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Does the new owner of a foreclosed single family home in San Francisco need to honor the option to buy in the lease?

San Francisco, CA |

I am interested in buying a Foreclosed single family home (built in 1927) in San Francisco, there is a tenant with a 3 years lease signed right before foreclosure. The lease terminates in 7/31/2014, it has terms/conditions: "Tenant can sublease the premises to others...Tenant has the right to purchase the property for X amount during the duration of the lease" Question 1: Do I have to honor this option to buy as a new owner? I intend to move into the property after the purchase. Question 2: Can I use Owner Move In Eviction on the tenant or the people they sublease to. Thanks in advance.

Attorney Answers 2

Posted

If the option is recorded in the chain of title you buy subject to it. If not, you may still buy subject to it if you buy with notice of it which you obviously have. You need to hire a real estate attorney and lay out all the facts and documents. You will get a legal opinion upon which you can rely which this is not.

As to your second question- I cannot quite figure out what you are asking. If there is a valid lease, I do not think that merely purchasing the property enables you to move in and evict the tenants if there is a valid lease.

If your purchase and sale agreement requires the seller to give you possession as well as title, do not close until all tenants have been removed. Let the seller deal with it. Your agreement SHOULD require seller to deliver possession as well as title.

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Posted

There is a distinction between you purchasing at a trustee's sale to become the new owner, and you purchasing from the bank or other new owner following a trustee's sale.

If you were planning to purchase at the trustee's sale, then the Protecting Tenants at Foreclosure Act of 2009 (PTFA), part of the Helping Families Save Their Homes Act of 2009 (Public Law 111-22, approved May 20, 2009), applies. It requires that tenants residing in foreclosed residential properties be provided notice to vacate at least 90 days in advance of the date by which the immediate successor, generally, the purchaser, seeks to have the tenants vacate the property. Except where the purchaser will occupy the property as the purchaser's primary residence, the terms of any bona fide lease also remain in effect.

Here, however, it sounds like you are planning to purchase from a bank or other third party owner. If so, then the existing 3 year lease remains in effect, and you would have to honor the lease including the right to sublease and the option to purchase. Therefore, this property would not be suitable for you if you planned to occupy it after the purchase.

Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice for a particular case. This Avvo.com posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult with your own attorney.

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