Tenants without a Lease?!?!

[Stephen Bruce]

Good morning! Here's the situation:

I'm under contract on a quadplex. Current owner/landlord is terrible at his job. He says he does not have a lease signed for 3 out of 4 units. It is "word of mouth." He claims they all pay accurately and on time. I am going to do extensive repairs to the complex meaning I will have to remove these tenants. 

Since there is no lease, does anyone foresee legal issues with removal? 

Do the tenants have any grounds to fight me on kicking them out? 

How do you recommend I go about this if you predict complications? 

Thanks in advance for your advice!

[Nathan Gesner]

Quote from @Stephen Bruce:

If you are going to be successful as an investor, you must learn the law. And the best time to learn it is before you need it! I'll have a book coming out this summer to help with that. In the meantime, I highly recommend "Every Landlord's Legal Guide" by NOLO. It's the best $30 you'll spend as a new Landlord.

I believe the law in SC is that you give 30 days written notice. You can use your favorite search engine for "terminate lease south carolina" and do some reading. Search "sample lease termination letter" and get examples of what the notice should look like. If you learn how to use basic searches online, you can find answers to anything you need.

[Kevin Sobilo]

@Stephen Bruce, signed estoppel for each unit as part of due diligence under the sales contract.

You need to use these estoppel forms to verify all the details about the oral rental agreement with each tenant. The tenant needs to sign these so that you have certainty that the information you're being told is accurate.

If you don't, the tenant could pull out a written lease after you buy the property or claim the deposit money is more than you were told or that the tenant owns the appliances.

[Melanie P.]

The above is the correct course of action. An estoppel certificate signed by every tenant stating they are in a month-to-month tenancy at how much rent, are they current, amount of security deposit - even if the amount is zero it needs to say that.

Tell them now because these will take time to prepare and then the seller has to get the tenants to actually sign them. 

[John Underwood]

If they are paying rent there is a verbal lease.

Give them the 30 day notice. Make sure you  can prove they got it. 

If some need more time you could begin renovations on some of the units while still collecting rent on the others.

You could even ask for higher rent in exchange for anyone needing more time.

[Stephen Bruce]

Quote from @Nathan Gesner:

Quote from @Stephen Bruce:

If you are going to be successful as an investor, you must learn the law. And the best time to learn it is before you need it! I'll have a book coming out this summer to help with that. In the meantime, I highly recommend "Every Landlord's Legal Guide" by NOLO. It's the best $30 you'll spend as a new Landlord.

I believe the law in SC is that you give 30 days written notice. You can use your favorite search engine for "terminate lease south carolina" and do some reading. Search "sample lease termination letter" and get examples of what the notice should look like. If you learn how to use basic searches online, you can find answers to anything you need.

 Thanks for the book recommendation. I'll be sure to read it as well as yours when its released! 

[Stephen Bruce]

Quote from @Kevin Sobilo:

@Stephen Bruce, signed estoppel for each unit as part of due diligence under the sales contract.

You need to use these estoppel forms to verify all the details about the oral rental agreement with each tenant. The tenant needs to sign these so that you have certainty that the information you're being told is accurate.

If you don't, the tenant could pull out a written lease after you buy the property or claim the deposit money is more than you were told or that the tenant owns the appliances.

 Thanks, Kevin. I'm not familiar with these forms. I will do some digging and have the tenant and seller agree to what is written and sign them. 

[Stephen Bruce]

Quote from @John Underwood:

If they are paying rent there is a verbal lease.

Give them the 30 day notice. Make sure you  can prove they got it. 

If some need more time you could begin renovations on some of the units while still collecting rent on the others.

You could even ask for higher rent in exchange for anyone needing more time.

 Are verbal lease's legally binding? I'm curious as to how clauses or terminations of the lease are enforced if its strictly verbal. 

[John Underwood]

Absolutely. And proof of the agreement is the tenants rent.

You can evict occupants either way if they refuse to leave.

I get houses all the time that has an existing tenant or even someone not paying rent. I just file an eviction. You can even put John Doe and all occupants if you didn't have names.

Try and work with everyone first of course. You may not need any legal avenues.

[Troy Gandee]

@Stephen Bruce Like some of the others here have suggested, call your closing attorney Monday morning and ask them about an estoppel certification/letter. A judge will likely be hesitant to process an eviction if there is no documentation on hand. I've seen this happen in other cases where the tenants can basically say they had a verbal agreement for another X months. Without any documentation, a judge may just have to take their word for it. 

The estoppel will probably require you to make contact with these tenants and come up with an end date on the lease. It's likely the original leases are expired, so a 30 days notice would suffice, but without any documentation, they could make up any lease terms they want. Your estoppel is probably going to essentially be a negotiation with these tenants to come to terms you both agree with.

[Colleen F.]

@Stephen Bruce  Aside from rent, security deposit, and the fact it is a verbal month to month agreement in the estoppel you may want to have a statement about whether they own the appliances  or anything else that could be  questioned (unless you don't care).  And it should specify what they are renting outside the unit (storage areas and such). Your lawyer can advise you on what to include.  

[Christie Gahan]

Quote from @Nathan Gesner:

Quote from @Stephen Bruce:

If you are going to be successful as an investor, you must learn the law. And the best time to learn it is before you need it! I'll have a book coming out this summer to help with that. In the meantime, I highly recommend "Every Landlord's Legal Guide" by NOLO. It's the best $30 you'll spend as a new Landlord.

I believe the law in SC is that you give 30 days written notice. You can use your favorite search engine for "terminate lease south carolina" and do some reading. Search "sample lease termination letter" and get examples of what the notice should look like. If you learn how to use basic searches online, you can find answers to anything you need.

 Nathan Gessner: I can't wait to get your book!  Congrats!

[Christie Gahan]

For the sake of clarity, if you are reading this and new to real estate ... this advice is for this state.  In a different state, the advice could be to back out of the deal.  In some states, you inheirit the tenants and are stuck with them.  It could take 6 mos or more to evict.  This could mean 6 mos no rent money coming in.  Demand proof of payment on every unit for the last year.  I would make it clear to the seller that I have to have all of these leases signed by such and such date or the deal does not close.  Or, that the seller gets all the paperwork legally filed to evict by such and such state or the deal does not close.  I'd get an addendum in writing with the seller that states this. 

All paperwork to the tenants should also state that All adults on the premises  have to qualify for the new rents as well as what ever new clauses that you want in there.  Limit the frequency of over night guests.  State how often there will be inspections etc etc.  Explain late fees and charge them. Set your expectations and enforce them. 

[Kevin Sobilo]

Quote from @Troy Gandee:

@Stephen Bruce Like some of the others here have suggested, call your closing attorney Monday morning and ask them about an estoppel certification/letter. A judge will likely be hesitant to process an eviction if there is no documentation on hand. I've seen this happen in other cases where the tenants can basically say they had a verbal agreement for another X months. Without any documentation, a judge may just have to take their word for it. 

The estoppel will probably require you to make contact with these tenants and come up with an end date on the lease. It's likely the original leases are expired, so a 30 days notice would suffice, but without any documentation, they could make up any lease terms they want. Your estoppel is probably going to essentially be a negotiation with these tenants to come to terms you both agree with.

@Troy Gandee, part of your point would be state dependent. In my state (PA), an oral agreement can ONLY be month-to-month. So, for a tenant to claim they have a lease in place they would need to produce a written document. 

[Brandon Lawrence]

Quote from @Kevin Sobilo:

@Stephen Bruce, signed estoppel for each unit as part of due diligence under the sales contract.

You need to use these estoppel forms to verify all the details about the oral rental agreement with each tenant. The tenant needs to sign these so that you have certainty that the information you're being told is accurate.

If you don't, the tenant could pull out a written lease after you buy the property or claim the deposit money is more than you were told or that the tenant owns the appliances.

@Stephen Bruce In South Carolina, where month-to-month tenancies default to a 30-day notice period with no formal contract, it's especially important to exercise due diligence. I agree with Keven that obtaining signed estoppel forms from each tenant is essential. These forms provide a written confirmation of the terms of the oral rental agreement and help prevent misunderstandings or disputes down the line.

By having tenants sign estoppel forms, you can verify important details such as rental amounts, deposit amounts, and any additional agreements or responsibilities. Without these forms, there's a risk that tenants may produce conflicting documents or make claims that could complicate the transition of property ownership.

We are a property management company based in the Upstate of South Carolina. It continues to surprise me how many landlords approach us to manage their properties without having proper leases in place with their tenants during the transition.

[Stephen Bruce]

Quote from @Brandon Lawrence:

Quote from @Kevin Sobilo:

@Stephen Bruce, signed estoppel for each unit as part of due diligence under the sales contract.

You need to use these estoppel forms to verify all the details about the oral rental agreement with each tenant. The tenant needs to sign these so that you have certainty that the information you're being told is accurate.

If you don't, the tenant could pull out a written lease after you buy the property or claim the deposit money is more than you were told or that the tenant owns the appliances.

@Stephen Bruce In South Carolina, where month-to-month tenancies default to a 30-day notice period with no formal contract, it's especially important to exercise due diligence. I agree with Keven that obtaining signed estoppel forms from each tenant is essential. These forms provide a written confirmation of the terms of the oral rental agreement and help prevent misunderstandings or disputes down the line.

By having tenants sign estoppel forms, you can verify important details such as rental amounts, deposit amounts, and any additional agreements or responsibilities. Without these forms, there's a risk that tenants may produce conflicting documents or make claims that could complicate the transition of property ownership.

We are a property management company based in the Upstate of South Carolina. It continues to surprise me how many landlords approach us to manage their properties without having proper leases in place with their tenants during the transition.

 Thanks, for the helpful info! Are you based out of Greenville? 

[Brandon Lawrence]

Quote from @Stephen Bruce:

Quote from @Brandon Lawrence:

Quote from @Kevin Sobilo:

@Stephen Bruce, signed estoppel for each unit as part of due diligence under the sales contract.

You need to use these estoppel forms to verify all the details about the oral rental agreement with each tenant. The tenant needs to sign these so that you have certainty that the information you're being told is accurate.

If you don't, the tenant could pull out a written lease after you buy the property or claim the deposit money is more than you were told or that the tenant owns the appliances.

@Stephen Bruce In South Carolina, where month-to-month tenancies default to a 30-day notice period with no formal contract, it's especially important to exercise due diligence. I agree with Keven that obtaining signed estoppel forms from each tenant is essential. These forms provide a written confirmation of the terms of the oral rental agreement and help prevent misunderstandings or disputes down the line.

By having tenants sign estoppel forms, you can verify important details such as rental amounts, deposit amounts, and any additional agreements or responsibilities. Without these forms, there's a risk that tenants may produce conflicting documents or make claims that could complicate the transition of property ownership.

We are a property management company based in the Upstate of South Carolina. It continues to surprise me how many landlords approach us to manage their properties without having proper leases in place with their tenants during the transition.

 Thanks, for the helpful info! Are you based out of Greenville? 

@Stephen Bruce You're welcome. Yes, we are a local company based out of Greenville. We cover most of the Upstate of South Carolina, from Spartanburg down to Anderson.