Leases and Tenants

Lease agreements encumber the property, because current leases effectively transfer possession and use of the property (or portions of it) to a third party. Leases can be considered as encumbrances on the title that could render it non-marketable, even if those leases are not publicly recorded.

The seller should make sure that the real estate contract clearly states that the title will be subject to leases or tenancies, as applicable. The buyer, on the other hand, should avoid signing any contracts that refer to existing leases or tenancies without receiving an opportunity to first examine those leases. At the very least, the buyer's attorney should use the attorney review period to demand copies of the lease agreements and approve them.

For more information about lease agreements, see the "All About Leases" article.

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