Hello BP! I have a 4 unit property in Providence, RI I’m about to purchase. I have a medium value-add rehab intended, but the property is currently occupied. The tenants are currently under market rent. What options might I legally have to perform the rehab, in asking them to vacate upon purchase? Thanks for any advice!
@Sara Blouin I'd recommend having the seller vacate the units before you buy. It will be much easier than taking that on yourself.
If you do close and then want to get them out to do the rehab, it depends on whether each is on 1) no lease, 2) a month-to-month lease, or 3) a longer (usually year-long) lease.
#1 is effectively the same as #2 if they pay monthly, and those are easy, you just - or if this is your first time, might be better to have your attorney just - send them a 30 day notice of termination, with a date at least 30 days from their next rental due date. So today, 8/27/19, you could give them a notice of termination having them out by 10/1, but not 9/1, since they need at least 1 full rental period notice.
You can see page 22 of the RI Landlord-Tenant Handbook for an example of a notice of termination of tenancy.
For #3, under a lease which is longer than month to month, you need to review the lease terms. Generally you'll need to wait until the lease expires, but you might want to send a notice of non-renewal at least 1 month before that. If you don't understand everything about the leases you've inherited, or if this is your first time doing this, then I strongly recommend consulting an attorney (which I am not).
For purposes of vacating the units in order to do the rehab, I'm not sure it really matters whether they are under market rent or not.
@Anthony Thompson if they are in a lease, how can that be accomplished? I thought about that, just figured that was a harder solution. Thanks for your input.
@Sara Blouin you need to read and understand the lease, since it's usually specified in the lease.
But generally, a year long lease has a provision to roll over to month-to-month under the same terms, at which point you can terminate under that route (at least 30 days notice etc. as for any other month-to-month lease).
The lease may specify that either party needs to give notice of non-renewal, or that it automatically rolls over to another 1 year lease. So you definitely need to examine the leases, especially before you buy.
This is why you always need to review the leases as part of your due diligence when buying a rental property, to understand exactly what rights and obligations you'll be taking on (inheriting).
If you're using an agent and thus probably the 'standard' RI MLS multi-family purchase and sale agreement, section 17 "Buyer's Review of Rental Agreements and Information" obligates the seller to provide you with the leases (if any), gives you a certain number of days to review the leases and, if you don't like them, be able to back out of the deal. I strongly recommend you do review them.
Besides generally understanding what time frame you can get tenants out if you need to - which is important because if you do good screening, you're a lot more likely to have problems with inherited tenants than ones you place yourself - you also want to guard against the relatively rare but very problematic "long term lease to a relative/friend for way below market".
@Anthony Thompson I apologize for replying to what you apparently already answered. I’ve had BP a while but only installed the app today. Your post changed every time I went back into it, and it still says 0 replies on my end, some glitch is occurring. At first your post stopped after asking seller to have them vacate, then it ended at (which i am not), then I see until market rent not mattering, very odd.
@Sara Blouin no problem, I frequently have problems with the BP interface myself.
I can't tell you how many times I type "@" and wait for a list of taggable people to pop up, and sometimes it never pops up, then I go back and try again, and sometimes a few names pop up, and sometimes a lot of names pop up. And I never know if the space will let me include the last name in the lookup.
And I consider myself somewhat technically savvy :) So no worries!
Hi Sara, it pretty much looks like Anthony has this covered as far as making sure that you take a look at that lease beforehand to understand which provisions the seller has included (as far as original language, whether or not the lease is set to go month-to-month at the end, etc). The more you dig into this during the due diligence phase, the less likely you are to need to proceed with legal action after the fact. I hope everything pans out! @Sara Blouin
Like everyone stated, you should make yourself aware of what provisions you are bound to in the lease. When there is an opportunity to make adjustments illustrated in the lease, I would have everything ready to go with however you choose to proceed whether it be vacating the property or increasing rents to market value, etc. the easiest solution which I believe was also posted previously was to have the property vacated at closing.
@Sara Blouin Just curious how this ended for you? We're in the process of looking at multi-families, and most have year leases (and can't be delivered vacant).