Tenant Wants to Buy a House

[oceanmd]

Hello, everybody,

I need some explanation of this tenant-landlord situation.

We have been renting the house out through the management company for 10 year to the same tenant. Now we want to sell the house and informed the management company that we would like to terminate the Owner Agreement. According to the agreement, it will be terminated after 60 days.

After the management company informed the tenant that the owner would like to sell the house, the tenant called me, the owner directly, and said that he would like to buy the house after 60 days.

I, the owner, informed the management company about it, and they replied that they are due a commission.

Did anybody experience a similar situation? And if you did, what solution satisfied all parties?

 

[surprising]

I wouldn't give the management company anything. They manage it, they are not your realtor. When you sell, they're job is done.

 

[OldShooter]

First, read the contract. Carefully. Then talk to a real estate lawyer

 

[aja8888]

First, read the contract. Carefully. Then talk to a real estate lawyer

^^^^^ THIS!

 

[oceanmd]

I just read the contract. What can and cannot we do under this contract?

SALE: Charge a sales fee equal to 6percent, if the Property is sold during the lease term to a purchaser procured by Agent. Further, for a period of 90 days following the expiration of the lease term, if the Owner lists the Property for sale, Owner agrees that it shall exclusively list the Property with Agent for sale, upon execution of a Listing Agreement, at the commision rate of 6 percent of the sales price of the Property. This provision does not grant the Tenant any right to purchase the Property, nor does it authorize the Agent to offer Property for sale unless until a Listing Agreement is executed.

 

[OldShooter]

I just read the contract. What can and cannot we do under this contract?

Your lawyer can tell you. One thing to ask is whether Agent procured the current tenant and can prove it. Another is possibly letting the clock run out on the 90 days, possibly even by cutting the Agent out of the deal and renting to the current tenant directly for the 90 days. Or just leaving the property vacant for the 90 days. IANAL, however. You need to hire one

 

[oceanmd]

This is a good idea. The Agent Agreement will end in 60 days. If we wait for 90 days after terminating the Agent Agreement, can we sell to the tenant after 60 days + 90 days?

 

[Lorenzo]

I just read the contract. What can and cannot we do under this contract?

SALE: Charge a sales fee equal to 6percent, if the Property is sold during the lease term to a purchaser procured by Agent.

Your lawyer could attempt to argue that your tenant was not a purchaser "procured by" the management company. But the management company did apparently inform the tenant that you were selling, so they have a reasonable argument they procured the buyer.

 

[OldShooter]

This is a good idea. The Agent Agreement will end in 60 days. If we wait for 90 days after terminating the Agent Agreement, can we sell to the tenant after 60 days + 90 days?

That's the way I'd read it. But ... this is important ... IANAL.

 

[SnowballCamper]

Find out if your management company is a member of the NAR before talking to the lawyer, as the recent ruling could have an effect, maybe https://www.cnn.com/2024/03/15/economy/nar-realtor-commissions-settlement/index.html

 

[Lorenzo]

I may have missed it, but when does the lease term expire? When I used a management company, they would rent the property for terms of no less than one year, even to the same tenant renewing the lease after one year.

 

[oceanmd]

I may have missed it, but when does the lease term expire? When I used a management company, they would rent the property for terms of no less than one year, even to the same tenant renewing the lease after one year.

The tenant is renting now on a month-to-month basis. The lease will end in 60 days.

 

[oceanmd]

Find out if your management company is a member of the NAR before talking to the lawyer, as the recent ruling could have an effect, maybe https://www.cnn.com/2024/03/15/economy/nar-realtor-commissions-settlement/index.html

Yes, they are. What exactly does it mean?

 

[pb4uski]

I just read the contract. What can and cannot we do under this contract?

SALE: Charge a sales fee equal to 6percent, if the Property is sold during the lease term to a purchaser procured by Agent. Further, for a period of 90 days following the expiration of the lease term, if the Owner lists the Property for sale, Owner agrees that it shall exclusively list the Property with Agent for sale, upon execution of a Listing Agreement, at the commision rate of 6 percent of the sales price of the Property. This provision does not grant the Tenant any right to purchase the Property, nor does it authorize the Agent to offer Property for sale unless until a Listing Agreement is executed.

Check with a lawyer, but it sounds like the management company is just trying to shake you down on very dubious grounds.

Was the tenant renting the property when the management company got involved or did the management company find the tenant for you? If the former, then the purchaser wasn't procured by the management company. Second, the last sentence refers to a listing agreement and in this case there is no listing agreement.

Worst case, cut the manager loose asap, keep renting to the tenant and after 6 months or so do a FSBO sale to the tenant. At that point, the management company would need to decide whether they think that they have a strong enough case to sue you for a commission and I doubt that they would.

 

[pb4uski]

Your lawyer could attempt to argue that your tenant was not a purchaser "procured by" the management company. But the management company did apparently inform the tenant that you were selling, so they have a reasonable argument they procured the buyer.

Perhaps, but they notified the tenant in their role as the property manager and have no listing agreement with the OP. Also, they didn't have a listing agreement with the OP at that time so they had no authority to offer the property to the tenant so they couldn't. If the tenant was an existing tenant when the property was put to the management company then they didn't procure anything. Finally, the tenant reached out to the owner directly after the manager notified them that the property was going to be sold in their role as property manager... the property manager hasn't earned squat.

 

[oceanmd]

Check with a lawyer, but it sounds like the management company is just trying to shake you down on very dubious grounds.

Was the tenant renting the property when the management company got involved or did the management company find the tenant for you? If the former, then the purchaser wasn't procured by the management company. Second, the last sentence refers to a listing agreement and in this case there is no listing agreement.

Worst case, cut the manager loose asap, keep renting to the tenant and after 6 months or sold do a FSBO sale to the tenant. At that point, the management company would need to decide whether they have a strong enough case to sue you for a commission and I doubt that they would.

The management company found this tenant. The agreement was signed 15 years ago.

 

[Texas Proud]

You should also look to see what they have in there on renting your property out to an existing tenant... IOW, getting a mgmt company that gets a tenant and then firing them.. probably language in there..

 

[Kings over Queens]

The management company found this tenant. The agreement was signed 15 years ago.

At first blush, given what I've read, the management company has a right to the commission.

they found the tenant and the tenant expressed an interest in buying the property during the lease term.

this likely can be negated by not doing anything official until enough time has expired.

The best advice came early in the thread by old shooter...seek advice from your lawyer. we can banter around all day and nobody here is going to solve it.

 

[Lorenzo]

Perhaps, but they notified the tenant in their role as the property manager and have no listing agreement with the OP. Also, they didn't have a listing agreement with the OP at that time so they had no authority to offer the property to the tenant so they couldn't. If the tenant was an existing tenant when the property was put to the management company then they didn't procure anything. Finally, the tenant reached out to the owner directly after the manager notified them that the property was going to be sold in their role as property manager... the property manager hasn't earned squat.

Yep, that is the other side of the argument. Also, I think their choice of the word "procure" rather than something like "find" was clever. Notifying could arguably be procuring.

 

[OldShooter]

Yes, they are. What exactly does it mean?

To you right now it doesn't mean anything. That's why you need to hire that lawyer. They can figure out if it is germane and how to use the information. I have looked at that agreement though casually because we did pay a commission during the rebate period but how it might apply in your case is not clear to me.

 

[OldShooter]

Remember, too, that the management company has years of experience trying to enforce its claims to sale commissions. There may even be some case law for or against them. Hire that lawyer, ideally one that has actual experience dealing with this company.

 

[wrigley]

I wouldn't give the management company anything. They manage it, they are not your realtor. When you sell, they're job is done.

I urge you to read the contract thoroughly!

 

[ponyboy]

Hire a lawyer but it seems like you can wait the 90 days and tell the company pound sand. Just keep renting to the tenant after you ditch that company, then sell when enough time has passed.

 

[oceanmd]

Thank you, everybody. We definitely will consult the lawyer to make sure we are doing the right thing.

 

[38Chevy454]

Just a question, I agree best to sell FSBO to the tenant if you can, but if you didn't have a tenant that wanted to buy and decided to get out would you then list with a realtor and pay the 6% sale commission?

Or related, would you sell FSBO to the tenant for a lower price if you did not have to pay 6%? That may benefit the tenant and may benefit you if the price was say 3% lower and no commission. That savings to the tenant may be your carrot to rent for the next 60 + 90 days time limit if the previous replies are accurate?