Buying Multi-Family Property / Inheriting Tenants / Leases???????

Question

Hey BP,

My Wife and I really need your help on this one! We're buying a Duplex in Florida that is currently occupied by Tenants. There is a 12 month lease in place for one unit and the other unit is month to month. We plan on occupying one side and keeping the tenant with the lease in place on the other. The Seller provided us copies of the current lease agreements. The Seller provided us a lease from 2012 for the month to month tenant and Feb, 2015 for the current "12 month lease tenant". I'm not sure how that adds up?? The contracts state that "After the initial 12 month period of this Rental Agreement, the tenants may continue to reside at the premises on a monthly basis. All other provisions of this rental Agreement remain in effect." I understand that we will inherit this agreement after closing. There is a clause in section 12 that states "This agreement may be terminated at any time by either party giving 30 days written notice to the other party." Could we just issue a written document to the tenant after closing to start the clock? Is anyone familiar with this process or how to evict someone in Pinellas County, FL? Is it possible the Seller has a more recent lease agreement with this tenant and is concealing it from us? How could we possibly check to see if there are any more recent lease agreements in place before buying the property? It would really screw us if we buy this place and find out we have to wait a year before moving into it. Does anyone know how to fact check the Seller on current lease agreements in place. There has to be a way to do this. We just want to be sure we can occupy in no more than 30 days after closing. Who's got a solution?! Thanks in advance for discussing and helping with this BP Family!

Your Friends,

Chris & Megan

Bruce Ellerd · Answer

@Chris Nelson I agree with Chandra as the estoppel form will tell you the tenants understanding of their rental terms. I think you should get Brandon Turners books on buying and managing rental properties as I got them both and have learned a lot from them and they come with great ready-to-use forms.

I think the seller probably gave you the most recent information. The one tenant signed their lease in 2012 and like the unit so they've stayed on a month-to-month basis. The only thing you need to find out is how much the rent has changed from when the lease was originally signed and when the last rent increase took place. I'm not sure why you'd want to evict a long-term tenant that is paying and seems happy with the unit. Also, if they're month-to-month you don't need to evict, just give them their notice that you're terminating the rental agreement.

Chandra Venkat · Answer

Chris, you can look at the estoppel statement, where the tenant will provide info about the lease and anything else. It is in the book on buying rental properties by @Brandon Turner.

Chris Nelson · Answer

Thank you everyone! This is great information. We added an estoppel agreement to the contract. The seller has been a real pain to deal with and refuses to give the tenant a move out notice. He wants us to do it after closing which we are fine with, though it will take longer for us to be able to move in.

The reason we are getting rid of one tenant is she never pays rent on time and is usually 3 months late. She is a single mom and I think the owner has developed a personal relationship with her and feels bad for her. We don't need this problem on our hands. She was cursing at the realtor for being inconvenienced during the showing. No thanks!!

Plan to get Brandon's books. Thanks again!

Ronald Perich · Answer

At this point, both residents are month-to-month. The lease states 30 days notice. You can give either or both said notice properly (check FL laws on what proper service of notice means). If you are concerned about a backroom deal, then an estoppel is the way to go, but it is not a guarantee of anything.

Unfortunately, even with a 30 day notice, you're not guaranteed you can move in. They could fight it in court. I understand FL is a pretty fair and fast state, so it wouldn't be too long after that to take possession.

Jeff Copeland · Answer

This is actually fairly common, and arguably an ideal situation - you have the property producing income on day one, but also have the option of terminating or altering either month-to-month lease.

Given that both leases now appear to be month to month, you'd want to update the leases anyway with your own preferred contract language and terms. And all you need to do is give written notice to one of the tenants if you need to occupy one side. As noted above, this is not an eviction; Just a non-renewal.

I'm not sure why you'd suspect the existence of "phantom" leases. But reviewing the current leases should certainly be part of your due diligence.

Good luck!

Colleen F. · Answer

Why can't you just have a condition that the seller provide notice to the tenant upon signing contract of sale and deliver the unit vacant? or with proof that the notice has been given? Let your lawyer advise you on how to word this. You can't prevent a holdover but you can make it their problem to vacate the unit.

John Thedford · Answer

You can terminate the MTM agreement by certified mail. I would give a 60 day notice to cover yourself. It is not an eviction but rather a termination of MTM tenancy. If they fail to leave, then an eviction may become necessary. It appears both tenants are MTM, and you might want to consider renewing them with a lease on your terms. You may need to increase deposits, increase rents, change language, etc. Also, you need to familiarize yourself with chapter 83 Florida landlord-tenant statutes. You can find those online. Last but not least, security deposits MUST be held in a Florida institution in a segregated account. I suggest a non-interest bearing checking account at a local bank in the same town.

Chandra Venkat · Answer

Here is a file from the resources section, https://www.biggerpockets.com/files/user/kp1/file/estoppel-agreement you can ask them to sign it to provide the details.

Buying Multi-Family Property / Inheriting Tenants / Leases???????

Buying Multi-Family Property / Inheriting Tenants / Leases???????

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