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Selling a Tenant Occupied Property - Rights and Obligations of Parties involved

29 Nov 2019

Legal, by Broosco Team

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What are the main things you should check when buying a tenant occupied property. What are the rights and obligations of all parties involved (seller, buyer, tenant). What is provided by the Greek Law.

The property market in Greece has begun to recover and the reasonably founded expectations for further growth in the near future make the property an attractive investment option. In addition to buyers looking for houses that meet their housing needs, there are more and more property buyers exploring the housing market in order to invest in real estate. Particularly in Chania the demand for houses within the city limits has begun to rise sharply due to buyers' belief that prices will begin to rise.

But what happens if the property for sale is leased?

How is the process of selling a property affected by the existing lease agreement?

What are the rights and obligations of the parties involved (seller, buyer, tenant)?


According to the current legislation (Law 2235/1994) the leasing contract of the property is not affected by the change of ownership status in case of sale. As a result, the new owner is bound by the existing lease and is required to comply with all the terms and conditions included. In case that the property is the tenant's main residence (the most common case), the legal term of the lease is at least three years even if the contract signed is shorter, e.g. One year. It should be noted that older provisions that allowed the owner to terminate the contract in order to use the property himself, no longer apply.

What should you look out for depending on your property?

I'm a property owner-seller


It is very important to be aware of the obligations arising from the lease agreement you have signed with your tenant and the specific provisions of the law referring to the lease, especially if the lease is the tenant's main residence. Before deciding to list your property for sale, you should consult your lawyer and discuss about your contractual obligations with the tenant. It is also advisable to discuss the matter with the tenant and find out what his intentions are, whether he will be cooperative, etc. In any case you will need his consent for the viewings with the potential buyers.
Accordingly, you have to inform the buyer so that he is aware of the situation and decide if the purchase under these terms is ultimately something that interests him. Last but not least, you need to inform your broker to make a proper presentation of your property!

I'm a buyer


As mentioned in the introduction, the new owner is bound by the existing lease and is required to comply with all of its terms. If you want to buy the house in order to move straight away, know that this cannot be done without the tenant's consent. If the tenant refuses to terminate the lease at the expiry of the three-year or the agreed extension, you can appeal to the competent court and request a court ruling on the termination of the lease. However, the process can be lengthy, depending on postponements, remedies for breach of contract, etc. that can be enforced by the tenant.

If you want the house for investment and you are satisfied with the rental income, then there is no worry. If however you are not satisfied with the rent and you think that it could be higher then you should refer to the lease again and read the terms of the rent adjustment provided therein. In this case too, the existing contract is binding for three years.
Unless a rent adjustment term is provided, the rent paid up to the end of the three-year period may be legally adjusted annually at a rate equal to 75% of the change in the consumer price index. If you can still prove that the rental value of the property has increased due to some events - such as a new subway station 100m away from the property, the creation of a sidewalk, the addition of a swimming pool, etc. - then you can always, in accordance with the good lending and trading ethics, adjust the rent to the level that is considered reasonable.
Therefore, in the case of buying a leased property, it is wise to ask your lawyer to investigate the lease agreement and to provide you detailed information on all the cases mentioned above.

I'm a tenant


In case that you are the tenant of the home for sale you should also be aware of your contractual obligations and the rights under the lease you have signed. The change of ownership does not affect the existing contract. In addition, the law gives you the right to use a three-year term even if the contract you have signed is shorter.

Tips to all parties


It is crucial to know your rights and obligations arising out of the contract you have signed (seller, tenant) or that will be bound by you as a result of a purchase you are about to make (buyer). When you are fully informed, negotiation is more mature and effective and in any case preferable to any conflict or litigation.

 


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