The buyer’s contingency asks for me to terminate the tenant’s contract at closing. I am unsure what to do. Any advice?

December 25, 2018

Have a plan to propose when you communicate with the affected parties. Here is one example of a course of action to consider in keeping everyone happy. Read on…

Reader Question: I need negotiation advice. ​I own a duplex and occupy one of the units. I have accepted an offer from a buyer for the property. My tenant’s lease extends eight months past the date of closing. I have negotiated a rent back to stay in my unit until the end of my current tenant’s lease. The buyer’s contingency asks for me to terminate the tenant’s contract at closing. He wants a family member to move in. I am not sure if my tenant will be willing to relocate early. If the tenant refuses to vacate I am also not sure if the buyer will balk. Also, does my tenant’s lease transfer to the new owner at closing? Any advice?

​Monty’s Answer: There is considerable backstory absent from your letter. I will assume you have no agent, or you are not comfortable with their advice. Another assumption is that you like the offered price and you want the sale to go through. It is a good idea to have a plan to propose when you communicate with the other parties. Here is one example of a course of action to consider in keeping everyone involved happy.

  1. Ask the buyer if they are agreeable to having their family member move into your unit and you vacate the building instead of involving the tenant. This solution is the simplest and does not include the tenant. Is your eight-month occupancy more critical than preserving the transaction?
  2. Is there a reason the buyer wants you to remove the tenant? Delinquent rent, poor housekeeping, or loud music could cause the buyer to want you to deal with them. Go to the tenant and ask them if they will relocate voluntarily. Be prepared to pay for the request. Moving is an inconvenience for most people, and if they are doing something for you, albeit they will have to move soon, they may ask you to reciprocate. How much to offer them can vary depending on your resolve to eliminate the obstacle.
  3. If you and your tenant cannot come to terms, consider going back to the buyer and learn how they react to the news. If they want to cancel, you could offer them money to assume the responsibility of removing the tenant.

The new owner is responsible for all the expenses and is entitled to all the income. Run the paperwork by your attorney before signing.