Recently I found an auction property at attractive price, when I enquired I found it has some issues with the tenants. It is a commercial property, with four tenants running shops in them. They have a lease agreement of 5 years with previous owner. Each of them paid 5 Lakhs to the owner and the owner was supposed to return the amount at the end of lease time and there is no monthly rental. Out of four lease agreements, one got expired a year back but the tenant is still staying. The other three agreements still has a year. The previous owner is absconding. The bank manager said, eviction is a slow process but if I bid for the property they will expedite the process. I don't trust him much. I understand the risk, still it is an attractive property with good rental income. Out of four, three might come for a settlement, the fourth one with expired lease is doubtful. What are the options I have, are their agreements still valid even after the auction of the property? The fourth one with expired lease is still a legal tenant? If I go ahead and buy the property, what are the risks I could be facing form the tenants. Can they raise legal dispute and drag it, mean time just paying nominal rent to the court. The fourth one with expired lease, what are the options he has since the lease is expired. I have no issue in allowing them to stay if they pay rent at current market rate.
1) on expiry of lease agreement fourth tenant has no right to stay in premises
2) owner can issue legal notice to vacate premises . If he refuses file eviction suit against him
3) other agreement would be valid even after auction of property . The can continue during subsistence of agreement
1. stay away from such property,
2. you are not buying property rather litigation,
3. if the deal is lucrative enough, go ahead else leave
1. since the property has no monthly rent, therefore, you are not liable to claim any rent, however, at the end of the lease you can demand the rent but what about security refund,
1. If there is a tenant who is in the premises even before you buy the property then only on due course of time you can get vacant possession of the property.
2. So on expiry of the period of lease you will have to bring a suit for eviction and will have to wait till the decree of passed.
Please note that in case of transfer of property under Sarfaesi Act it is the responsibility of the bank to get the private property evicted before selling it to any other person in auction the agreement entered by the previous owner from whom the property has been transferred to the bank because after Sarfaesi Act is invalid because the landlord have no right on the property so any agreement entered by the landlord for the property is invalid with the Transfer of Property to other title holder how are you have to file the eviction suit but this will be decided quickly by the court
1. Tenancy right can not be impaired by initiating SARFAESI Proceedings.
2. So, the tenants continue to stay as tenant even after you buy the said property. You or the Bank can send them a letter of attrition informing that you are the new landlord and they should pay the rent to you.
3. Thereafter you can negotiate with them for increasing the rent or file eviction suit against them depending on the situation.
4. It is to me kept in mind that eviction suit takes decades to be disposed of.
All tenants are entitled to their lease amount including the expired lease.
If you agree to continue the relationship it may not pose any issue.
Regards
G.Rajaganapathy
High Court of Madras
- Under the provisions of Sarfaesi Act, 2002, Bank used to take symbolic possession of the property , and property is left in the possession of the defaulter borrower, and further advertise for auction .
- But, it is the duty of the bank to handover a clear title with clear physical possession to the intending buyer at the time of auction.
- Otherwise , if you will go to purchase without a clear possession i.e without vacating the tenants from the property , then you may face problem from the tenants.
- Yes, further the tenants can approach court for continuing the tenancy as per law.
- If , the lease has been expired , then the tenant has no right to continue in the property , but they can approach you /court for the renewal of lease deed.
- At the time of renewal of the lease deed , owner can put condition to raise the rent .
- Before purchasing the said property , you should approach the bank , to give you a clear & vacant possession , and the bank is bound for the same as per law.
The lease agreement is valid till the date of its expiration i=even if you successfully bid for the property and the tenants cannot be evicted before the expiration of the lease period
The bank may even obtain symbolic possession but they cannot obtain the physical possession before the expiration of the lease period.
Moreover the lease amount has to be paid by you to the tenants t the time of they vacating the shops which can be recovered from the previous owner provided you get the details of him through court of law.
The price may be attractive, but the expenses you may incur subsequently towards litigation and the energy a and the time you will be spending for this cannot be compensated or it will work out to more than what you have saved by this purchase.
Better obtain a legal opinion from a local lawyer before proceeding with this
1. Lease /Rent agreement are amenable to rescind /revoking /cancel at the hands of Owner (new /old) and there is nothing that the lease holder can claim for perpetuity. The privily of contract is between the old owner and the tenants and not with you.
2. As a new owner you can issue proper legal notice revoking the lease agreement and giving them an option to enter into a new lease agreement with mutual terms & conditions.The lease holders do not have any options on this, BUT to the exception of arm-twisting you into submission by initiating infructuous legal cases which will serve only to prolong their possession which in turn shall be tentative, till court upholds your rights (or lease rent at current prevailing market rates....)
If the tenant refuses to vacate after the expiry of the lease then property owner may move to the court and obtain an order of eviction against him.
Eviction will take years and till payment not made, eviction cannot possible. Don`t rely on bank, this is entangle property, hardly find any buyer, this is the reason of lucrative price. One sold, bank will raise hand neither bank has anyhtign to do with your cause.
Don`t purchase, every buyer suffers in such cases. Transfer of ownership dose not effects tenancy. You will only face risks and loss of money.
Legal dispute/eviction will take at least 10 to 15 years. Expired lease - return 5 lacs than only eviction proceeding can be initiate.
I have no issue in allowing them to stay if they pay rent at current market rate. -- Fresh lease deed will execute.
As a whole don`t get cajoled by bank offer.
1. Dont trust bank manager as he will not help you much after purchase of property through Auction.
2. Bank can takeover the property under SURFAESI act and seal the building.
3. Tenants may not give you possession of property after purchase and you may have to pay the amount which was due towards previous owner or may be more than that.
Don't get into the same, in India a property with litigation can take years for title. If you can manage all the said hassles then you can think
