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In the past I have used the phrase “Possession is nine tenths of the law.” Whenever you purchase a property that is occupied, that phrase usually kicks in. Under most circumstances your having purchased occupied property does not give you the right to make the occupants vacate the property. On those rare occasions when we sell rental property, there is usually a tenant in the property. If the tenant is satisfying all the terms of his lease, the new owner has to respect and abide by all terms of the current lease that are in compliance with the law.....even if he does not like them.

If the new owner wishes to modify the lease he can only do so when the term of the current lease is about to be up or if the tenant is on a month-to-month lease. Most leases allow a tenant to remain in possession of a property, on a month-to-month basis, after the term has expired. A benefit for the owner of the property, where the lease is month-to-month, is that, by giving the tenant notice no later than the first day of the next month, the owner may change the terms of the lease, including raising the rent. The owner may also tell the tenant he must vacate the property no later than the last day of that month. Any notices given to a tenant after the first day of the month typically allow the tenant to remain in the property until the end of the next month. By the same token, if the tenant gives move-out notice after the first day of the month, he is required to remain the entire next month and pay the full month’s rent, even if he leaves a few days early.

Some leases do allow the landlord or tenant to give a 30-day move-out notice after the initial term of the lease has expired, e.g., the tenant, on the twelfth day of the month could state that he will be out no later than the eleventh day of the next month. This is not a good practice, but it can be stated that way in the lease. If I am selling an occupied rental, I will typically place in the “SPECIAL PROVISIONS” section of the contract that the buyer buys subject to the rights of parties in possession. This protects me. There is also other language in a Texas contract that does address tenants and the delivery of a copy of the lease to the purchaser.

On rare occasions, a buyer may be buying an owner’s home that the owner has leased to a third party. The forms that the state has provided us do not address that situation. Obviously, the buyer wants to move into the home as soon as possible. The only thing the buyer can do is get with the tenant and give him written notice that the tenant’s lease is not being renewed and that the tenant must vacate the property at the end of the lease term. Because the state does not provide us a form that deals with individuals in possession of a property that the buyer wants to occupy, I had to pay an attorney to prepare a form (an addendum to the contract) that states that the buyer is buying a property occupied by the seller’s tenant.

If a buyer is buying a residence that the seller is going to occupy after closing, there is a form called “Seller’s Temporary Residential Lease” that the state provides that the two parties sign. In this kind of situation, the seller becomes a tenant and the buyer a landlord. This form is only good for 90 days. If the seller is going to occupy the property for more than 90 days then another more traditional lease form has to be used.

As usual, the devil is in the details. If you are buying occupied property be sure you have a solid grasp of how and when your possessory rights begin.

Mike McEwen is a real estate broker with 32 years in the business.

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