New Rental, Existing Tenant

10 Replies

Good evening! I should be closing on a rental property in Baltimore in early June. The previous owner has a fabulous existing tenant who has signed a lease until May 2019. From what he’s told me she’s been a model tenant for the last 2-3 years and I would definitely like to keep her. I’m sure she signed a lease with the previous owner and gave a security deposit. Has anyone previously been in this situation? What is the best way to handle the transition? Should the lease with the previous owner be voided and her deposit returned? Then she could sign a brand new lease / submit a new deposit with me. Advice is appreciated. :-)

Hi Chibu,

When you purchase the property, the lease will transfer to you. Make sure you introduce yourself to the new tenant and be clear about where payment should be made and how they can get maintenance help. The security deposit should also transfer to you. Make sure you see that on your settlement statement.

I hope that helps! I wish you the best.

I agree with Jonathan, you purchasing the rental and acquiring the tenant means nothing to them except they pay rent to you and your responsible to uphold their current lease.  Their deposit including any non-refundable deposit should transfer to you during closing.  I just closed and was given a check in the amount of both tenants deposits.

Right away you want to call and transfer any utilities that the previous owner was paying, as well as call and set up a time to introduce yourself to them, as well as lay out clear guidelines and expectations as to what to expect with you as the new owner, ie. where and when to send payment, contact info and info on what to do if there are any issues that need to be addressed.

I just closed on a new duplex and acquired tenants, i called right away and started service for water and garbage for the tenants, as well as met with them in person, I showed up with a copy of their current lease agreement for them to have as a refresher, a basic rental application for them to fill out to make sure i had the most current information about employment, tenants, contact info, as well as had them make a list of concerns and things that need repair.  My tenants are on a month to month lease, at this time i also gave one tenant notice to rent increasing and the other notice that i would be not renewing their lease.

Good luck and be open and honest with them!!

The existing lease transfers with the sale of the property. You have to abide by it, as does the tenant, unless both of you agree to negotiate something different.

I recommend you keep the current lease in place. Find out if the tenant is really as good as they say before you sign any extension or renewal.

I also recommend you get an estoppel certificate. What's is an estoppel certificate? I'm glad you asked!

The estoppel certificate is a form filled out with the tenant, confirmed by the Landlord, and then handed to you as the buyer. It's supposed to ensure there are no surprises after closing. For example, you buy the place and the tenant could claim the Seller allowed them to paint the walls black or that their security deposit was $5,000 when the Seller told you it was only $1,000. 

Some things it may include:

1. Tenant name, contact information, and address

2. Occupancy date

3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate

4. Are there any modifications to the written lease?

5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?

6. Current lease term (expiration date, month-to-month)

7. Current rent rate

8. Rent due date

9. Security deposit amount

You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.

Here is an example and explanation: https://eforms.com/rental/estoppel-certificate/

Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.

Good morning, unless the rent is terribly under market value I would keep her. Is there any reason why you would like her evicted? 

Ask yourself, “What benefit is there in having that unit vacant?”

I’m not a lawyer so I will not discuss details of less other than it probably transfers. 

Good luck

In the closing process the seller will transfer deposits to you. You must honor the existing lease with the tenant until it's expiration. You can ask them to sign a new lease with you but they don't have to because they already have a contract that follows the property not the owner.

You need to take the time now to study/learn all your state landlord tenant regulations. They govern the operation of your business. If you do not want to risk having a tenant take you to court you had best start studying now before you take ownership.

Originally posted by @Bradford Clark :

Good morning, unless the rent is terribly under market value I would keep her. Is there any reason why you would like her evicted? 

Ask yourself, “What benefit is there in having that unit vacant?”

I’m not a lawyer so I will not discuss details of less other than it probably transfers. 

Good luck

 @Bradford Clark 

Having her evicted is the absolute last thing I want to do! I just wanted to make sure legally I was following the correct guidelines. Sounds like there is a way I can do this without making her sign a new lease.

Originally posted by @Dick Rosen :

In the closing process the seller will transfer deposits to you.

 That is an important point, I wanted to emphasize it again. Unless your contract to purchase the property specifically says otherwise you are entitled to the security deposit. You will be responsible for crediting it back to the tenant when she eventually leaves. (whether you get it at closing or not.)

One piece of advice. Although it is generally a given that the lease will transfer to you at closing, you need to make sure. I recommend two things: (1) read the lease to make sure there is not a clause the prevents assignment and (2) create an assignment of lease document and have the tenant and the owner sign it. If you follow these steps you can increase your certainty that everything will transfer as you expect it.