DEAR BOB: As a renter, I have lived for two years in one unit of a two-family house. On Nov. 1, 2006, we signed a new two-year lease. But on Nov. 7 the landlord called to tell us he will be selling the property. Does the new owner have to honor our lease? Or are we out of luck? We’ve gotten the runaround from both the landlord and the Realtor selling the property. They don’t seem to be showing the property to many investors, but instead mainly to families –Jessica J.
DEAR JESSICA: Presuming your two-year written lease has no escape clause for the landlord, the new buyer of your property must honor the terms of your lease.
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Just between us friends, your landlord must be very foolish to sign a new two-year lease shortly before he planned to sell the property. Few buyers will want to purchase that residence and have to wait two years to occupy it after your lease expires.
You might want to study the lease to see what it says about the landlord and/or listing agent showing the property to prospective buyers. If the lease doesn’t provide for showings, you don’t have to let prospective buyers inspect your unit.
If the lease provides for such showings, as most do, you must be given “reasonable notice.” That is presumed to be at least 24 hours’ advance notice. You might want to inform any prospective buyers that you have a two-year lease and you have no plans to move. For more details, please consult a local real estate attorney.
POSSIBLE PITFALLS OF BUYING AT A PROPERTY AUCTION
DEAR BOB: If I purchase a house at a public auction, am I liable for debts other than the mortgage on the property? If so, what is the best way to be assured of knowing what they are prior to the auction? –John F.
DEAR JOHN: Be sure to read the terms of the auction before bidding. Is it an auction for unpaid property taxes? Perhaps a mortgage foreclosure auction? Maybe a homeowner’s association assessment lien sale? Or an IRS income tax lien sale?
For example, if you buy at an auction for unpaid property taxes (not a tax certificate sale), all junior liens such as a mortgage, judgment lien against the former owner, and even homeowner association liens, are wiped out.
However, if you buy at an IRS income tax lien sale, you buy “subject to” all prior liens such as a mortgage and unpaid property taxes. Also, after an IRS tax sale, the taxpayer has a 120-day redemption period to reclaim his property by paying you the amount of your successful high bid for the property.
Most auctioneers will disclose the prior liens of which they are aware. To be certain, before the auction you can buy from most title insurance companies a “title guarantee report” (or similar name), which reports what encumbrances are recorded against the property title.
WHY PROSPECTIVE HEIR SHOULD NOT BE A PROPERTY CO-OWNER
DEAR BOB: You frequently mention the benefits of a revocable living trust such as probate court avoidance and having the named successor trustee manage the property if the original trustor becomes incapacitated by a stroke or Alzheimer’s. How does this work? Would it be wise for my mother to add my name to her living trust (which contains only her home) as a co-trustee in case she becomes incapacitated so I can manage the trust? – Pat S.
DEAR PAT: If you are the beneficiary of the living trust after your mother passes on, and if you are also named as the successor trustee, if she becomes incapacitated as determined by a physician, then you can manage her living trust assets.
Adding your name to the property title and to the living trust as a co-trustee could be a major mistake because you then might not receive the full stepped-up-basis-to-market-value inheritance benefit. For details, please consult a local estate-planning attorney.
The new Robert Bruss special report, “How to Buy Fixer-Upper Houses with Little or No Cash for Fun and Fortune,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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