We have an opportunity to purchase a mid size apartment building (33 units pre 1978) where the current owner has not given any tenant lead based paint disclosures to the tenants to sign. During our due diligence we have asked to have tenants sign estoppel certificates and lead paint disclosures and the sellers said "no". They don't want the tenant's to know the building is for sale and they are scared of the lead paint issues. Is this a good reason to walk from the deal or would we be ok with getting these items signed after settlement. We are getting a decent deal and although there are some discrepanices on the leases but we have all the leases. We will need to make renovations but I don't want the liability of having no lead disclosures upon settlement.
It's my understanding that MD requires not only disclosures but lead testing between tenants, special registration of property, lead certified contractors for renovations, and huge issues if he is not in compliance, so not only would I hesitate, but I would require proof that proper registration and proper lead testing has been completed. It used to be just 1950 and back for required registration, but now it is 1978 and back. And I would consider calling proper agencies to let them know he may not be in compliance as any future owner could be buying a huge problem and tenants could be at risk.
To me that is a major red flag. You can probably assume that the building has lead paint and while you won't be liable for failing to disclose it all those years, you might be on the hook for remediation after you buy it.
I don't know the laws in your area. In RI, basically everything is an older building, so I get every unit lead certified. If it is exterior paint, depending on the exposure of the house, you may need to have it abated which equals big money. If it's interior, prep and paint, and as long as the lead is encapsulated, you should be good to go. When you sign your lease with your tenants, provide them the lead disclosures to sign.
@Natasha Sumner If I were you I would not give in on the tenant estoppels being signed. The reason the landlord doesn't want to have them signed is because he is either hiding something or simply does not want to go through the long process of getting this done.
Getting estoppels signed when you are a landlord is a complete nightmare to coordinate because typically they need to be notarized.
While I get him not wanting to do it, it is a must for you. You made the offer based on the current rents and that leases were in place. The estoppels confirm that. If he still balks at them I would tell him that you want a reduction in price to make up for them not being signed.
Without those estoppels you really in theory have no clue what you are walking into. You are basically taking the sellers word for everything.
As a EPA lead certified renovator, don't take it lightly, we are required to wear overall suits. That's considering you do it the right way and don't cut corners. Time spent on this is almost 30-50% more, if you're paying x per square foot, then expect to pay double that. That is just the remodel part of it, the abatement part is another story.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing