I'm closing just after the first of the year on a 5 unit building. I own a duplex currently that is my primary residence so it is easy to self manage - but this new building will be a new adventure.
All units are currently filled some long term, some in their first lease.
For those who have purchased buildings with tenants in place:
- What are some things you wish you thought of before closing to prepare (and I should start to plan for)
- What makes for a smooth transition to a new owner
- What are some things I should be doing in the next month and a half to prepare
- What wisdom can you share with me from your experiences!
Your offer to purchase should include a requirement that they provide all documentation and agree to sign an estoppel certificate (also called estoppel form or agreement). The estoppel certificate is a form filled out by the tenant and then confirmed by the Landlord. It's supposed to ensure there are no surprises after closing. For example, you buy the place and the tenant could claim the Seller allowed them to paint the walls black or that their security deposit was twice what the Seller claimed. How will you know? An estoppel certificate fixes this problem.
Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.
Here is an example and explanation: https://eforms.com/rental/esto...
Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.