Inherited tenants, no lease

6 Replies

I’m in the due diligence phase of my second rental purchase. It is an off market deal and the seller does not have a lease agreement (the tenant has also confirmed). The current tenants have lived there for 10+ years and are below market rent. I will keep the current tenant if possible and the only raise in rent I would immediately impose is to have them start paying the water and sewer. Can I simply have them sign my lease after I take ownership?

Any insights/advice would be appreciated. 

Please help!

Hello. If they're not on an active signed lease you can create a new lease for them to sign. 

@Kyle Beckwith , Check your state's landlord-tenant laws, but most states have a 30 or 60 day notice requirement to change anything. Meaning you are required to give 30 or 60 days notice before your lease can go into effect.

If all you're doing is having them start paying utilities, it's most likely they will sign your lease. Tell them in advance of closing, then schedule a time to have them sign your new lease after closing. You can't have them sign a lease with you until you own the property.

It's considered month to month ,, verbal lease agreement,, USUALLY even if there is no written lease..

Check your state landlord tenant laws.. 

The norm is you are still required to give them proper notice of any changes so if they pay rent on the 1st you would need to give them notice by the 3oth of Nov,, that you will be changing to a written lease as of Jan 1st and this is the terms of the new lease, rate, utility,, what ever,,..

I would suggest you do this if you close before Dec 15th,, give them written notice (15 days extra, prior to end of month of Dec... that as of Feb 1st the change will take effect.

This gives them about 2 weeks to ponder if they are going to accept or if they are going to give there 30 days notice to vacate to you by Dec 31, that they will leave Jan 31st.

Get a lease renewal form made out,, Check forms here on BP

Also do a walk thru within a week of ownership, have them fill out a contact info form for you, Give them your info how to pay, emergency numbers,, and realize their sec deposit,, (they say is none,, no lease right) isn't going to cover any on going damages.. so I'd tell them your going to require a sec deposit with new lease,, Condition of Apartment from date you close is now the NEW conditions check sheet you should fill out to hold them responsible from that date going on.

What ever you decide to do make sure you only offer a M2M lease if you wish to remain in control of the property. They have been on a verbal M2M lease likely for years so should have no issues with a written M2M lease.

You are making a mistake not raising the rent to market at the same time. Tenants expect it and by holding off when you do raise it they will feel you are nickel and diming them. Why choose to supplement a tenants rent when you do not have to. Tenants paying market is the proper business approach.

Rip off the band aid and get it over with all at once.

Originally posted by @Kyle Beckwith :

I’m in the due diligence phase of my second rental purchase. It is an off market deal and the seller does not have a lease agreement (the tenant has also confirmed). The current tenants have lived there for 10+ years and are below market rent. I will keep the current tenant if possible and the only raise in rent I would immediately impose is to have them start paying the water and sewer. Can I simply have them sign my lease after I take ownership?

Any insights/advice would be appreciated. 

Please help!

Do yourself a favor. Put a contingency in your contract that you will ONLY close the deal if you have the property vacant on the day of closing. Also you will only accept the property in the condition it was on the day you signed the contract. Which means the old landlord has to kick them out.  Put the onus and the responsibility of dealing with the old tenants on the seller. 

I am learning from my mistake right now, that DO NOT ACCEPT inherited tenants. You don't know who they are. You haven't screened them. They don't know you, and have no respect for you. Trying to evict them after the fact ends up being a delicate hostage situation. They can potentially trash your property. The landlord will always paint the rosiest picture of the tenants.  My seller told me that the tenants are angels. In reality they are one step above thugs. LOL. 

In small multi family units and SFH you can do this, but not feasible in big commercial buildings where most likely there is going to be leases and better record keeping.

Good luck. 

Updated 7 months ago

Not to mention in situations like these, any attempt to raise rents can be met with fierce resistance.

@Kyle Beckwith   Good long-term tenants are worth keeping. Starting out without a rent raise and instead having the tenant assume other costs is reasonable. We always try to save tenancies when we buy a tenanted property. We meet with our tenants as soon as we can after closing. We also prepare a letter of introduction and introduce them to our management style. If all parties agree, changes to a verbal or written rental agreement can be made at any time, so offer a reasonable contract. Make it a win-win.  If the property is worth owning, don't make the current owner deliver it empty.... you might lose the chance to buy it!  You probably have a sense that the current tenants of 10+ years are worth keeping. You probably also know that with a good month-to-month rental agreement, you can begin your relationship in a respectful, professional, and friendly manner.... and still bring rents up if necessary over time.  I wish you the best!

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