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Short- Term Rentals (Unmanaged)

NOTE: “Short-term” usually refers to weekly/monthly rentals, but can refer to anything up to a 90-day rental.

Things to Know:

  1. The purchaser of a residential property subject to a vacation rental takes title subject to the vacation rental agreement* and the vacation rental management agreement** for all vacation rental periods that begin no later than 90 days after the purchaser’s deed is recorded.*the “vacation rental agreement” refers to the written rental agreement   between the management company and the tenant.
  • **the “vacation rental management agreement” refers to the written agreement between the seller and the management company.
  • **the “vacation rental management agreement” refers to the written agreement between the seller and the management company
  1. The buyer steps into the seller’s shoes in every respect. This means the buyer will be: a) bound by all existing reservations; and b) responsible for any deposits paid.

The Listing Agent Should:

  1. If the tenant will remain in the property after the sale and/or if the property is subject to rental reservations:
  • A.  Have a complete and readable copy of each reservation agreement;
  • B.  Be ready to furnish all renter contact information to the buyer’s agent;
  • C.  Furnish the current renter’s rent/deposit information to the seller’s attorney (for proration/transfer); and
  • D.  Furnish to the seller’s attorney a complete record of all deposits paid to the seller (because these deposits must be credited to the buyer at closing) as well as rent for the period of closing (because it will be prorated at closing).

The Buyer’s Agent Should:

  1. If the tenant will remain in the property after purchase and/or if the property is subject to rental reservations
    • A.  Prepare a contract addendum addressing all requirements. A few possible requirements are: a) produce the lease and/or a copy of each reservation agreement within 3 days of contract ratification; b) lease/reservations (and deposits) assigned at closing**; b) rent for the period of closing be prorated at closing; c) require production of current renter’s contact information and contact/payment information for all reservations;
      • **if “short term” is a weekly/monthly rental, an actual assignment of lease typically is not done.
    • B.  In that there may be a charge to prepare the lease assignment, special in the contract which party is responsible for preparing it and paying for the preparation; and
    • C.  Furnish to the buyer’s attorney a complete record of all deposits paid to the seller (because these deposits must be credited to the buyer at closing) as well as rent for the period of closing (because it will be prorated at closing).
  2.  If the renter is supposed to vacate prior to closing, prepare an addendum making it a contract contingency that the renter will be out before the closing. It is unwise to allow for the renter to vacate on the actual date of closing because, if the renter “needs another day or two,” damages the property or removes appliances/furnishings, the closing is jeopardized.

The Closing Attorney Should:

  1.  Prorate rent for the period of closing; and
  2. Transfer the Security Deposit and/or reservation deposits to the buyer (this is done as a credit from the seller to the buyer on the Settlement Statement).

Extra Things:

  • After closing, the buyer should notify the current renter and any reserved renters that the buyer is the new owner and the lease/reservations has/have been assigned. The letter should: a) include a demonstration of new ownership; b) state the reservation deposits have been transferred; and c) provide the buyer’s contact information.

More Posts

Long-Term Leases (Managed)

Things to Know: The Management Agreement will continue to control after closing. If the buyer wishes to have another company

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