A lease gives a tenant an interest in a property. When the owner sells a property, the lease moves with it and the sale has no effect on the lease. What can change, however, is the intent of the new owner. While the prior owner might have intended to rent the property to the same tenants for as long as they wanted to stay, the new owner may have other plans. How the new owner's plans may affect the tenant depends on what type of lease is in effect and the location of the property.
Whether or not a lease will be affected by the sale of a property depends entirely on the language included in the leasing contract.
Unexpired Lease Term
If a tenant has a fixed-term lease, the new owner can't make any changes to the lease. He cannot raise the rent, take away parking rights, shift responsibility for utility payments or, especially, evict a tenant. Every clause is unchangeable until the term expires. What happens after the lease term expires, however, is another story. Sometimes the lease itself explains what happens next -- for instance, the lease continues on a month-to-month basis or it ends. In either of these cases, the new landlord can make any changes to the tenancy, including ending it, with a thirty-day notice.
Exploring Periodic Leases
A periodic lease has no end date. It operates from rental payment to rental payment, which is most often month-to-month. Whether a periodic lease transfers to a new owner or remains with the current owner, the landlord can change any or all aspects of the lease, including ending it, with a notice that is the same as the duration between rental payments. If the rent is due once a month, the notice to change terms is one month, unless otherwise stated in the lease.
State and Local Tenant Laws
Every state and some cities, notably in California and New York, have laws that regulate residential tenancies. New Jersey and New Hampshire have a statewide regulation preventing any landlord from evicting a tenant without just cause, such as nonpayment of rent. Local controls are usually in the form of rent control, which prevents eviction without just cause and limits rent raises. These laws supersede anything written in a lease. When a lease transfers through an ownership change in a city or state with such restrictions, the new landlord, just like the previous landlord, must adhere to the strictest of applicable regulations.
Before May 2009, when a property changed ownership through a foreclosure, this wiped out the lease. The Protecting Tenants at Foreclosure Act of 2009 changed that. It required new owners after a foreclosure to honor an existing lease. It suspends this rule, however, for new owners who intend on living in the property themselves. Those buyers may end a lease with a 90-day notice to the tenants. Although the Protecting Tenants at Foreclosure Act was inactive for a period of time, it was reintroduced by legislators in 2018.
Mary Gallagher runs Mary Gallagher Planning (mgaplanning.com), an urban planning and consulting business in San Francisco. She is the former assistant planning director for San Francisco and planning director for San Mateo. Gallagher has been writing about real estate, development and land use for numerous websites since 1995. She holds a master's degree in historic preservation planning from Cornell University.