New owner, current tenants w/no lease, rents below market, no security deposits

[Adriana Sirignano]

Hello Everyone, I'm in the process of buying a multifamily. All the tenants want to stay but none have had a rent increase in over 4+ years. The rents are literally $1200 below market value. The previous owner hasn't done any upgrades and it's very dated!  They were fine with the low rent because the property is paid off, tenants didn't complain and they didn't have to upgrade anything. The owner informed me he does NOT have any security deposits or last months rent and they are all TAW. There is an extra vacant unit which I'm willing to have the tenants stay, while I do some renovations. So my questions are: 

1) "MUST I" or should I get a security deposit from each tenant if they want to stay?  

2) How do I go about informing them that the rent is going up an extra $1000

3) If I give them new leases, how do I collect the Security deposit to put into escrow? I'm trying to do things legally. But if they haven't had a rent increase, I'm concerned they will have problems trying to afford the increase and pay the proper security deposit, as well as paying the last months rent as well.

I know the rent increase is going to come as a shock. But it also cost money to renovate and bring the property to updated standards.

I'm due to close in July, so when should the tenants be updated with the upcoming changes? Because as of now, I do not own it. Should the current owner give them a heads up? 

Thank you all for the input, it's greatly appreciated.