Seller Not disclosing tenants behind on rent

General Landlording & Rental Properties
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Seller Not disclosing tenants behind on rent

Mark Panno
Member since 2019 · 2 posts · 0 votes

Is it illegal to sell a rented property(4 plex in this case) and not disclose that a tenant is behind on rent?   

The rent was prorated at closing as if it was paid for the month of December.

Anyone have experience with this?  

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Tim Johnson
Real Estate Agent · Skagit Valley, WA · Member since 2021 · 256 posts · 283 votes
4y

I have no comment on the "legality" of that. But from a buyer's perspective - it's hard to imagine closing on a 4-plex without asking to see a rent roll report and all other financials (for the past 12 months at minimum) as part of normal due diligence. 

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  • Tim Johnson
    Real Estate Agent · Skagit Valley, WA · Member since 2021 · 256 posts · 283 votes
    4y

    I have no comment on the "legality" of that. But from a buyer's perspective - it's hard to imagine closing on a 4-plex without asking to see a rent roll report and all other financials (for the past 12 months at minimum) as part of normal due diligence. 

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  • Tim Herman
    Member since 2018 · 2k+ posts · 1k+ votes
    4y

    @Mark Panno an estoppel certificate would have solved the problem. The owner would have certified that the rents were current and a valid lease was in existence. The tenant also sign stating the lease terms are correct and no verbal agreements exists.

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  • Adam Martin
    Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
    4y

    Did you ask.  If they lied that is an issue but if you didn’t ask I don’t see why this is something they would voluntarily bring up.  

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    4y

    If you received prorated rent, you received the rent due to you at that time. Any previous rent to the existing landlord is theres whether they collected it or not. Your tenants will only become behind on rent once the next rent payment is due. 

    Disclosure laws vary widely by state. Many states operate on the concept of Caveat Emptor, buyer beware...which means no disclosures need to be made at all. Some states give sellers a choice to disclose or not disclose, and others require mandatory disclosures, but what those are vary by state. 

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