Buying a property with existing tenants

[Daniel Karbownik]

I just got my first rental under contract, and it's a no-money down deal! (I will post about this separately).  The rental currently has tenants in place that are on a month to month lease.  I know there are a lot of other posts about this topic, but none of them really addressed some specific questions I have.  

1.  I understand that a normal lease would have to be honored with the sale, and that with a month to month I can pretty much re-sign the current tenants on a lease, or give them notice to get out.  But what stops the seller from signing a year lease with the tenants for $1/month the morning of closing?  I'm assuming the buyer would need to honor that?

2.  Is there anyway to assure ahead of time that the tenants are not in arrears on any rent?  If I ask for an income/expense statement for past 2 years and the seller doesn't have one because he is just "bad at record keeping", is there any recourse?

3.  Should I get a copy of the current month to month lease or most recent annual lease?  Does it matter all that much since they are on month to month and I would be having them sign my own lease upon sale? 

4.  I've read a few things about the estoppel agreement, but don't really have my mind wrapped around it fully.  Can somebody elaborate on it?  Who writes that up? When do you get it?

[Larry Turowski]

1. The seller should provide the lease for closing.  In NY closing happen with an attorney and the seller provides the lease agreement.  I suppose in either case they could sign something with the tenant right before sitting at the closing table but this would be fraud.  I'd think they'd have little to no incentive to do this and great incentive not to do it.

2. I didn't know that about an estoppel certificate before reading your post, but you could require one or something similar--maybe something signed and notarized by both the owner and tenant stating there are no arrears, amount paid to that point, amount of rent currently, etc.  Here is a sample tenant estoppel: http://www.wikinvest.com/stock/Hi/fn_(HIFN)/Sample_Form_Tenant_Estoppel_Certificate.

3. Yes.  If you close in the in the middle of the month and rent is due on the 1st, the seller will have to give you the prorated portion of the rent for the days that you own the property that month.  You'll want a copy of the lease anyway.

4. From my bit a reading just now it sounds like it like a sworn statement.  It can have whatever information you deem pertinent in it.