Credit from previous owner, make sense?

Question

Hi experts!

Just bought my first SFH rental, occupied with tenants. I closed the deal at 1 June.

Apparently (just found out) , the previous owner promised the tenants, half price credit for both May and June (even that we closed the deal on 1 June) for making them show the house for different people.

Is that legitimate? Do you think I should follow it (the credit)?

after all, I didn't promise it, I wasn't told about it by last owner.

In addition, I had to send inspector twice, in May, since the tenants were not there to allow him in (after scheduling with them) the first time. Old owner told them, they should pay for that, but they are making a lot of noise and resistance.

Also, the lease ends at 31 July, only 2 month with them left. I am not sure how to respond. On the on hand I don't want troubles, and ok to lose some money for sake of order. But on the other hand I think it is not right, that I should get the money (full price of June and money for the inspection).

What do you think about this situation? What would you do instead of me?

We are talking about c+ neighborhood.

Thank you very much for your help!

Nathan Gesner · Answer

@Idan Narotzki I don't think it's a legal transaction. The Seller can't promise reduced rent for a time period that he doesn't own the property. If he wanted to reimburse the tenants for showings, he should have done that when he owned the property and the money is coming out of his pocket. He can't obligate you to pay something unless it's in writing and signed by all parties.

Contact the Tenants in writing:

Dear Tenants, you've told me the owner offered a reduction in rent in exchange for the inconvenience of showing the home to prospective Buyers. Unfortunately, I was never told of this agreement, nor did I agree to it. If the Seller promised you compensation, that is his responsibility to pay. I am adhering to the terms of the lease, which is what I purchased, and expect you to pay your rent in full.

If they keep complaining, ignore them. You don't have to keep giving them the same answer over and over.

If they fail to pay what is owed, start the eviction process.

Caleb Heimsoth · Answer

@Idan Narotzki. This is pretty easy.

1.  Don’t reduce rent for June or July.  Not your promise and it’s not legal anyways most likely (this is not legal advice).

2.  You’re out that inspection money.  Just cost of business.  Your tenants won’t pay for that.  Just how it goes. Had the same thing happen to me before.

Nancy P. · Answer

Yes.  A lease is between the owner and the tenant.  In this case,  YOU are now the owner whereas it was someone else before May 31.  You, as the owner have to honor the lease until it ends July 31.  You can't raise rents, etc.  You do NOT have to honor promises made between old owner and the tenants that you did not know about.  (reduced rent).  Who the PM is matters not at all,  he or she is just acting in your place and enforcing the lease.  If they haven't paid all of June yet,  I'd start eviction.  They are being jerks.

Sam Horton · Answer

@Idan Narotzki The PM doesn't matter. If the previous PM has in writing that the previous owner was going to discount rent, ask for a copy and go back to the previous owner for the money. If it's not in the lease or in writing from the previous owner then you're not obligated to pay. That just goes back to if you want to extend the current tenants lease, taking a hit now might make for a good relationship down the road. That being said offering it without verification, they could just be looking for a handout and will undoubtedly request It again when you sell or their lease is up you have to get people in to see their unit. I also wouldn't rely on late fees.

Jim Goebel · Answer

You have a tough call on your hands there, Idan.  I might try feeling out openness to them renewing their lease.

If there is none, I'd signal that you're not interested in offering that credit.  If they are your tenants for the next 2+ years that goodwill might pay dividends later.

Do they have record of this in writing?  Or is this just something 'you've been told'?

Corby Goade · Answer

This is an easy one- what does the lease say? That's exactly what you follow. If the tenants are already being difficult, assuming you are being reasonable, I'd cut my losses and tell them that they'll need to vacate at the end of the term. If you go that route, screen properly and find yourself some good tenants, treat them well and enjoy your profits.

Best of luck!

Corby Goade · Answer

@Idan Narotzki, you are obligated as the new owner to honor any legal agreements between the previous owner and their tenants- so if the seller has agreed to a credit for the tenats, in writing, once you close it becomes your obligation. A couple things to consider:

-this agreement must be disclosed and provided to you previous to closing on the property.

-nothing would stop you from negotiating that the previous owner reimburse you for that credit at close.

Good luck!

Jennifer T. · Answer

1)  No to the half-rent for June, unless (maybe) they have it in writing from the previous owner.  Sounds like they don't, so it's a completely moot point.

2)  I wouldn't bother trying to get the re-inspection fee from them.  Hopefully it wasn't much?  My inspector charges a $100 fee if he has to go back a second time.  I would have made the seller pony that up as a credit at closing.  Because it isn't the tenant's responsibility to allow an inspector in.  It's the sellers.  And if they relied on their tenants to do it and it didn't work out, that's on them.

I've been going through this myself.  I'm under contract for two duplexes that are next to each other and its the same seller.  Except the only people who have keys are the tenants themselves (eye roll).  Access has been a nightmare.  My inspector had to go back twice.  The seller's agent verbally told us he would pay the extra fee, if that happened.  And they did.

But I wasn't taking a chance with the appraisals because I don't control what company gets called and don't know what their re-visit fees would be.  My agent told theirs that I wasn't ordering appraisals until they had extra keys.  A week's delay went by and we got word they couldn't get extra keys (I doubt they tried very hard), but would sign an addendum to the PA that they were responsible for any extra appraisal fees.  Sure enough.  The appraiser had to make an extra trip because one of the tenants wouldn't open their door.  They paid the re-visit fee for the appraisal also.  I wonder if they now regret not hiring a locksmith to make extra keys from the locks or put in new locks and give one to the tenant.  Like I strongly recommended from the beginning.

Idan Narotzki · Answer

Thank you very much for your help!

Another critical point is that I switched PM. Does the lease of the tenants with old PM, should be applied to the new Property mangment?

A summary of the situation would be:

- Old owner promised half rent discount for both MAY and JUNE (it was confirmed by old pm)

- I closed the deal at 31 MAY (without knowing about the last owner "generosity")

- The tenants have their lease until 31 July, with old PM.

- I switched to a new PM (at 1 June). I got full cooperation from old PM, and got the tenant's deposit and lease.

- Tenant demands to pay half month fee for June.

So, My main question here is: Does the lease of tenants with new PMs, should be applied to the lease with the new PM??

If yes, I would be able to use "late fees" in case the tenants keep resisting to pay full price for June.

(This is my first SFH rental, Hope I don't sound to bad. I want to demand the last owner to credit his tenants, but not at my expense...)

Thank you very very much for your help!

Idan Narotzki · Answer

By "All parties" you mean all the parties of the buying contract, right? Including me, as a buyer? Thank you very much, Nathan.Your comment is very very helpful!!!

Credit from previous owner, make sense?

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