So I have an accepted offer on a duplex where the bottom unit is currently occupied by the seller's son, who wasn't paying any rent at the time - I knew this before I made the offer.
I spoke to him (the son) briefly yesterday as I was at the property for the home inspection - he said that him living there has been part of his "compensation package" from his father for managing his father's properties. Obviously that is going to change. He also seems like a pretty reasonable guy and keeps a tidy apartment. I can see it from his perspective of going from paying $0 in rent to paying $X is rough, but I certainly don't want to get into a negotiation after closing with the son.
My question is - I got the inspection back and plan on making some requests anyways - should I / can I require that I have a signed lease from the son before closing?
I may prefer to have the unit vacant at close... I would feel uncomfortable renting to someone closely related to the previous owner that has no recent history of paying rent. You could screen them the same way you would screen anyone else and verify income and all that, and if it's all good, go forward with it.
I would definitely want a signed lease at closing if you decide to keep him. Vacant at closing is definitely cleaner, then again if you already know the guy takes care of his place and he'll agree to market rent you could be booting someone who has potential to be a good long term tenant. And his family may be reluctant to sign that addendum if you already have an accepted offer that doesn't mention him vacating.
Either way you go have it resolved at closing, I just went through this on a house hack where one tenant had to leave for me to occupy and it took a lot of pressure off my end knowing that I don't have to handle that situation myself after closing.
I was in a similar situation a few years ago, with a duplex. The seller's brother had been living rent-free for about 10 years on one side. The other side was vacant. Other than being used as the whole extended family's storage unit, lol. I thought about requiring both sides to be vacant before closing. But, it was such a phenomenal deal, I just included "worst case" eviction costs into my numbers. With that said, I live in a landlord-friendly area and it would have taken me 4-6 weeks tops, to have evicted this person if he hadn't left at the end of the 30 day notice to vacate.
I knew he didn't have enough money to pay any rent. But, more importantly, the unit was in poor condition and I didn't think anyone should have been living there. Nothing he had done. Just seriously deferred maintenance. So I posted a notice to vacate, right after closing. I offered him $600 cash for keys if he was out in two weeks and the place was in the same condition. Or, $350 cash for keys if he was out in the 30 days. He ranted and raved that he needed 90 days. He was super resentful. He even claimed he had no idea the house was for sale. Which was a ridiculous lie. He was on a first name basis with the agent and I'd MET him while I was there for the inspection, smh. At any rate, I explained I was only required to give a 30-day notice and was not required to give him any money to move. I was choosing to, in order to make the process easier for both of us. So if he literally just followed the law, he'd be rewarded for it. He was out in 30 days and there was no additional damage. Win-win.
More than likely, keeping the son as a tenant is not going to work out well. A large percentage of the population are "paycheck to paycheck" spenders. He is already used to not paying rent and may not easily have that in his budget. Maybe if the rent would be on the lower side for the area anyway, but it just sounds problematic. I know you said he is reasonable. But if he has bad feelings/is annoyed/feels put out by his father selling the building, there is a good chance he will take that out on you and be non or late paying and/or a PITA.
Request vacant at closing. Keeping a relative on after purchase is guaranteed to be a mistake. Get rid of him before closing.
Get an agreement in writing at a minimum with being vacant preferred.
Those that are paying nothing(especially family) are not likely to want to pay something
I'd recommend not keeping the tenant, but if you do screen, screen, screen! Stick with a set rental criteria and if he doesn't meet your standards, give him a 30 day notice to vacate (or whatever is required by your state).
Thanks for all of the input everyone!
We are still weighing my options at the moment but leaning towards having him apply for the rental, agree to the lease (assuming the credit / bg check isnt negative) before closing and if not (if he doesnt agree or the his credit profile is poor) then asking to vacate within 30 days
I would insist on an estoppel agreement. This will outline what he is entitled to at closing. It is very important. Reason being if he has a lease you are bound by it. So if you choose to "let it kind of ride until after closing" then a day before his father can sign him to a 10 year lease at $7 a month. I will give you a guess who is bound to those terms for 10 years.
The next important issue ... does he want to stay? If it looks at all odd, I would ask for a vacant unit, but keep in mind he does have the rights of other tenants and it may be 60 days to get him out depending on your local laws. That would slow down your closing.
Well as it turns out the tenant isn't staying... so while I am bummed at needing to fill two units right off the bat - I am glad to have a clean slate and to be able to dictate my own terms
Don't resign yourself to the fact that they are not staying until they actually leave. When a tenant says they aren't staying, what they mean in some situations is they are aren't paying. ;)
I learned early on never to rely on what a challenging tenant says they are going to do, but what they actually do.
"Well as it turns out the tenant isn't staying"
Get it in writing. Trust has no place in this business.