One-year Lease Must be Honored in the Event of a Sale

Robert S. Griswold | Steven R. Kellman | Ted Smith
19-October-2003 Sunday

This column on issues confronting renters and landlords is written by Counselor of Real Estate and Certified Property Manager Robert Griswold, host of Real Estate Today! with Robert Griswold (10 a.m. Saturdays on News Radio 600 KOGO, or on the Internet at www.retodayradio.com), and by attorneys Steven R. Kellman, director of the Tenants' Legal Center, and Ted Smith, principal in a law firm representing landlords.

QUESTION: Prior to signing a one-year lease, we asked the agent and the homeowner if the owner planned to sell the property, and expressed our intent to want to stay in the home. The response was no. Two months later, the agent put the home up for sale. Are we obligated to stay in the lease, or can we break it since we were misled? If he sells prior to the expiration of the lease must we move?

ANSWER: Kellman: It is unfortunate that you may have been misled about the intended sale.

The owner will claim that he changed his mind after the lease was signed. What a surprise! Some owners will lease a home during a sale to keep money rolling in while others prefer the home vacant to effect a quicker sale.

Normally, a home can be shown only upon proper notice, during normal business hours, and the showings cannot be excessive. Of course, it is better to be up front about it so that the issues about showing the place can be handled before it becomes a problem.

You have a one-year lease. Unless the lease has a termination provision upon sale, you have the right to live there for that year whether the home is sold or not.

Generally, owners do not have to inform tenants about possible intentions to sell in the future. I think an owner should, however, disclose if the home was already sold and awaiting the close of escrow.

It may be difficult to break the lease due to the sale if no one disturbs you during the lease period. It could be different if there had been many buyers coming to see the place. If so, you could seek to break the lease based on a misrepresentation and the harm suffered due to the disturbance of your peace.

If you had been informed of an intended sale so soon into the lease period, you probably would not have leased the home or you may have required a different type of lease. Seek legal counsel to protect your rights before you take any action on that lease.

Tenants Rights Attorney Smith: Not so fast, Steve. You would have readers believe that landlords by nature are inherently greedy and enjoy misleading their tenants just for a lark.

I do not share Mr. Kellman's point of view. It is plausible that the landlord did not intend to mislead the resident but was well- intentioned when executing the one-year lease.

Later, the landlord determined to sell the property. Nothing in the lease legally prohibits the landlord from selling the property. With or without the sale, the lease carries through for the one- year term. The buyer will have to honor the lease with the tenant until the lease expires.

I further believe that a tenant would have a tough time convincing the court that a sale by itself constitutes a breach of the lease's quiet enjoyment provisions so as to justify a termination. Of course, it is always possible for the tenant to approach the seller or buyer to negotiate an agreement that would terminate the lease, and the resident would then have no further responsibility.

If the buyer bought the property to be owner-occupied, he or she might welcome the opportunity to break the lease. Otherwise, the lease stands on its own and all parties will be legally required to recognize it after the sale closes.

Question: We rented an apartment for four years before finding another unit nearby better suited to our needs. The manager of our former unit had told us we would get our full deposit of $900 ($500 general and $400 pet deposit) back if the kitchen and bathroom were cleaned and the rest of the apartment had sustained only reasonable wear and tear.

After we moved out, I went back and talked to the handyman who was renovating the unit. He recommended full refund of our deposit. Three weeks after we officially moved out a professional property management company contacted us saying they had assumed responsibility for collecting money we owed the apartment owner for damages and cleaning fees, which was greater than our deposit.

Now, needless to say, the original manager and handyman are no longer employed there, and the new management company is ignoring our requests for resolution. What can we do?

Tenants Rights Attorney Smith: I encourage my property management clients to make management changes as smoothly as possible. It seems to me that you are entitled to return of your security deposit.

A change in management company will not alter this.

The management company is simply a new agent for the same owner. You left the premises in good condition and repair, which was acknowledged by the handyman.

Under these circumstances, there is no reason why you should not have gotten your entire deposit back. If your deposit is not returned, you will have to take the landlord and the property management company to Small Claims Court.

The landlord and the old property management company are both responsible to you for the deposit. You should name both of them as co-defendants, then they can sort it out between the two of them as to who should pay the deposit to you.

IF YOU'RE A TENANT OR LANDLORD, the authors stand ready to answer your questions in this column, although letters cannot be answered individually. Write them at: Rental Roundtable, Homes Section, San Diego Union-Tribune, P.O. Box 120191, San Diego, CA, 92112-0191. Or you may e-mail them at rgriswold.sdut@retodayradio.com

Copyright Union-Tribune Publishing Co.

Back to 2003 Rental Roundtable Index

Robert Griswold and the Real Estate Today! radio show strongly support the intent and the letter of all federal and state fair housing laws. As a reminder to all owners and managers of real estate, note that all real estate advertised is subject to the Federal Fair Housing Act, which makes it illegal to advertise "any preference, limitation, discrimination because of race, color, national origin or ancestry, religion, sex, physical disability, or familial status, or intention to make any such preference, limitation or discrimination." Additional state and/or local fair housing laws may also apply. Be sure to inform all persons that all dwellings offered or advertised are on an equal opportunity basis.

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Revised and Updated - Wednesday, April 26, 2006

Robert S. Griswold, CRE, CPM, CCIM, PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
Email: rgriswold.ret@retodayradio.com