Part three of a three-part series: Issues surrounding sales of property with tenancies. Part one covered taking a listing, part two the contract language. Issues can also rise regarding closing, however, including some specific concerns.
ORLANDO, Fla. – This article is the last of a three-part series regarding selling properties subject to tenancies.
The first article provided advice to assist Realtors at the onset of taking a listing. The second article focused on contract language and required steps for both parties once they arrive at an agreement.
This article covers the closing process for properties subject to a lease.
Florida Realtors Legal Hotline receives a lot of questions about tenant-occupied properties – and most arise from a failure to understand the parties’ obligations and rights.
For this article, Florida Realtors/Florida Bar (FR/Bar) residential contract language is analyzed. If you’re using the Florida Realtors Contract for Residential Sale and Purchase (CRSP) document, addendum “W. Rentals” should be attached to the contract to clarify the parties’ rental obligations.
Standard 18(D) of the FR/Bar Contract
At least ten (10) days prior to closing, the seller must furnish tenant/occupant estoppel letters that specify the nature and duration of the occupancy, including rental rates and any advanced rent or security deposit paid by the tenant/occupant.
The tenant is supposed to sign the estoppel letter to confirm the information in it. If the tenant refuses to sign, the seller must provide the buyer a seller’s affidavit to this effect, and the buyer must confirm with the tenant that the terms of that affidavit are, in fact, accurate.
The seller may wish to consult his attorney regarding the estoppel letter(s) or seller affidavit(s) required under this provision if they have questions. In addition to the right to cancel under paragraph 6, Standard 18(D) also gives the buyer a right to terminate the contract within five (5) days after receipt of the information – but no later than five (5) days before closing if any of the above information materially differs from the lease provided via paragraph 6, or in the event the tenant fails or refuses to confirm the seller’s affidavit.
What does this mean? The seller should plan ahead – far enough in advance of the closing to gather all this information that must be provided to the tenant.
Advanced Rent and Security Deposit(s)
At the closing, it’s also very important that the seller is prepared to transfer advanced rental payments and/or security deposits as well – a requirement under Florida Statutes 83.49(7). If a seller uses a property management company to hold these types of funds, it’s best for the seller to communicate early and often with the company about obtaining those funds in time for the closing.
Assignment of Lease
The seller’s final step is to deliver and assign all leases to the buyer. The buyer then assumes the seller’s obligations under the lease, aka becomes the new landlord. An assignment is a legal document that transfers the rights of one party (the landlord-seller) to another party (the buyer). The seller may need to obtain legal assistance to prepare it.
As you can see, there are additional steps required when handling a transaction if the seller’s property is subject to a tenancy. This doesn’t have to make things more complicated, as long as the parties (as well as their agents) understand their respective obligations under the contract.
Occupied property transactions can go as smoothly as any other type of transaction with advanced preparation and communication between everyone involved.
Meredith Caruso is Associate General Counsel for Florida Realtors
Note: Advice deemed accurate on date of publication
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