Who is responsible for paying a tenant back for pre-paid rent if the property is sold?

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Who is responsible for paying a tenant back for pre-paid rent if the property is sold?

In 11/08 my mother-in-law moved into our home; she prepaid $50,000. The agreement was $5,000 a year for rent and utilities for 10 years. In -5/10 we divorced andsold the property to my ex’s girlfriend. She was aware of the mother living there and the mother was aware of the sale of the home. Things did not work out and the house is being sold.  Now mother is suing son and girlfriend for $40,000 (balance). Girlfriend is trying to say ex andI are responsible for paying her back since mother was “a guest” not a tenant. She never told mother that she would only be “a guest”. She bought the home with mother as a tenant.

Asked on January 10, 2011 under Real Estate Law, New Hampshire

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If rent was prepaid, then the those who collected the prepaid rent are responsible for returning it (the unused portion), since they can no longer provide the residence that the rent was paying for; e..g they are breaching the contract. However, if the $50k payment was not rent, then certain other possibilities exist:

1) If the mother was told it was rent but it's not being treated that way, it might be theft.

2) If the mother reasonably thought the money was to help buy the property, she might have an interest in the home and a right to a portion of its sale price.

3) If it could be shown the money was a gift, there'd be no need to return it, though there then might be serious tax consequences.

And if it was rent--a 10 year lease (though those must be in writing, not oral), then who've bought the home would still have to rent it the mother, but should have had the money turned over to him or her as part of the transaction.

This is a complicated situation, with very different rights and liabilities depending on exactly what was said and paid how. It's suggested all parties concerned get legal representation to help sort this out.


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