Buying occupied rental w/ no lease agreement

10 Replies

One of my leads is a mobile home that the owner is renting. She does not have an official written lease but says the verbal agreement she has with the renters will end in December 2019. Should I pressure this lead? If so, what options do I have as far as the renters? Should I make them sign a lease that ends in December per the verbal agreement?

Are there any other things I should look out for?

There is no such thing as a verbal lease agreement, at least not one that would hold up in court.  If you desire to move forward with the purchase, I highly recommend you have the tenants sign a written lease prior to closing on the deal.  If they refuse to sign a written lease that is a MAJOR red flag which means you will probably have to evict them as soon as you get ownership.. But it could be as easy as having them sign a lease under the same terms as what they are paying now. 

@Roberto Ramos I'd be concerned about a couple of things you said.

1.  There's no such thing as a verbal lease.  If they're paying rent and there's no written lease, they're month to month.  

2.  @Sean McDonnell is right.  You will most likely have to evict the tenants. If not immediately then in January after the supposed lease is over.

3.  You said the house is a mobile home.  Is this located in a park, or on land you are purchasing as well?  If it's in a park, the tenants are likely not supposed to be there.  Most mobile home parks do not allow the residents to rent their homes. It's considered a sub-lease and can get not only your tenants evicted, but you as well.  Then you have the option to either pay to have the home moved to another park (which is expensive, and finding another location can be very difficult, especially if the home is more than 10 years old), or abandoning the home.  Best case scenario if the park does not allow rentals is the eviction of your tenant, you ending up under the park's microscope to ensure it doesn't happen again, and hopefully you make a profit after rehab/repair, at least enough to cover the costs of selling.  Don't expect a hard money lender to lend on a mobile either.  All the HMLs I've spoken to over the past 20 years have said they will absolutely NOT lend on a mobile.  There may be some out there that do, I just haven't met them yet.

I see a lot of complications that may and likely will arise from this.  If you decide to move forward do so very carefully.  Do a lot of due diligence, then do more. Personally, I'd tell the seller "Thank you but no thank you"

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@Roberto Ramos Look into the landlord eviction laws in your area. Some states do honor verbal agreements. Though, it will always be up to the judge how to interpret the law when a case is presented. If the owner is being upfront with you and the tenant seems to be a good payor, you may want to get something in writing from both parties as @Greg H. suggested. Good luck! 

@Roberto Ramos

Have the owner let the tenant know one of the requirements is that they sign a lease and have them sign one contingent on the sale. Been there done that. Not a big deal. Just leave the extra wordy one at home and make sure it states you can notify them of changes