Rights of the New Property Owner Vs. Tenants
The rights of tenants and landlords don't change when a property is sold. However, the actions of the new owner toward the tenants may not be the same as the previous owner's. The specific changes that might take place depend on whether there was a written lease prior to the property transfer, the lease terms themselves and whether there are other laws affecting the tenancy, such as local rent control or the 2009 tenant-related foreclosure law.
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Month-to-Month Tenancy
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If there's no written lease or the lease term has expired, the tenants are said to be on a month-to-month tenancy. In most locations, under most circumstances, this allows any landlord---a new one or an old one---to evict tenants with a 30- or 60-day notice or raise the rent with a 30-day notice. Most other circumstances of the tenancy, such as parking privileges, can also be changed with a 30-day notice.
Written Lease
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If there's a written lease when a property is sold, it remains in effect. If the lease term hasn't expired, the landlord can't send an eviction notice without just cause (such as failure to pay rent) or raise the rent. For instance, if the tenancy is one month into a 12-month term when the property is sold, the new landlord can't raise the rent or evict a tenant for at least 11 months without just cause.
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Rent Control
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Many cities on the East and West coasts are subject to rent-control laws. Rent control not only limits how often and/or how much a landlord can raise rent---it also places restrictions on evictions. (If this weren't the case, landlords could get around rent-control laws by evicting the tenants whose rent they couldn't raise.) If a property is subject to rent control, it doesn't matter whether there's a lease or that the property has been sold: The provisions of the rent-control laws apply in all circumstances.
Foreclosure Law
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Previously, in many parts of the country, if a property was foreclosed upon and the mortgage had been recorded prior to the lease being signed, then the foreclosure trumped the lease. In May 2009, President Obama signed the Protecting Tenants at Foreclosure Act. It provides for survival of the lease in a foreclosure and also requires a 90-day notice to evict tenants whose leases have expired or those who had no lease.
Considerations
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A tenant who knows the landlord is selling the property should ask for a written lease before the building is sold. Even if the lease comes with a higher monthly rent, the tenant would be guaranteed protection from eviction and rent raises for the term of the lease. A prospective property buyer should ask to see all leases in effect prior to making a written offer on the property and should include as a condition of sale that no tenants on month-to-month tenancy be given leases.
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References
Resources
- Photo Credit signing a contract image by William Berry from Fotolia.com
