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RichN · Sep 28, 2011, 12:06 AM

Hi! We've put in an offer on a short sale property as a rental investment, and am currently waiting on bank approval.

There currently are tenants in the house six months into a one year lease. I actually consider this a good thing - it means no downtime in income while looking for a tenant.

The rent is a bit under market rate, and includes lawn maintenance. I was hoping to increase the rent a bit, and remove the lawn care inclusion, but from searching on various websites it appears I'd be on the hook to honor the existing lease to the end.

Could anyone refer me to the actual California statute that discusses tenant rights during short sales? Also, what are the obligations on the current owner regarding the tenant's security deposit?

Thanks!

ScottGem · Sep 28, 2011, 03:26 AM

I'm not sure why you even question this. A lease is a contract. When you buy a property, short sale or otherwise, you take on all the obligations of the seller. That's standard contract law.

The only difference between a short sale and any other sale is that the lienholder agrees to accept less than the full balance of the loan on the property. The buyer's obligations are not affected by it.

You have to honor the current lease, no question about it. The owner is required to turn over the security deposit, this is done at the closing. However, it may be a matter of negotiation.