Do real estate leases survivethe sale ofa property?

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Do real estate leases survivethe sale ofa property?

I want to purchase a condo to rent out. However, the association claims the by-laws require a minimum 1 year owner occupancy before a unit can be rented out (I haven’t verified this in the by-laws yet, but I take their word for it). I want to enter into some sort of option to purchase with the seller, then find a tenant who enters into a lease agreement with the seller (who is still the owner and has met the minimum 1 year occupancy requirement). After the lease agreement is executed, I will close on the property and become the new owner. Does this sound doable? Is it not true that the lease must survive owner transfer so the association has no authority to void the lease, and therefore must allow me to keep the tenant? If so, when is a lease actually executed and enforceable -when it is signed and after any attorney review waiting period or after the person actually moves in?

Asked on October 11, 2011 under Real Estate Law, New Jersey

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

In all states in this country leases concerning a given residential property that were entered into before the close of the property's escrow survive the sale. This is why most real estate that is being rented out for residential purposes have documents known as tenant estoppel certificates signed by the landlord and the tenants before close of escrow to be given to the buyer.

Such documents put the potential new owner on notice about the rental and the price paid per month. Leases to an extent in residential properties even survive foreclosures.

Your plan sounds well thought out in that any restrictions concerning leasing out the unit when there is a new owner would be subject to existing state law requiring the surviving of the lease (if there is a remaining term) post sale.

In most circumstances the lease is valid upon signing of all parties and the term of the lease would begin upon move in date. I recommend that you consult with a real estate attorney before you make any offers on real property about your plan.

Good luck.


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