June 15th, 2011 at 11:32 pm
While presenting a potential tenant I’ve found a property available that was in KB 13 and had an NOD (both disclosed by Owner and Agent).The potential tenant asked me what could be the potential downside to this situation if they were to rent the place. The place is a Condo and the building is located in Los Angeles. More specifically, the tenant wanted to know if the property were to be taken back by the lender or sold in auction, does the new owner owes the completion of the lease terms to the tenant? And how about the deposit if the deposit is held in Escrow?
Answer:
Do not place your client/tenant in a condo that is at risk of foreclosure WITHOUT obtaining written disclosures and acknowledgement by the tenant of the perils of renting a distressed property. There are many reasons a tenant should not enter into a lease such as this one, including but not limited to: (1) When the Bank obtains title, the lease is no longer enforceable, although the Bank must give the tenant notice (typically 90 days to vacate) they are not required to honor the lease, (2) The tenant’s deposit is almost always at risk, (3) The tenant may be required through an Assignment of Rent to pay rent directly to the new owner/Bank, and the annoyance of the posting of notices on the property and multiple solicitations from vendors, credit companies etc… Bottom line, the tenant should strongly be discouraged from entering into a lease on a distressed property.
Thank you George.
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