Existing Leases

Wondering if anyone has had any experience with type of situation. Just purchased a 3 unit with existing tenants. Here are my questions:

Do I have to honor the existing leases until they expire then write new?
Doesn’t the former owner by law have to turn over all security deposits to me?

House is located in Balto City.

Do I need a lawyer? Previous owner is refusing to send security deposits.

I don’t know what state Balto City is in but in Ohio you have to honor the old leases. I’m not sure about deposits but it would seem to me that they should be included in the consideration of the contract.

In most (if not all) states you have to honor the existing leases.

In regards to the security deposit it depends on your agreement, read it…what does it say.

I am in Baltimore, MD. The house was auctioned and sold as is by the owner. He left settlement before I arrived and faxed copies of the leases which I can barely read, left me no keys and is refusing to give me the total security deposits collected according to the lease. He states that the one tenant owes back rent and I should collect it from that. Of course the tenant says they don’t owe any back rent and I feel it is not my responsibility to collect back rents to cover a security deposit. The title company didn’t include anything about security deposits on the settlement sheet and let him walk out with his check before I arrived. When I questioned it they said work directly with him to get the security deposits. Now here I sit with no keys, no security deposits and faxed copies of 3 leases. I shouldn’t have settled but really didn’t think it would be a problem getting him to turn the security deposits over. I was wrong and not everyone including fellow investors will do the right thing. Guess I was wondering if I have any legal grounds.

Look into Maryland law and see how it addresses security deposits. These are sticky issues and most states seem to have laws specifically addressing their disposition. good luck

got a good lawyer?

In AZ you have to honor the existing leases. However what we do during escrow is request to review the existing leases. If they are not consistent with AZ Residential Tenancy Laws and in our opinion ‘unenforceable’, we ask the seller to re-negotiate the leases with the tenants using our lease documents before we take ownership of the property.

So far, its worked out great and we never look like the ‘bad guy’ in the process with the tenants.


You would have to honor the existing leases in most juriisdictions that I know of, including NY State, where I do business. Think of it this way. If leases are easily voided with a simple change of ownership, I can easily cancel any lease and evict any tenant at anytime by “quit claiming” the property to my brother, then quitclaiming it back later. A relative used to do that anytime a creditor threatens him. No neeed for landlord/tenant court.

The only exception is when a leinholder forecloses, and the mortgqge document calles for subordiantion of leases, and this is allowed under state law.

From what you said, appears there is no “estoppel” letter from the tenants before closing outlining:

  • Back rents due from the tenants.
  • Rental amounts.
  • Security deposits

If I were you, get a letter from the seller confirming what he said, the deposit was applied to the back rents. Then, send a letter to each tenant saying there’s no deposits as it was applied to the back rents, then asking for deposits.

And if the tenants balk at this, you might want to proceed to evictions. It is messy.

Seems to me no attorney was involved with the purchase either.

A friend of ours purchased a large number of single family homes at the peak of the market with little or no money down (following some really bad advice from a real estate broker). He just contacted me to say that his is foreclosing on all properties, but that the tenants in the houses are threatening to sue him.

I suspect they are being faced with the possibility of an early eviction if the bank takes over the properties, and are holding him responsible. Do you think they have a case against him under these conditions?


With a subordination clause in the mortgage, and one in the standard “Real Estate Board of NY” lease which I use, leases are voided in the event of foreclosure.

Yes, if the landlord collected the rent, and failed to pay the mortgages leading to foreclosure, and the tenant gets evicted as a result of a voided lease, the tenant can sue for damgages such as moving expenses among other things. The landlord can be charged with the crime of “equity skimming”, a felony.

In my lease, I have an addendum that states:

“if the tenant is evicted due to reaons beyond the landlord’s control, the tenant’s damages, if any, shall be limited to actual moving expenses, or one month’s rent, whichever is less”.

This would apply in cases of a fire, floods, foreclosure, actions by municipal authorities on health and safety issues etc…

Keep in mind the recent $54 million lawsuit over a pair of lost pants where the plaintiff, is a judge himself sued a dry cleaner. Granted, it was dismissed, but it cost the defenant a bundle in legal fees, I don’t need a $54 million lawsuit where I have to pay for therapy seesions, gas and auto expensives because they have to move further away etc., for the next 20 years