Posted 18 March 2010 - 02:45 PM
Sorry about the length of this post but we've just gone through a short sale with tenants from the buyer's side and this is all fresh in my mind from just this month. We're in San Jose so I can tell you my experience but you'll have to verify the Civil Code in your city.
The other reply is a bit flippant and vague. The truth is that all of
these points are covered in your local Civil Code for the city under
whose jurisdiction your house falls. I looked up the civil code on the SJ
city web page, and it took about 20 minutes of really boring skimming and text searching,
but I found the clause that governed the notice.
In San Jose, YOU CANNOT COMPEL RENTERS TO MOVE before the end of their lease in the case of a Short Sale. In San Jose, the only way you can compel the renters to move out is if you're the original owner and leaser and you're moving back into the residence as your primary residence. Even then, if memory serves, in
San Jose, if they signed a lease of at least a year's term, then you
have to give them 60 days notice regardless of how long they've been
there. After the term of the lease or if by agreement you convert the
lease to month-to-month, the required notice converts to 30 days.
But again, in San Jose, before the end of the term of the lease you can only do this if you're moving back in.
You need to find out the specifics for your city, and my point is you may be able to find these online.
If you amend the lease to convert it to a month-to-month at this time, you are not dissolving the lease, you are just changing its term. The rest of the conditions of the lease are still in force. After conversion to month-to-month, you can give them 30 days' notice to vacate (though I think it may be a minimum of 30 days' notice from the next pay period). Each time they pay you rent without being served notice to vacate, it extends the lease by another month.
You should be able to put a For Sale sign on the property with some minimal
notice. This I believe should also be covered in Civil Code. You can
do text searches if your city has the Civil Code online and probably
find it pretty quickly. I think there isn't much notice for a For Sale
sign, as long as you abide by the terms of the lease governing coming
onto the property, meaning giving proper notice to the tenants (usually
24 hrs notice, not just the day before, but actually > 24 actual
hours) before putting up a sign or showing the property.
You can still show and sell the property, but the buyers will have to take on the tenants until the end of their lease. In our case, we convinced the tenants to move out 60 days after close of escrow, so we could still purchase the house under FHA rules. They were nice enough to agree, because that date fell just after exams. And they got a move-out credit for terminating internet and cable-tv services early. But we were lucky, because our legal advisers said that if they hadn't voluntarily agreed, there would have been nothing we or the current owner could do to coerce them to leave before the end of the term of the lease, which was 120 days after close of escrow, and FHA would have only tolerated 60 days of tenancy.
I believe you don't have to make any special contract to put a lockbox on the property, as long as you don't detract from the tenants rights to enjoy the property without being unduly bothered. To satisfy this requirement, which is probably in civil code as well as in the lease and is inalienable by contract if in civil code (as it is in San Jose), I believe you just have to respect the 24 hour notification rules. And you really have to respect it. You can't leave a message on an answering machine unless you later get an acknowledgement. The tenants are supposed to accept your entry to the property and the premises; if they deny you access even with 24 hrs notice, you have to look up your legal remedy in your city. Don't force yourself on the tenants, they have a lot more civil rights in this situation than you do. Don't go on hearsay advice if not from a lawyer. Read through the your city's Civil Code governing these situations as I recommended earlier. It's not too hard.
That being said, you probably have 24-hr-notice language in your lease, and if you're nice and respectful of your tenants, and seek their cooperation and make reasonable arrangements to satisfy their wishes to not be unduly bothered, they'll probably be happy to cooperate if they're normal people. Use common sense and be nice:
- Make sure you're respectful and seek the tenants' approval on every action.
- Make sure all your agents give actual 24-hour notice to the tenants and get their approval before approaching the property even from the outside.
- Ask them what other rules or arrangements they would like you to make that would make their lives easier during the period that you're showing the property.
-Don't hang the lockbox on their doorknob where it gets
in their way every day. Put it somewhere else on the property that
doesn't inconvenience them.
- Ask the tenants to notify you immediately if an agent vilolates their notice rules or other agreed-upon rules between you and the tenants. You can then reprimand the agent or deny them future access if they're unrepentant or untrustworthy, and the tenants maintain their trust in you.
But before you take the big steps (for sale sign, lockbox, showings), I can't emphasize enough that you should read your city's Civil Code on the subject or get advice from a real-estate lawyer. Your selling agent should have access to one and should give you at least minimal help here because they're going to make 3% on this deal which in California is usually a lot of money.
Don't go by hearsay because when you alienate your tenants, you're in a world of hurt.