More compelling case for tenant buyout agreements amid COVID-19
A lethargic court system and little convenient legal grounds to compel a tenant to vacate, coupled with a tenant’s need for immediate cash, make tenant buyouts more attractive today.
With the courts' business being ground to an almost complete halt, landlords are hard-pressed to effectuate a vacancy. Barring the most egregious circumstances that pose an imminent health or safety risk, unlawful detainer actions have been put on ice.
There is no statute or ordinance, however, that prohibits owners from entertaining a tenant buyout agreement - also known as a tenant surrender of possession agreement - and this vehicle is especially worthy of exploration in today’s times if for no other reason other options are severely limited.
As its name implies, a tenant buyout agreement is a contractual arrangement whereby a tenant agrees to voluntarily vacate the unit in exchange for monetary compensation, a rent waiver, or both. This is often loosely referred to as “cash for keys,” but this oversimplification ignores the fact that owners are not just paying for a vacancy, but a clean break. The owner gets the peace of mind knowing that there will be no residual claims from the tenancy.
If you’ve followed us for any length of time, you know we are big proponents of tenant buyout agreements if the only goal is to effectuate a vacancy. Owner move-in or relative move-in evictions require that the owner or their close relative reside in the unit for a certain period of time, but there is no such condition required by a tenant buyout agreement.
Arriving at a mutually agreeable buyout amount can be tricky. Every buyout is unique and must take into account the length of tenancy, history of evictions, tenant protections, the desirability of the neighborhood, the landlord’s investment strategy, and the tenant’s inclination to move, among other considerations.
Buyouts can facilitate the move of a tenant who needs to relocate
There is a lot of uncertainty nowadays for many financially strained tenants who need the funds and are seeking a soft place to land and so tenants in this lot may be more motivated to engage in an agreement that gives them sorely needed cash.
As long as shelter in place orders remain in effect, it will be more challenging to find new tenants, but a vacant unit can pay more dividends in the intermediate and long-term future in the form of increased rents and perhaps, having a blank canvas to sell.
Rest assured, tenant buyouts cannot be made by parting with money and a friendly handshake or in these times an elbow bump. These agreements are highly regulated and require a bit of legal work, but it is something we routinely do at Bornstein Law.