Whether you’re buying a house to use strictly as an investment property, buying a double to live in one half, or even a single-family home that currently has people renting the property – there are things to know when buying a house with tenants! Even if you’re anticipating keeping the current tenants, you should know some of the ins and outs of purchasing a home with residents currently residing there.
Are the tenant’s leases recorded?
What is this, and why does this matter? Well, when a tenant, or even the property’s current owner, records the lease with the city, this lease stays with the property even after you purchase the house. Meaning that whatever the current lease terms are, including length of occupancy and rent, remain the same until the lease expires.
How do you know if the leases are recorded? The title company handling the sale of your home will check the court records to see if there are liens or leases recorded.
What if the tenants do not have a recorded lease?
If the tenants have not recorded their lease with the city/parish, you have a couple of options.
- Create a new lease for both you and the tenant to sign
- Give the tenant notice to vacate. The earliest you can ask the tenant to leave is within ten days of notification. Most people provide 30 days, though.
- Allow them to stay without a new lease and honor the previous agreement. This is not advisable since you do not have a lease with the tenant; they can leave on a whim.
What about the deposit the tenant gave the previous owner?
The deposit is transferred to you at the act of sale. You are now responsible for returning the deposit when the tenant is vacating the property.
Things worth mentioning:
- When purchasing the property, ask the seller if they have a walkthrough checklist from when the renter moved into the property. If they do, after buying the property, schedule a time with the tenant to do another walkthrough.
- If no checklist exists, ask the tenant during the buying process.
The tenant moved out right before our closing, and I needed the rent money!
If the tenant broke the lease with the seller before you purchased the property, you have no recourse. Take this as an opportunity to go in and freshen up the space in hopes of acquiring more rent.
I don’t want the tenants to remain after I purchase the house.
If the lease is not recorded with the city, you are under no obligation to let the tenants stay. As previously mentioned, you can give the notice to vacate the property.
What if the tenant refuses to leave?
Unfortunately, in this situation, you will have to go through the civil sheriff’s office to have them removed from the property.
Can I increase the rent?
If the lease is recorded, then you must honor whatever terms are built into that lease. However, if it’s not documented, you can request a rent increase after purchasing the property and signing a new lease.
I want the tenant to stay!
Great! Have your agent let the other party know so they can inform the tenant. After you acquire the property, we strongly suggest drafting a new lease with them. Most tenants do not want to move, so this may be an ideal scenario for all parties.
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