Selling a rental property in Florida can be a complex process, especially when there’s an existing tenant with a lease extending beyond the closing date. In such scenarios, the rights and obligations of the seller are usually determined by two key documents – the lease agreement with the tenant and the sales contract with the buyer. Let’s explore how these elements interact and impact the seller’s ability to sell a property with a tenant living in the home.
Lease Assignment or Termination:
One of the first considerations for a seller is whether the lease allows for an assignment to the new buyer or, under certain circumstances, an early termination. Lease agreements can differ significantly, and sellers must carefully review the terms and conditions outlined in the lease with the existing tenant. If the lease permits assignment, the seller might be able to transfer its rights (and sometimes obligations) under the lease to the buyer. Additionally, the lease may allow for early termination under certain conditions, such as adequate notice to the tenant.
Seller’s Obligations to the Buyer:
In Florida, real estate transactions are frequently conducted using the Florida Bar and Florida Association of Realtors contract (FARBAR). This standardized contract outlines the rights and responsibilities of both the buyer and seller. A critical provision in the FARBAR contract addresses properties with existing leases or occupancy agreements beyond the closing date. According to this provision:
“If Property is subject to a lease(s) or any occupancy agreements (including seasonal and short-term vacation rentals) after Closing or is intended to be rented or occupied by third parties beyond Closing, the facts and terms thereof shall be disclosed in writing by Seller to Buyer, and copies of the written lease(s) shall be delivered to Buyer, all within 5 days after Effective Date.”
This provision underscores the importance of transparency in the sale process. The seller is obligated to inform the buyer about any existing leases and provide copies of relevant documents within a specified timeframe.
Buyer’s Discretion to Terminate:
Crucially, the FARBAR contract grants the buyer the discretion to terminate the contract if they find the terms of the existing lease or occupancy agreements unacceptable. The relevant section states:
“If Buyer determines, in Buyer’s sole discretion, that the lease(s) or terms of occupancy are not acceptable to Buyer, Buyer may terminate this Contract by delivery of written notice of such election to Seller within 5 days after receipt of the above items from Seller, and Buyer shall be refunded the Deposit thereby releasing Buyer and Seller from all further obligations under this Contract.”
This provision provides a safety net for the buyer, allowing them to assess the terms of existing leases and decide whether to proceed with the purchase. The seller, in turn, must be diligent in providing accurate and timely information to avoid potential complications in the transaction.
Lapsed Lease or Absence of a Written Lease:
In cases where there is no written lease or the existing lease has lapsed, the term of the tenancy becomes crucial. In such scenarios, Florida law dictates the notice period required for termination by the seller. The absence of a written lease does not eliminate the seller’s obligation to provide proper notice to the tenant. Sellers must adhere to the statutory requirements, ensuring a fair and lawful termination process that respects the rights of both parties involved.
Closing:
Selling a rental property in Florida with an existing tenant involves navigating the intricacies of lease agreements and complying with the terms of the sales contract. Sellers must be transparent about existing leases, and buyers have the right to terminate the contract if the lease terms are deemed unacceptable. The FARBAR contract serves as a vital framework, emphasizing the importance of clear communication and adherence to contractual obligations to facilitate a smooth and legally sound real estate transaction. Additionally, when faced with the absence of a written lease or a lapsed lease, sellers must follow the applicable statutory notice periods to ensure a fair and lawful termination process.
DISCLAIMER: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.
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