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Q. After getting married last month, I moved into my wife’s apartment though I still own my old condo. I had been thinking about selling it, but I recently found a possible tenant whose rent would easily cover my carrying costs.
The fact that I could immediately stop worrying about the extra mortgage payment and generate a little bit of monthly cash flow is definitely appealing.
The tenant has insisted that they need a two-year lease which makes me nervous because I might want to sell before that. What can I do?
A. You have a couple of options. To begin with, just because an apartment is leased, an owner’s right to sell the property is in no way impaired. However, the buyer will inherit your tenant pursuant to the lease that is in place at the time of the sale.
Once that lease terminates, the buyer can decide to renew it, find a new tenant, or take possession themselves.
That said, selling an occupied apartment will limit your market to buyers who don't need to move in immediately and whose mortgage lenders don't object.
Alternatively, you can negotiate a right of early termination with your prospective tenant. That would enable you to end the lease early upon the occurrence of certain events.
For example, the lease could state that if you find a buyer, you have the right to terminate the lease upon 60 days notice. It’s not uncommon for a landlord to offer something extra to a tenant for agreeing to such a provision, such as free rent for the last 60 days. This way, you can accommodate your prospective tenant’s request for a two year lease but preserve your ability to sell the apartment and deliver it vacant to a new buyer.
Keep in mind that selling an apartment with a tenant in place has a unique set of challenges. Tenants may or may not accommodate requests for private appointments or open houses. Also, they will not have the same incentive you do to keep the apartment in showing condition. There’s nothing worse than bringing in a potential buyer only to find an apartment that looks like a bomb went off.
While there is little you can do about their tidiness and taste in interior design, your lease should address each parties respective rights and obligations with regard to showing requests.
Mike Akerly is a New York City real estate attorney, landlord, and real estate broker. He is also the publisher of the Greenwich Village blog VillageConfidential.
The information provided here is for informational purposes only. It should not be construed as legal advice and cannot substitute for the advice of a licensed professional applying their specialized knowledge to the particular circumstances of your case.