Tenant in Possession

Tenant in Possession

Tenant in Possession is a very important aspect of a transaction.

RIPA [Residential Income Purchase Agreement]

  1. If the Buyer intends to keep tenants in a residential income property, this is best covered in the RIPA [Residential Income Purchase Agreement].
    1. Seller needs to provide copies of all existing Lease(s) for each Tenant.
    2. Seller needs to provide Tenant Estoppel Agreement(s) for each Tenant.
    3. Seller & Buyer need to come to an agreement of how to handle any security deposits involved.
    4. Existing Lease(s) may be cancelled as of Close of Escrow and new Lease(s) executed between current Tenants and new Buyer.

RPA [Residential Purchase Agreement]

If Buyer is purchasing property as a primary residence and Tenant remains in Property after Close of Escrow.

  • Seller’s Agent must confirm that Seller has given proper notice to vacate to the existing Tenant.
  • Buyer’s Agent must also confirm that Seller has given proper notice to vacate to the existing Tenant.
  1. Tenant must be given proper legal notice to vacate.
    1. Notice to Vacate must be at least 60 days notice, in writing, delivered by Certified Mail / Return Receipt Requested.
      1. Verbal notice is not adequate.
      2. Email notice is not adequate.
      3. Notice by regular mail is not adequate.
      4. Section 8 Tenants must be given 90-days notice.
      5. Being told   “Don’t worry, they will be out” is NOT sufficient evidence.
  2. Note RPA paragraph 7.A. Seller shall disclose to Buyer if occupied by tenants or persons other than the Seller, and attach CAR form TOPA (Tenant Occupied Property Addendum).
  3. TOPA 1.B.(4) – Seller, within 5 (or ) ___ Days prior to Close Of Escrow, shall Deliver to Buyer the names of all adult occupants residing in the Property (other than Seller) that are known to Seller.
  4. If existing Tenant is staying only a few days, it is recommended not to use the CAR Form TOPA [Tenant Occupied Property Addendum], but to extend the Closing Date until the Seller has ensured the property is vacant. Otherwise, the Buyer would be responsible to make sure the Tenant vacates the Property.
    1. Typical scenario – Close of Escrow is on 27th of month and Tenant may remain until 30th.
      • Buyer is at great risk of Tenant not vacating on the 30th and then Buyer would have to assume the responsibility to make sure Tenant moves out before Buyer can move in.
      • Buyer can not move into property until Tenant moves out, so it is prudent to extend COE.
      • Extending Close of Escrow until Tenant moves out leaves the Seller with the responsibility to make sure Tenant is out before Buyer takes ownership.

Using RPA and the Buyer wants to keep Tenant in the Property

  1. If the Buyer intends to keep tenants in a residential income property and uses the RPA [instead of the RIPA which is recommended], the TOPA should be used to cover the switchover of each Tenant Lease, Estoppel and Security Deposit.  The TOPA serves as an addendum to the existing Rental Documents and Proposed Changes.
  2. TOPA includes the following regarding required Property Owner Disclosures:
  • Rental Service Agreements
  • Income and Expense Statements
  • Tenant Estoppel Agreements
  • Survey, Plans and Engineering Documents
  • Permits
  • Structural Modifications
  • Security Deposits

Also, remember that Tenants now need to sign the BBD, TFHD & RCJC.

in Buyers, Compliance, Listings