I try looking this question up but nothing shows up. Maybe the way I type it into the search engine.
I'm planning to buy a duplex and it tenants occupied.
How do I work this out with the owner or what needs to be done here? What do I do with the existing tenants? Re-sign contract, re-screen, etc.
@Tou Vang - you have to honor the leases in place by law. If they are month to month, then you provide appropriate notices. Be sure to study the leases as part of your due-diligence...
Hope this helps!
I manage properties and have had some clients that have bought occupied units or I have taken over for their previous managers. First check your local laws. Here in Missouri I have to honor an existing lease unless I can get the tenant to agree to my terms and have them sign my lease. If they do sign my lease, usually don't extend it past the period their lease would have been. I want to know they are good tenants before I lock them into a longer lease. Second, ask he seller for the rent ledger to make sure the tenants are paying on time. Lastly, and possibly the most important, make sure the security deposits are transferred to you at the sale. I know in Missouri, deposits are supposed to be held in a separate account.Technically that is not the seller's money, it is the tenant's and you don't want to be responsible for money you never had in your possession. If I know my client never got the deposit I tell the tenant as soon as possible so they can contact the person they paid their deposit to.
How do they acknowledge the change of ownership? Do we have re-sign the leases again under my name?
@Hannah Robie Thanks for the feedback.
Where is a good place to get a decent lease contract?
I wrote my own. You can search for leases for your state online to get some examples of what you need to have in there. Just make you you have an attorney glance through t to make sure there isn't anything that will get you in trouble.
We have bought two occupied properties. In one case, the previous owner notified the tenants of the change in ownership, the other did not. In both cases, we let them know via letter who we were, where to send rent payments, who to contact with maintenance issues, and that we would honor their existing leases.
Make sure you get the security deposits transferred to you at closing, along with prorated rent for that month!
What I usually do is have them sign my lease, just remember if there is something in your lease that is not in their existing lease and they don't agree, you can't hold them to it. I usually stop by the property or post a notice informing them of the new ownership/management and go from there. Sometimes these people have no idea and are shocked when I come knocking on their door.
I didn't see this one in the responses so I will mention - depending on local laws, you will want to have the tenants and seller sign estoppel letters. If you do a search on BP you'll find more details, but it's basically a letter for each tenant laying out certain lease details, who lives in the property, if the tenant owns any of the fixtures/appliances (this is an important one), and other stuff. These have been useful for me in buying already-occupied homes.
@Tou Vang At closing the leases get assigned to you. The seller needs to sign that. You can have the closing attorney write the simple document or do it yourself and save the $150. I am sure there are templates in the net, maybe even on BP in the document section. After closing you need to give the tenants, who are named on the lease, a copy. At the same time you can check if all residents are actually on the lease. If not, tell them the tenants on the lease are in lease violation and have the other ones sign an addendum. Obviously, you should screen them first.
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