Dear Heather,

I am buying a house with an apartment and there is someone renting the apartment. Can I give them notice? How does that work in Bermuda?

New Homeowner

Dear New Homeowner,

Sometimes homes for sale are occupied by tenants who will remain in residence after the sale has completed. It is important to understand tenant rights, landlord obligations and the associated risks when you purchase a home that is still occupied by tenants.

In Bermuda, the terms of a tenant’s lease runs with the house and not the owner, so the sale of a home does not change the original lease agreement. As a buyer you will inherit all of the landlord obligations and terms of the lease. So, for instance, if there is six months to go on the lease you are required to honour it.

If the unit is under rent control (an annual rental value of $22,800 or less) then all tenancies have to abide by the Rent Increases (Domestic Premises) Control Act 1978. Therefore all rent increases, lease terminations or intentions to owner-occupy your new home must be done in accordance with the Act.

If a tenant is on a fixed-term lease (one year/two years, etc) you only have two options: you either let the tenants finish the lease term or you may be able to negotiate with them for an early termination, which often means sweetening the move with attractive financial consideration. They are under no obligation to agree to an early termination.

If you are terminating a month-to-month agreement, notice must be given in writing and must include one full calendar month’s notice.

If you are inheriting lease obligations with your home purchase, do spend the time to review the lease documents prior to closing. Make sure that the existing lease is well-written and structured with local rental laws in mind, including the placement of government-required stamps on the lease agreement and any copies.

Make sure that there is documentation of any prepaid rent or security deposits, including a check-in report describing the condition of the home when the tenants moved in. If the tenants cause damage that you intend to take out of their security deposit, you won’t be successful unless you can properly document the property’s original condition.

We strongly recommend that you have a walk-through with the tenants before closing, where you can verify the current condition and speak with them directly about their lease terms and condition of the property.

Inheriting tenants means that you are inheriting their security deposit and any prepaid rent. Verify with your lawyer that these funds are being transferred to you on your closing statement. Your attorney will also prorate the current month’s rent payment between you and the seller.

Renting out a home involves risk that must be properly insured. You want to make sure that your insurance provider is aware that the home is currently rented to make sure that you are covered for tenant injuries, negligence and other possible catastrophes.

• Heather Chilvers is among Coldwell Banker Bermuda Realty’s leading sales representatives. She has been working in real estate for 27 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332-1793. All questions will be treated in confidence. Read this article on Facebook: Ask Heather Real Estate