in contract - can I list as rental and sign lease agmt now??

Question

We are in contract on a unit and have explicit permission from seller to list it as a rental and show the property to prospective tenants before we have closed. Would love your thoughts on:

1. Can we sign lease agreement now with a tenant effective a future date after closing

2. Any special clause that you have used in similar circumstances

3. Are there other creative alternatives to lock in the tenant now (say reservation fee applied to first month rent etc).

Property is in New Jersey if that is relevant.

Thanks so much!

MarZia RiVera · Answer

Shefali R. no difference in Florida.  Any agreements, leases, contracts, repairs, maintenance, etc done prior to closings must be done in the sellers name with the seller agreeing and then adding it to the purchase agreement.  Almost anything can be done so long as the seller is in agreement, excecutes all paperwork along with the other party (Tenants in this case) and then added to the purchase agreement.

If all agree to move forward and do this then you as the buyer should be involved with it every step of the way, side-by-side with the seller so you are making decisions with seller signing.  Offer up your lease agreement rather than the sellers former lease agreement, or any repairs or  or maintenance or moving request made by the tenant should be with you along with that the seller as it will be you who will be taking on any maintenance moving forward after the 15th after closing

MarZia RiVera · Answer

Shefali R.  The only way that that would work in Florida, is if the seller agrees and go into lease agreement with your future tenants, collects first last and security and places in his escrow account or in escrow at the title company doing the closing. You and the seller can then move forward with signing of lease (seller only executes with tenants), the tenant walk-through, move-in checksheet, etc.  Once the lease and move in are finalized  you can then add the lease to the current purchase agreement.  At time of closing the lease agreement, the security and last month escrowed and any pro rated rent for the month would be transferred to you.

Once you have closed on the property you would then send a letter to the tenants notifying them of new landlord, transferred management if any, to whom and where they will be paying their rent.

Upon drawing the lease you can opt to have it state that at the time of sale a new lease will be drawn with the new landlord owners name and then after the sale have the tenant sign the new lease with you executing, otherwise leave the lease as it is prior to the sale and upon renewal put all the updated names

Good luck

MarZia

Shefali R. · Answer

@Julie Haveman thank you. I think I will pursue the deposit option.

Julie Haveman · Answer

The receipt said non refundable unless sale was not complete by given date.

Shefali R. · Answer

@Julie Haveman glad to hear that!

When you took the deposit, did you just give a simple receipt or it had additional caveats. Thanks!

Shefali R. · Answer

Ah - got it. Thanks @MarZia RiVera!

Shefali R. · Answer

thanks @MarZia RiVera.

I should have clarified, we expect to close on May 1 and the lease would start may 15. So we would be owners when the lease commences.

I was wondering if we could lock in a lease agreement now for a lease starting May 15 with some appropriate caveats and whether anyone in the community had explored this option.

Thanks!

Shefali R. · Answer

Thanks @Kevin Harrison - you make a good point - my lawyer said the same thing!!

Just for additional context: we don't plan to misrepresent to any tenant that we own the unit currently but say that we are in contract.

On your other points - we are doing a cash transaction and community has 24/7 security and v low crime. But you are correct, there are always risks that should be considered. Thanks!

Kevin Harrison · Answer

Personally I think this is a terrible idea. anything can happen before closing. the place can be ransacked by thieves, the seller can get a higher offer and back out, your financing can fall through. All of that is terrible enough for you but imagine what it would do to someone who has all their things packed and has already turned over their other place. Now you will have made them homeless because you were greedy.

I guess its fine to show the place and take applications but I would not put anything in writing until I had closed. This is a CYA move on your part as well.