Hello BP! I finally have my first deal under contract! I knew going into the deal that tenants were m2m but figured i'd just change that immediately after the current leases were up considering I want longer term tenants. Well my agent just sent me a text letting me know that tenants are not in any agreement to live there. I can see this being a problem immediately after closing. Any input/recommendations would be helpful.
There is no problem. Oral month to month contracts are perfectly valid, and transfer along with the property. in fact, this is nearly an ideal situation since month to month contracts give you more control of the property, especially with inherited tenants who we assume were not properly screened when placed. Under no circumstance should you give inherited tenants a term lease unless you have screened them after taking over. You should have tenants and landlord fill out an estoppel agreement that states what current rent rate is and identifies the amount (if applicable) of any deposit or last month rent. (make sure your contract specifies that you get deposits and pro-rated rent when you purchase)
Only thing you can consider requesting is that the tenants be put onto a new month to month lease. the benefit to this, is oral leases can only convey rent amount. this lease is created by accepting rent from the tenant every month. every other stipulation defaults to state law. this means tenant can show up tomorrow with 3 pets and you cannot do anything about it (except provide notice of lease termination) whatever you do keep the current tenants on month to month.
Thanks for the feedback Andrew. I read an article regarding an estoppel agreement recently and will be get on this asap. I'm fairly green to this process, just want to make sure I don't miss anything drastic while at the same time not being scared away with all the small things.
Why do you assume a lease is better? There is nothing wrong with TAW. Pros and cons to each - do your research before you pick one over the other. I exclusively use TAW.
By the way, using a lease because you “want long term tenants” is nonesence. Tenants will leave when they want regardless of a lease or TAW.