Part 3: The closing process for tenant-occupied properties
Oct. 2, 2017 – This article is the last of a three-part series regarding selling properties that may be subject to tenancies.
The first article provided advice to assist a Realtor at the onset of taking a listing. The second article focused on contract language and the required steps for both parties once they arrive at an agreement.
This article covers the closing process when a property is subject to a lease.
Many calls to Florida Realtors Legal Hotline focus on tenant-occupied properties, and most of those questions arise from the failure to understand the obligations and rights of the parties.
For the purposes of this article, language in the Florida Realtors/Florida Bar (FR/Bar) residential contract 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’ obligations with regards to rentals.
• Standard 18(D) of the FR/Bar Contract
At least ten (10) days prior to closing, the seller must furnish 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.
The tenant is supposed to sign the estoppel letter to confirm the information in it. Should the tenant refuse to sign, the seller is required to provide the buyer a seller’s affidavit to this effect, and the buyer is to 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 should he have further questions. In addition to the right to cancel under paragraph 6, Standard 18(D) also gives the buyer a right to terminate the contract no less than 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.
• Advanced Rent and Security Deposit(s)
It’s also very important that the seller is prepared to transfer advanced rental payments and/or security deposits at the closing as well – a requirement under Florida Statutes 83.49(7). If a seller is using a property management company to hold these types of funds, it’s best for the seller to communicate early and often with that company regarding obtaining the funds in time for the closing.
• Assignment of Lease
The seller’s final step is to deliver and assign all leases to the buyer who will assume the seller’s obligations under the lease, aka become 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) are aware of 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 Manager of Member Legal Communications for Florida Realtors
© 2017 Florida Realtors
Original — http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=357227