Acquisition of a property occupied by a tenant

Advantages of buying a property with a tenant

Buying a property with a tenant can offer several advantages. Firstly, the tenant can guarantee a regular income flow from the property. Secondly, the tenant can be considered an asset since they already occupy the property, which means the new buyer does not have to worry about finding a tenant and establishing a new rental agreement.

However, buying a property with a tenant can also present challenges for the buyer, especially with regards to the relationship with the tenant, the obligations of the landlord, the duration of the rental agreement, and unpaid rents and charges.

 

Obligations of the landlord

When a property is bought with a tenant, the new buyer becomes the new landlord, which implies important obligations. Firstly, the new landlord must comply with the terms of the current rental agreement. This means that they must respect the rent conditions, the rental charges, and the notice periods.

The landlord is also responsible for the maintenance of the property, repairs, and necessary works. In case of any problem with the property, the tenant can contact the landlord to report a problem or a repair that needs to be carried out.

In addition, the new landlord must provide a rental deposit to the tenant in accordance with the law. The deposit is a financial guarantee intended to protect the landlord against any potential damage caused by the tenant to the property.

 

Relationship with the tenant

It is important for the new buyer to maintain a good relationship with the tenant. The tenant may have questions about the change of ownership or the duration of the new rental agreement. Therefore, it is recommended to meet the tenant as soon as possible after the purchase of the property to explain the situation and answer any questions they may have.

 

Duration of the rental agreement

The current rental agreement must be respected by the new buyer. It is important to check the duration of the rental agreement and the termination terms before buying the property. If the rental agreement is of a short duration, the buyer may consider proposing a new rental agreement upon the expiration of the current one.

It is also important to check whether the tenant has the right to renew the rental agreement in case of extension. If the tenant can renew the agreement, this may have an impact on the buyer’s future plans for the property.

 

Unpaid rents and charges

It is important to check whether rents and rental charges have been paid regularly by the tenant before buying the property. The buyer must ensure that all rents and charges have been paid in accordance with the current rental agreement.

If the tenant has arrears of rent or rental charges, the buyer must discuss with the tenant to ensure that these arrears will be repaid and discuss the repayment terms.

In case of non-payment of rents or rental charges, the buyer can initiate a procedure to recover the unpaid rents or charges, or to terminate the rental agreement in case of the tenant’s failure to comply with their obligations.

 

Tenant’s right of first refusal

If a landlord decides to sell a property that is currently rented, he or she must sometimes respect the tenant’s right of pre-emption. This right is set out in the law of 31 December 1975 and the law of 6 July 1989. If a landlord wishes to sell a dwelling that is currently rented, he must first offer the tenant the opportunity to buy the dwelling before offering the sale to any other potential buyer. The tenant then has two months to accept the offer and exercise his right of first refusal.

The right of pre-emption applies in four situations:

• in case of sale of the dwelling following the division or subdivision of all or part of the building
• in the event of the sale of the property when the lease has expired and the lessor has given notice to the lessee
• in the event of a block sale of a building with more than 5 units (vacant or occupied)
• in case of sale of more than 10 dwellings with the collective agreement of the legal owners

The presence of a tenant in the context of a commercial lease

With the Pinel law of 18 June 2014, the tenant of a commercial premises benefits from a right of pre-emption which allows him to become a buyer. He has a period of one month to inform his landlord. The first step is for the landlord to inform the tenant of his intention to sell, specifying the price and conditions of the planned sale.

The French Minister of the Economy has clarified that the right of preference must be interpreted strictly. Thus, only the holder of the lease for the commercial or craft premises can benefit from it. If the tenant is a company, the preferential right belongs to the company and cannot be used individually by a shareholder or a manager. Subtenants, precarious occupants or usufructuaries are not eligible for this right.

 

Conclusion

Buying a property that is already occupied by a tenant can be a good opportunity for real estate investors, but it also involves important legal and financial considerations. By exercising due diligence and seeking the advice of a lawyer, buying a property that is already occupied by a tenant can be a wise and profitable decision for real estate investors.