Do you know what to do when a property is listed for sale with a tenant on the property and the tenant refuses to cooperate with requests for open houses and viewings by interested buyers? As the real estate agent, there are steps you and your seller client can take to help address and avoid this situation up front.
Risk Prevention
The first step you should take as the listing agent is to meet in-person with the landlord (listing client) and the tenant of the property that will be listed for sale. You and the landlord should inquire if the tenant is interested in purchasing the property before it is listed and, if so, at what price. By doing this, it shows that the landlord is being considerate with respect to the tenancy.
If the tenant does not want to buy the property, then you can take the following steps with the tenant and landlord:
- Address any issues regarding open houses and showings, including repairs to be made in advance, whether the tenant will be present or must vacate for the short time during each showing, etc.
- Discuss the location of the lock box.
- Discuss the scheduling of showings so as not to interfere with the tenant’s schedule.
- Confirm the dates and times for open houses and private showings, and in a written document to be signed by the tenant, landlord/owner and listing agent.
- Memorialize all interactions and decisions in writing and send copies of the agreed upon decisions to both the tenant and landlord.
By taking the above steps before a property occupied with a tenant is listed, and then confirming by email to the tenant and landlord what was discussed and agreed upon by all parties, the chances of an uncooperative tenant are greatly reduced.
Addressing the Listing Agreement
After the meeting with the tenant and the landlord, you should then meet with your client, the landlord, to go over the terms and conditions in the listing agreement. In the listing agreement, there should be explicit mention that the property to be listed is occupied by a tenant with his or her name and when the term of the lease will end. If the tenant is not cooperative, mention that viewing is subject to tenant availability and conditions in the listing agreement.
The Uncooperative Tenant
If the tenant is uncooperative during the listing, conduct a follow up face-to-face meeting with the landlord to attempt to resolve the conflict. Whether or not the conflict is resolved, you as the listing agent should send an email to the tenant and the landlord memorializing the date and location of your meeting with the landlord, the problem or concerns of the tenant that were discussed, and what resolutions were discussed and agreed on.
If the tenant still will not cooperate for open houses and showings, you should then recommend to the landlord that they consult with an attorney for next steps. Understandably, a landlord could get frustrated in this situation. The risk is that the landlord may make unreasonable demands on the licensee for access or use force to get access to show the unit, and matters could get out of hand and escalate to a lawsuit. This is why it’s important to be clear with the landlord that you as a real estate licensee do not have the training, knowledge or professional license to resolve such a situation.
An attorney may be able to work with the landlord to offer the tenant the possibility for a rent reduction in exchange for tenant cooperation. Any rent reduction agreement would be drafted so that it would solely pertain to when the owner who has listed the parcel still owns the parcel. The suggested rent reduction would be temporary pending the current listing of the parcel. Once the sale closes and there is a new owner, and assuming the tenant remains in the unit, the new owner would not be obligated under the temporary rent reduction agreement.
Any formal agreement created between the landlord and tenant for rent reduction should be mentioned in the listing agreement. Once again, as the listing agent, save all transaction notes in your transaction files as backup documentation should the threat of a real estate E&O claim arise.
As a CRES member, you also have access to on-call real estate attorneys as part of CRES’ ClaimPrevent® services. Call on us for questions and advice on how to handle situations like these to minimize your E&O claims risk.
About the Author
B. Edward McCutchan, Jr.
Sunderland | McCutchan, LLP
Mr. McCutchan’s practice is primarily civil litigation with an emphasis in defending professionals and businesses in real estate, mortgage brokering, construction, banking and agricultural industries and all phases of dispute resolution through trial and appeal. His area of practice is also agricultural law (viticulture and wineries), trusts and estates, probate, real estate transactions, business law and elder abuse. B. Edward McCutchan, Jr. was admitted to the Bar in 1985 and is admitted and qualified to practice in all California courts and the U.S. District Court, Eastern and Northern Districts of California as well as the United States Tax Court.
