Expert: Karyn Foley - 8/11/2004

Question
Hello.  My mother-in-law has a home in Hampton, Va and she wants to create a new lease for the residents.  There has been no lease for the residents for approximately 2 years.  Are there any ramifications in creating this new document with a increase in the rent(from $999 to $1500)?  She also has a property in Petersburg, Va. that property she wishes to sell.  Is it feasible to first offer the property to the folks that reside in the home and secondly, if they don't show any signs of purchasing, when can we put it on the market?  Is there a certain amount of time that the existing residents need to have if they have to relocate and if the home gets sold to another buyer?  Finally, if the total of the 2 properties, according to the government appraisal, has the value at approximately $241,00, what buying power does my mother-in-law have concerning purchasing a new property?  Her thought process is to pay off the Petersburg property and then sell that property since it does not hold too much value(60k).  Use the money off of the sale to pay off the property in Hampton, Va which is valued at(181k).  But she wants to keep the property in Hampton.  Are these good ideas and do you have any suggestions?  

Answer
Dear Harry:
 You are asking excellent questions, however, most I cannot answer because each and every city in the United States can have different laws.  These laws pertain to properties that have rent control on them, those that do not have rent control; they address time periods on when you must notify tenants of putting the house up for sale and when the time period is that you can ask them to move; rent increases allowed and time period you must notify tenants of rent increases; if you must pay -or do not have to pay- for the relocating of the existing tenant.
 These questions can be answered by your calling city hall in the particular cities and finding out these answers.  Or, if you are a friend of a real estate agent or real estate attorney,  ask them for the guidelines.
 County and/or state laws may also apply,  
 First, you should hire an appraisser or ask a real estate professional to give  you the fair market value of the property.   When you have determined the value, then you can go to your tenant and give them an opportunity to purchase.  If this is covered in your lease, with a right of first refusa. then you should do it in writing so that there are no misunderstandings or problems down the line.
 Having a tenant on the property during a sale period is hard to do.  "Cooperative Tenant" is usually a contradiction in terms.  They may not be obliging.  You should consider a monetary incentive if they wish to remain on the property during the listing and sale period.  They should be out a week before the close of any transaction.
 You say that there has been no lease for two years.  Was there a previous lease?  If so, check it out to see if there are any facts about being able to raise the rent.
 There may or may not be tax consequences regarding the sale of the properties.  You should contact an accountant so that you know what is ahead for you and how best to structure any sale or what would be the best direction in which to go.  Your Mother may wish to keep a loan on a property if she still needs some tax write-off.  Again, this is why you should contact a specialist.  We, as real estate professionals, are not permitted by law to give legal or accounting advice.
 Contact a mortgage broker to discuss the money your Mother will end up with, so you can find out her buying power.  You don't want to act in a hasty manner until all of your questions have been fully answered to your satisfaction.
 Interview three active agents and companies in the neighborhoods and I think you will find an agent in whom you have confidence and who can head up the search for the answers you seek.  Then, list with this agent if she has proven helpful and has a good track record of sales in your area.
 If I lived in Virginia, I could be of more help.  But we are a nationwide service.  Good luck to you.  I wish you and your Mother success.  KARYN FOLEY