Tenant payments after ownership change

[Chad Harris]

Hi all,

How do you normally handle tenant payments that are made to the previous owner after closing and before you can notify them of ownership change and new payment instructions? We asked the seller to notify the tenant's after closing that ownership has changed and they should expect to hear from new ownership but it was already close to the end of the month and payments were already in the mail. For those payments, do you ask the seller to forward them on to you, endorsed over to new owner, return to tenant, etc? Do you put it in your offer terms that seller agrees to forward all future payments to new owner after closing? Do you notify tenants prior to closing to hold payments?

I'm new to the commercial tenant space and was just looking for any insight and best practices to make the transition as smooth as possible. Any help is greatly appreciated!

[Nathan Gesner]

Quote from @Chad Harris:

Your offer to purchase should include a requirement that the Seller provide all documentation and agree to sign an estoppel certificate (also called estoppel form or agreement). The estoppel is a form filled out by the tenant, then confirmed by the Landlord, then accepted by the Buyer. It's supposed to ensure there are no surprises after closing. For example, I often see Buyers purchase property thinking there is a $1,000 deposit but then the tenant claims it was actually $2,000 because they paid the last month's rent. How will you know? An estoppel certificate fixes this problem.

Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.

Here is an example and explanation: Sample Estoppel

Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.