Best Way to Terminate Leases upon Settlement

[Mark Simon]

HI Bigger Pockets Forum!

We’re super excited that we’re under contract for our first rental property! Woot! It’s a triplex in the Philadelphia area that needs a lot of work. Two of the units are currently occupied but paying well below market rents. We would like to terminate those leases right away and rehab the building. After much diligence, we're convinced that the cost/benefit of doing the rehab is compelling.

The existing leases have a very specific clause that says “If the landlord sells this property, the purchaser can end this lease”. However, we worry about the tenants being upset as they’ve been there for 2-4 years. Our attorney says that a lease with this sort of clause is rare and the tenants probably aren’t actually aware of that clause – even though they signed the lease. Also, if we enter any situation where we let them stay for a period of time, there are numerous issues that need attention (active leaks, broken fixtures, etc). Plus, the tenants do not take care of the property the way they should. One tenant’s unit is very messy; while the other did a bunch of unauthorized and shoddy alterations to the unit.

We’re thinking the best way to handle this is to contact them (in writing and in person) after settlement and announce our intentions. We’d like to give them enough fair notice to find a new place and make arrangements, but we also want to incentivize them to leave sooner and peacefully. Is it fair to simply say “you have 30 days to leave”? 60 days?

We look forward to hearing your thoughts!

-Mark