Buying a house with a tenant may not be as far-fetched as you might assume. Think of a seller who rented their property and has decided to list it. If you want to buy a property with a tenant living in it, additional factors come into play. You’ll be forced to decide whether to adopt the lease, take over the tenant’s security deposit, or deal with issues like the tenant refusing to leave. These are aspects to think about before moving forward with your purchase.
Things To Consider When A Tenant Is Living In the Home You Want To Buy
If the tenant has a valid lease, that agreement will usually transfer to you, the buyer. You most likely need to honor the lease terms, including the rent amount and move-out date. Additionally, the security deposit paid by the tenant must be transferred to you at closing. In Illinois, the security deposit is required to be kept in a separate account designated only for tenant funds. Failing to do so could result in penalties, including the potential for the tenant to recover triple damages under the Residential Landlord and Tenant Ordinance (RLTO).
You’ll also want to confirm when the tenant will move out. For example, if the tenant’s lease ends on June 30th and your closing date is set for July 15th, the tenant is expected to vacate before closing. You’ll be involved in a holdover situation when the tenant doesn’t leave after the lease ends. This could delay your plans for the property and require legal action to evict the tenant. If the tenant doesn’t move out as agreed, the seller may be in breach of contract, which can interfere with your ability to complete the purchase.
Options For Avoiding Future Issues
When a tenant is involved, there are several things you can do to prevent the issue from devolving. You can opt to delay the closing until the tenant has vacated. This gives you more time to resolve the problem, and then you close on the property when it is vacant. Alternatively, some buyers may assume the lease and collect rental income if immediate possession isn’t necessary.
If the tenant wants to stay and you are open to keeping them, you must ensure the lease terms work for you. On the other hand, if you wish to have immediate possession but the tenant doesn’t leave, you may need to work with a landlord-tenant attorney to begin eviction proceedings. Each step must be carefully planned to avoid delays in your closing or unexpected issues after purchasing the property.
There are state security deposit regulations that you must adhere to when buying a house with multiple tenants. For instance, you must keep the funds in a separate account. This is to prevent the commingling of funds, which has legal ramifications.
Buy & Sell Property with Legal Guidance & Advice
If you’re considering buying a property with a tenant, proceed carefully and speak with legal counsel. Schedule a consultation with Auricchio Law Offices to ensure you’re fully prepared for the transaction and any challenges that may arise.
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