Inheriting Existing Tenants

21 Replies

Hi everyone! Brand new to BP. We are in contract on a property that has 2 houses: a 3 bed 1 bath "main house" next to a 1 bed 1 bath "apartment" which both have existing tenants. We close on July 1 and have sent a message to each tenant (through our Realtor) about the rental amount we are asking as well as an application for them to fill out if they are interested in staying. I am curious to know what the traps are for keeping an existing tenant in place, if any. We will screen them the same as we have our other tenants and ask for a security deposit. What should be at the forefront of our minds? Thanks!

Hi Tracey,

Welcome to BP and congrats on your new property.

I am not familiar with the laws in Ohio so my first piece of advice would be to get a copy of the current leases and have a RE attorney review them. In some states you will have to honor the terms of the current lease. If you want to change anything, such a rental amount, you often have to give them a certain amount of advanced notice, typically 30-60 days.

Second, you should be collecting the security deposits from the current owner (seller). The tenants should not have to give you a new security deposit.

Again, you need to familiarize yourself with the laws in your state and city, if you're not already, before you start making changes to the terms of the lease, etc.

Best of luck!

Eric

You most probably need to honor existing rental agreements. If they live there month to month, be aware of the dead line for notices. It is spelled out in the existing leases, which you hopefully have gotten a copy of from the seller.

Interesting Eric. There are not existing leases. The landlord, from what we have been told, is renting to her brother in the smaller unit and to friends in the larger unit. There are no security deposits either. Thoughts on this? Either way I will check the law.

i just did one like this, but did it a little differently. i met the tenant and talked to her before closing. i didn't hide behind a letter, just went to talk to her. and i listened. and listened. she was happy with the condition of the house, which makes it our worst looking house. she was paying on time, so i was ok with that.

i promised that i had to keep her current lease for at least a month after closing. so i had her sign our application and lease after that. both parties were happy.

Hi Tracey,

That is an interesting situation and can also be tricky. First, I would confirm there is no kind of written agreement in place. Second, if there is not, I would be sure to either have a signed lease before closing on the property or have the tenants out. If you close on the property and do not have some type of formal agreement, for either situation, you may have a hard time getting the tenants out.

Eric

George I like how you did that with meeting them. I wanted to do that too but wasn't sure about the appropriate path. I thought it more appropriate to work through our Realtor to their current landlord that they have a relationship with to them. Perhaps I can get permission to speak with these folks and open up that communication channel that served you.

we asked their realtor if we can talk to her. they said "yes", so we just went and talked to her. majority of the talking also happened during the "showing" as well. good luck.

I think you need to get legal advice. You are not the current owners and I doubt you have any legal standing today to notify the tenants of change the rent as of July 1. If I were the tenants I would ignore you until you closed and proved you owned the property. If you have month to month tenants and you close on July 1, you would then have to give whatever advance notice is required by OH law in order to raise rents or change terms of tenancy.

A better course of action might be to have the current owner give notice of change of rents now. That way when you close, any rents collected are prorated based on your desired rental amount, and going forward the rent is set at your rate. At that time the tenants can sign a longer term lease with you or they can vacate.

oh, i somewhat agree with @Account Closed . it is too early to get them to sign anything. they are not your tenants, so even if they sign they can say "she didn't own it then".

that's why i got mine to sign after the closing.

the reason for talking to them BEFORE closing was to get them evicted if they are not paying/terrible/argumentative from the start.

i dont agree with the "legal advice" part. you'd pay a lawyer just to tell you the same thing.

Originally posted by @George P. :
oh, i somewhat agree with @K. Marie Poe . it is too early to get them to sign anything. they are not your tenants, so even if they sign they can say "she didn't own it then".

that's why i got mine to sign after the closing.

the reason for talking to them BEFORE closing was to get them evicted if they are not paying/terrible/argumentative from the start.

i dont agree with the "legal advice" part. you'd pay a lawyer just to tell you the same thing.

I'm not stickler for where the legal advice comes from. Doesn't have to be a paid attorney. Even a call to a local landlord association to confirm requirements for changing rents might be enough.

The internet has made free info available to both tenants and landlords. Even tenants without a computer can go to the library. Tenants without funds to pay rent or who don't want their rent to change can easily find out what's legal and what's not. The days of making requests of tenants wily nily are pretty much over.

The good news is that I sent my "letter" to my Realtor and have confirmed she did not send it on to them. So I told her not to until I figure this all out lol! You guys are great for helping, thank you! I should have been more respectful of the tenants. One of the tenants is paying hundreds below market value in rent because she is a friend of the current landlord.

Originally posted by Kristine Marie Poe:
Originally posted by @George P.:
oh, i somewhat agree with Kristine Marie Poe . it is too early to get them to sign anything. they are not your tenants, so even if they sign they can say "she didn't own it then".
that's why i got mine to sign after the closing.

the reason for talking to them BEFORE closing was to get them evicted if they are not paying/terrible/argumentative from the start.

i dont agree with the "legal advice" part. you'd pay a lawyer just to tell you the same thing.

I'm not stickler for where the legal advice comes from. Doesn't have to be a paid attorney. Even a call to a local landlord association to confirm requirements for changing rents might be enough.

The internet has made free info available to both tenants and landlords. Even tenants without a computer can go to the library. Tenants without funds to pay rent or who don't want their rent to change can easily find out what's legal and what's not. The days of making requests of tenants wily nily are pretty much over.

that makes sense.

I have left a message with my local landlord association. I also sent an email to my lawyer about this. Thanks @George P. and @K.Marie.Poe.

Any thoughts to using an Estoppel agreement at this point to establish the current situation? I believe that from what I have read on BP that I can use this ahead of closing and have it signed by the landlord and by the tenants. From that point I could have a better direction of what to do?

@Tracey Marzich

First off, welcome to BP. There's lots of great info here and knowledgable people. We're from Kirkland, WA. Have you seen the BP guide to screening tenants? You can find it here: Screening Tenants I like the idea of finding a local Landlord Association and getting your questions answered.

We have experience inheriting tenants. Our thinking back then was, great! we don't have to go looking for tenants. The problem in a lot of these situations is the seller is gettng rid of a problem. They really don't care who is in the place or whether they are even paying rent. I would establish your own criteria and stick to it. If they don't meet your criteria, don't bend your rules just because they are there. You could end up with more problems than it's worth.

If the tenants do not have a rental agreement in place, they are likely tenants on a month to month basis. No rental agreement is really a poor idea, so that tells you something about the situation right off the bat. You will need to honor landlord tenant law in your state. The laws can be very picky about how you do things and if you do them wrong, you could end up wasting a lot of time and money. In WA, for a month-to-month agreement, we need to give at least 20 days notice before the end of the rental period to make changes or to terminate, but it is likely different in your state or jurisdiction.

If I were you, I would get on top of the situation and have a plan ready. Maybe some Columbus, Ohio BPers could chime in with some advise.

Good luck.

Hey Tracey - is this property in Columbus?

@Tracey Marzich i would like to state that no matter what the current agreement is your soon to be tenets are be default on a month to month lease. in ohio a verbal agreement still counts in court ( good luck proving what was said but it is still legal in ohio. ) so your realtor should have had a clause in your contract that one of two things happens before you close, 1. the current tenets be in a new lease with you starting on the day of closing or 2. the current owner have removed both current tenets and the houses be completely empty for you to start fresh. both clauses would give you cause to stop the closing as once you close if the new lease isn't already signed or the houses are already empty it will be your responsibility to get new leases signed or evict the current tenets. these are the clauses i use when working with investors as they are what protect you. if you close and there are no leases signed they by law are still in a month to month with what the "current" rate is that they have been paying and you will have to serve them with a 30 day notice to move out if you wished that at that time. i hope this is of some help.

thanks @Jeremy Davis ! Tell me at this stage of the game what you think I should do? I have asked an attorney but haven't heard yet from him.

Is it too late to amend the contract as you suggest?

An article here suggests using an Estoppel Agreement to get consensus on what the current deal is between the tenants and landlord and then move on from there. What do you think of that?

hmm good question, you are kind of stuck at the moment. you are in a contract and your realtor should have added those clauses to help you. i have faith in the other realtors tho so maybe double check your contract to make sure he/she didn't add it in there for you????

and the other thing i have to be careful as I'm not your agent and I'm licensed in ohio, but have you called and talked with your agent to see if he/she can help with with this matter? and if they say no i would ask them why they didn't add those clauses to your original contract?

hmm have you thought about eating the 1st months of rent and just serving them with a 30 days notice. if you financed the house you won't have or at least you shouldn't have a payment the 1st month so maybe collect the little rent you can on the 1st and hand them they 30 day notice. and hope they ether move out or agree to your new contract.

@Jeremy Davis good idea! I think we can do that about the 30 day notice. I will try and get permission to call each directly and discuss it with them. Thanks!