Real Estate never manages to bore, whether the deal is residential or commercial. Somehow the process of each deal has a story of its own along with its individual ups and downs, sometimes including soap opera sagas with plenty of material for a reality TV show—dramatic and never boring.
Commercially, real estate tends to be a little less emotional with a typical mixed bag of professional buyers and sellers trading properties on a regular basis, but even with commercial deals, something can always come up that you never experienced before, even when you have been in the business for many years.
I recently had a building that I sold that fell into the category of “new experiences.” Although as we marketed this project it seemed pretty run-of-the-mill, producing all the income and expenses as well as the building and zoning information, by the time it actually sold and we were ready to close, a bizarre kink came into play that not only had I never seen before, but many other real estate professionals and real estate attorneys had never heard of previously.
A situation arose with a commercial tenant who had vacated one of the units in the building nearly a year and a half before the building’s sale. The tenant who had given up his tenancy reluctantly, was asked to leave by the landlord because of a problem he had with his business and the law and as such the court had mandated that the landlord close him down.
Although he had no lease at the time and was actually renting on a month-by-month basis, he still had to be evicted formally. As he vacated the premises and moved all his possessions out of the unit, he failed to sign a document stating that he officially left the premises for the landlord to show the court, and as such, when hearing of the upcoming sale of the building, he decided to use the fact that he never signed the release document as an excuse to go back into court and sue the landlord for damages.
When we originally heard what this guy was trying to do, we were all laughing. The building owner, the lawyers, even the buyer figured this would just be a minor nuisance that could be resolved as soon as the court date appeared and then they could be finished with him.
However, the building owner needed to hire a landlord-tenant lawyer for this court date, and after presenting all the paperwork to this lawyer and sitting down with him for a discussion, was shocked when he was told, “This is not as easy as you think. Your old tenant has rights, based on a “rolling lease.” “A rolling lease?” asked the owner. “What the heck is a rolling lease? This guy has not had a lease in years and has been occupying the premises on a month-by-month basis only.”
The lawyer took a deep breath and said, “That’s what a rolling lease is. When a tenant retains possession of a property on a month-by-month basis after previously holding a lease that expired, that’s considered a lease with the same provisions as the old lease except that it can be ended with 30 days’ notice by either side. But—and this is a big but—when you evict the tenant with 30 days’ notice, he also must sign a document when he leaves, stating that he has given back the property to the landlord and their “rolling lease” now ceases to exist.
Needless to say, nobody was laughing anymore, and a lot of maneuvering had to be done in order to finish up with this tenant and still close the sale of this owner’s property. We did close after all, and it all worked out, but now I check all the properties I market to make sure there are no hidden “rolling leases” we need to deal with prior to closing a deal!
Anessa Cohen lives in Cedarhurst and is a Licensed NYS Real Estate Broker (Anessa V Cohen Realty) with over 20 years of experience offering residential, commercial and management real estate services. You are invited to visit her website at www.avcrealty.com. She can be reached at 516-569-5007. Readers are encouraged to send any questions or comments by email to anessa@avcrealty.com.
