!"  Yeah - I know - should have seen it coming. We asked for leases and assurances on the addendum to the contract stating that the actual rent was x. The lease is close to expiring and we received a copy of the next 12 month lease in which the rent was significantly lower.  We had the lawyer send out a letter stating that the rents were obviously lower and we asked estoppel letters and for a credit for the rent difference for the duration of the 12 month lease (rather than renegotiate purchase price).

Now the seller is stating that he never delivered the signed future lease to the tenants and we could either assume the lease as is or kick out the tenants and negotiate our own lease since he says it's not actually fully executed or legally binding - even though we have a copy of the signed lease. ...  We met the tenants at inspection and it's clear that they signed a lease for next year and expect to stay.  Not quite sure what to do or make of it.

Was it wrong to ask for a credit of the rent difference? Is this as slimeball a move by the seller as it seems? My gut reaction is to say goodbye and walk away.  The numbers fall quite a bit with the newer rent amounts.

Billy Rogers · Answer

I would refuse to deal with this person.   I heard a quote once and it essentially said "Don't think you are going to get a good deal from a bad man."

Michaela G. · Answer

If you're ethically not allowed to contact them, what if you were parking on their street and just so happen to walk by their house while they were coming or going? Since you're met, it would be very impolite to not say 'hello' and talk about the weather and whether they have a lease.......

Account Closed · Answer

If you do buy the property, you will be stuck with the lease that was signed. I call bullshit on all he said. You can't renegotiate with the tenants, they've signed a lease in good faith and their current landlord is not acting in good faith. If you try and renegotiate or kick them out after closing, you'll get hammered in housing court.

I'd walk away. If you really don't want to, I would renegotiate the price... significantly. If it makes the numbers better, you could reconsider but otherwise walk away.

Since these are students, chances are after another year, they're going to end the lease anyway and you can then decide whether to keep on renting to students. I would also get a lawyer to rewrite that lease, the lease seems to allow for variability of rent.

Account Closed · Answer

you have a lawyer what does he say  it sounds like you are getting a good deal otherwise you would have walked away already What is the cash difference between the leases, play some hard ball with the landlord to get some concessions

Colleen F. · Answer

In RI even if the landlord did not return the lease if it signed by one party it would be valid. Check NJ law.  As a student lease you have all the students and their parents to deal with. I would bet that lease is valid as it stands. If the advertisement clearly represented a higher rent I would ask for the credit or walk.  You are not going to do well renegotiating with the tenants.  My student leases are based on the number of bedrooms. I can tell you it is impossible to police the number of occupants even if it was worth my time.  The girlfriends are over ,  friends from out of town.

In the end if the current rent does not support the purchase and he won't do a credit I would not purchase it. If it is say a 4 bedroom and they are paying the rate for 3 bedrooms you can probably get the rent up down the road however if he is figuring the rent on 2people/room and that is not customary in the area I would definitely walk if the single occupancy doesn't support meet your profit margin.

Ceril S. · Answer

The deal is that it's a group of students. The way the lease reads is There is a "base" rent for a "base"number of students and for each additional person up the the max allowed - the rent goes up.  It looks like once (2-3 years ago) where the max number of people lived there and that was the rent $ advertised. (So theoretically, you could get that rent). My theory is that it was a fluke and that level of rent is actually unsustainable.  The lease also gives the option for the current tenants to renew the lease which this group did.

Incidentally, we did see them and as far as they know they think they have a lease (since they signed it) and they fully expect to live there next year.   Really nice group of kids. (See? Too attached?)

Phillip Tillotson · Answer

If the tenant has a signed and dated lease for this year then consider it valid. Fair Housing will most likely agree.

Assuming this is the case, be sure to request the security deposits from the current landlord. That responsibility becomes the new lanlord's responsibility.

Lease can only be terminated if tenants breach it or you both mutually agree.

If you are having to question legalities at all then you need to get a lawyer. Not worth the risk of being wrong.

Dawn Anastasi · Answer

Are you in a position to talk to the tenants directly and get their side of the story?

Michaela G. · Answer

I would be wondering why the rent was lowered. That rarely happens, unless there's something wrong, that maybe wasn't wrong before. Have you spoken to the tenants and gotten their side? I would not consider this sale, unless I've found out where they stand.

Was a disclosure given? He's obviously gotten caught in a lie - either, as advertised, there's a fully executed lease to 2016 and he's lying now or there isn't and he was lying then. Is that something you can pressure him with?

Ceril S. · Answer

So, now the seller is asking whether we want to negotiate for 2015-2016 ourselves or if he should execute the lease. To me it sounds like a trap. If we decide either way, he will say it was our choice and whatever he stipulated previously is now a moot point.... (Therefore relieving him of our request for a concession on this point)

I understand the thought of walking away - he is unethical.

The problem for me is here - and I know the pitfalls even as I'm saying it - but I'm posting it here to be able to see it hopefully more clearly: is a bird in the hand better than 2 in the bush?  ie. Is the lower lease locked in better than a hypothetical future lease or am I getting too attached to this property?  The numbers go from pretty good to just ok, but there is the hope that rents could be higher next year? (Yes I see this....looking for outside confirmation)

Can the seller do this? Cancel leases?

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