California Attorney and Real Estate Broker Chris Adishian answers the question, “What are some of the major deal points with transactions involving residential rent control building?” at the South Bay Association of Realtors Commercial Attorney Panel on June 2, 2015.
If you’re going to go into a rent control transaction and you’re not well-versed in rent control, you could be opening up some liability for yourself as an agent. This is me switching over to the litigation track and trying to give you some advice to protect yourselves.
You might get far along in the transaction and you might see that commission hanging out in the distance and the gentleman out there says “Well, the tenants are not going to sign it”. What if my – it’s a disaster, right – it’s a disaster if the owner buys under those circumstances, but you as the agent might be thinking, “This is a disaster. I’ve put five months into this. The tenants aren’t signing – now what?”
Well, I think you have to swallow hard and see if you can work out the situation. Get an acceptable estoppel, or for your client, get a disclosure specifically to the owner and say, “Hey look! I’m telling you – we asked for the estoppels. The tenants are not signing them. If you want to go forward with this transaction that is your business judgment – your decision based on this knowledge. But I told you that.”
That’s a much better place to be as an agent, versus hiding that fact or not being knowledgeable about the risk that you’re putting your client into. That’s a point, as you cross over into some of these rent control transactions to be very aware of that, from an agent perspective as well.