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Real Estate Purchase Agreement: Essential Guide for Landlords, Investors, and Tenants

Comprehensive guide to understanding real estate purchase agreements for tenants living in properties being sold, real estate investors with multiple rentals, and individual landlords selling rental properties.

Introduction

A Real Estate Purchase Agreement is a legally binding contract that outlines the terms and conditions of a property sale between a buyer and seller. Whether you're a tenant concerned about your living situation when your landlord decides to sell, a real estate investor expanding your portfolio, or a landlord looking to sell your rental property, understanding this document is crucial to protecting your interests and ensuring a smooth transaction. This guide breaks down the key components of a Real Estate Purchase Agreement and provides specific insights for tenants, investors, and landlords navigating property sales.

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Key Things to Know

  1. 1

    A Real Estate Purchase Agreement is legally binding once signed by all parties, so review it carefully or have an attorney review it before signing.

  2. 2

    Tenants generally maintain their rights under existing leases when a property is sold, as the new owner must honor the terms until the lease expires.

  3. 3

    Contingencies protect buyers by allowing them to back out of the deal under specific circumstances without losing their earnest money.

  4. 4

    Landlords selling rental properties must disclose existing leases, security deposits, and any known property defects to potential buyers.

  5. 5

    Real estate investors should include contingencies for reviewing tenant payment histories, lease agreements, and property financial records.

  6. 6

    The purchase agreement should clearly state whether the property will be delivered vacant or with tenants in place at closing.

  7. 7

    Security deposits must be transferred from the seller to the buyer at closing, with proper accounting and notification to tenants.

  8. 8

    Financing for investment properties typically requires larger down payments and carries higher interest rates than primary residence loans.

  9. 9

    Local landlord-tenant laws may impact how a property sale can proceed, including requirements for tenant notification and rights of first refusal.

  10. 10

    Tax implications of selling rental property differ significantly from selling a primary residence, including potential capital gains tax and depreciation recapture.

Key decisions before you file

Before you file a Real Estate Purchase Agreement in New York, a few decisions shape the document: which option to choose and what each one means. The Real Estate Purchase Agreement guide walks through them.

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New York Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (New York General Obligations Law § 5-703)

    Real estate contracts must be in writing to be enforceable under the Statute of Frauds, which requires certain contracts to be evidenced by a writing signed by the party against whom enforcement is sought.

  • Property Disclosure Statement (New York Real Property Law § 462)

    Sellers must provide a property condition disclosure statement to buyers before they sign a binding contract, disclosing known defects and material issues with the property.

  • Lead-Based Paint Disclosure (42 U.S.C. § 4852d; 40 CFR Part 745)

    For properties built before 1978, sellers must disclose known lead-based paint hazards and provide buyers with a 10-day period to conduct lead-based paint inspections.

  • Attorney Review Period (New York common law and practice)

    New York real estate contracts typically include a provision allowing attorneys for both parties to review and approve the contract within a specified time period (usually 3-5 business days).

  • Mortgage Contingency (New York common law and practice)

    Contracts should include a mortgage contingency clause allowing buyers to terminate the contract and recover their deposit if they cannot secure financing within a specified period.

  • Title Examination and Insurance (New York Real Property Law § 334)

    Provisions regarding title examination, marketable title requirements, and title insurance to protect the buyer against defects in the seller's title.

  • Real Estate Transfer Tax (New York Tax Law § 1402; New York City Administrative Code § 11-2102)

    Disclosure and allocation of responsibility for payment of New York State and New York City (if applicable) transfer taxes on the conveyance of real property.

  • Escrow of Deposit (New York General Business Law § 778; New York Real Property Law § 440-a)

    Requirements for handling and maintaining buyer's deposit in an escrow account by an attorney or broker until closing or termination of the contract.

  • FIRPTA Withholding (26 U.S.C. § 1445)

    Compliance with Foreign Investment in Real Property Tax Act requiring withholding of tax if the seller is a foreign person.

  • Fair Housing Compliance (42 U.S.C. § 3601-3619; New York Executive Law § 296)

    Prohibition against discrimination in the sale of housing based on race, color, religion, sex, familial status, national origin, disability, sexual orientation, gender identity, or military status.

  • Closing Date and Possession (New York common law and practice)

    Clear specification of the closing date and when the buyer will take possession of the property, with provisions for extensions if necessary.

  • Risk of Loss (New York General Obligations Law § 5-1311)

    Allocation of risk if the property is damaged between contract signing and closing, typically governed by the Uniform Vendor and Purchaser Risk Act.

  • Home Inspection Contingency (New York common law and practice)

    Provision allowing the buyer to conduct inspections and potentially negotiate repairs or terminate the contract based on inspection findings.

  • Deed Type and Transfer (New York Real Property Law § 258)

    Specification of the type of deed to be delivered at closing (typically a Bargain and Sale Deed with Covenants in New York) and requirements for proper execution and recording.

  • Certificate of Occupancy Compliance (New York Multiple Dwelling Law § 301; local municipal codes)

    Requirement that the property has all necessary certificates of occupancy and complies with local building and zoning codes.

  • Condominium/Cooperative Disclosures (New York General Business Law § 352-e)

    For condominiums and cooperatives, specific disclosures regarding bylaws, financial statements, and board approval requirements must be included.

  • Environmental Hazards (New York Environmental Conservation Law; CERCLA 42 U.S.C. § 9601)

    Disclosures regarding known environmental hazards such as underground storage tanks, asbestos, or contamination issues.

  • Merger Doctrine (New York common law)

    Specification of which contract provisions survive the closing and which are merged into the deed upon transfer of title.

  • Real Estate Settlement Procedures Act Compliance (12 U.S.C. § 2601-2617)

    Compliance with RESPA requirements regarding closing procedures, disclosures, and prohibition of kickbacks in federally related mortgage loans.

  • Default and Remedies (New York common law)

    Clear provisions outlining what constitutes default by either party and the remedies available, including specific performance, liquidated damages, or return of deposit.

Frequently Asked Questions