Renters without rental/lease contracts

5 Replies

I will be buying my first property soon.  One of the possibilities is a 5 unit and 3 units do not have rental contracts.  Can I have the tenants sign contracts during the escrow process? 

Any other Ideas I would love!

Since there is no written lease, you should be able to require the existing tenant to sign a new one or move out.

@Coy Barnes   The fact that 3 of the 5 tenants have no lease may be indicative of how tight of a ship the current landlord runs.

Make sure to verify what they pay in terms of monthly rent, with no leases they can tell you any amount.  Verify what they pay and that they actually pay.

Are the numbers good on this deal?  Is this your first rental?  Just take the time to do your due diligence, taking over a property where the majority of the tenants have no leases can be a sticky situation where experience definitely helps.

Personally, I would run my numbers as if I will have to evict the 3 tenants without leases.  if they willingly sign a lease at a market competitive rate than great, if they aren't you have to be prepared.

Also, if they have no lease, I am assuming they did not get a background check run on them either.  You might want to do that as well.

I agree with @Michael Noto  run your numbers assuming the worst possible scenario. 

@Coy Barnes  I think you mean ask them to sign once escrow is complete and you're the legal owner. You might be able to work out some leasing concessions with the current owner during the sales process but don't hold your breath.

Some Tips

  • Check to see what market rents are in your area.
  • If they're paying substantially below market rent you might have a fight on your hands. Be professional and courteous. 
  • You might want to also send out a survey to each of your tenants to make sure you know the names and contact information of everyone occupying each unit, the total number of minor children, etc. 
  • Most landlords I know require their tenants to get Renter's Insurance. You might consider requiring this in your lease in addition to the security deposit. Why? Because it gives you one more avenue to collect if the tenant destroys the property.
  • "Cash for Keys" might be your most effective option. But, in that case you may be putting out $500 to $1,000 (or more) per tenant to get them out. Factor that into your numbers!
  • Going forward, do yourself a favor and find a flat rate eviction attorney. You send them the paperwork, they take care of the process for you for a fixed dollar amount. Everybody wins.

@Michael Noto  I couldn't agree with u more! I would be nervous about no leases on 3/5 units? . And why didn't current owner get leases signed before putting it on the market, at least? 

Smells fishy. And move outs  or evictions because of any lack of cooperation in signing leases after COE expensive!! 

Buyer needs to see all financials and payment history for the past few years and have the current owner sign each page of everything as true and correct representation. 

Dunno...not a good feeling about the current owner's integrity. Maybe I'm over the top buyer beware. But thats how my experiences have taught me to be. 


 Thank you all for your replies!  I really appreciate it.  I would much rather have an easy first one, and am still not sure of how this will come out.  I will say this.... The numbers just started looking better with your input!  I am now more concerned about the extra work involved with evictions and repairs too.  

Thank you again.


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