New owner, new lease?

Question

So we are purchasing 4 SFH with existing tenants. My question is this...since the tenants are contracted with another company (seller), would it be in our best interest to have them sign leases with our company as soon as we take ownership or do we wait until their term is up?

Thanks

Account Closed · Answer

As others have said, send the tenants a notice that you're the new owner and should send their payments to you, etc.  You'll have to abide by the leases that are in place--unless a tenant is willing to sign an addendum to the lease to change things.  If the property was built before 1978, you should also make sure you have copies of the lead disclosure forms signed by the landlord and tenants.  If the previous owner did not provide these, you should give the tenants the EPA booklet "Protect Your Family from Lead in Your Home" and have them sign the rental lead disclosure form.  If you get sued for lead poisoning or the EPA comes snooping around, you'll need proof that the disclosures were done--sadly, there are still many landlords that do not know about his or do not do it.  The fines are huge for not doing it and the liability for a huge civil case is increased dramatically if you don't have the proper records. And, don't forget to ask for copies of the beginning inventory checklist.  All the best!

Nicole Benischek · Answer

These are all great recommendations. I appreciate it!

Lois Ginter · Answer

I'm inheriting tenants that are on month to month.   The previous LL leases were weak, I am going to get new leases after closing, but before the end of the month.  I have one tenant that would have never passed my background check standards, if he doesn't agree to sign, I can give him 30 day notice then.

Frank Dimino · Answer

Local laws will take precedence, so you may or may not have that option.

You should get copies of all leases and estoppels for each property before closing.

Look over the existing leases, they could be better than the ones you have, or a few

sections you may want to add to yours. In our area the existing lease will continue unless you have them sign a new one.

My advice is never buy a rental without first seeing the lease(s) and having the estoppel(s) done.

At least you know the rent figures are agreed upon by the landlord & tenant.

Kelly N. · Answer

In Michigan, we have to use the exiting lease.  It may be different where you are.   I let the tenants know who we are, that we purchased the house, and how to pay us and who to contact with any issues.  I get as much info as possible from the previous landlord and try to get the tenants to fill in any gaps.  They are not usually very cooperative in this, but that doesn't necessarily mean they aren't good tenants.

When the end of the lease is approaching, we offer a new lease to start when the old one ends, but  about half have already planned to move on and had been planning that since the property was put on the market.  That being said, I invest in a college town and tenants that stay more than a year or two are rare.

Before we renew, I get an application and run a background check on everyone at my expense.  It isn't their fault that the old landlord didn't do this or didn't pass the info on, but any new tenants would have to pay for the background check.

Hope that helps,

Kelly

Mark Limke · Answer

The lease itself should shed some light on this. I would think it would have some language that says the lease survives a change of ownership, such as "Pleasant View Properties LLC or its assigns." I'm no attorney, but that's where I'd start, by reading the contract carefully. I bet there are answers to your questions in it! And have the real estate attorney you use (hint, hint) look at the leases.

Also, look at each lease. Don't assume they are all the same. They may not be. You don't want to end up in court because you assumed something not true.