How should i handle inheriting tenants
Ben WengerPro Member
Investor · Lititz, PA · Member since 2015 · 38 posts · 3 votesHow should i handle inheriting tenants
Most Popular Reply
Investor · Allentown, PA · Member since 2016 · 100 posts · 65 votes
6y@Ben Wenger, I just found myself in a similar situation. I recently purchased a triplex that was fully occupied. I sent new landlord letters to all of them informing them of the change in management and advised them how to pay rent, when rent was due, who to contact for maintenance issues, and upgrades we planned to carryout on the property. I also informed them that their rent would be going up and that, should they stay, they would be shifted into 1 year leases. However, I gave them 2 months before the rate increase and lease signings took place. This 2 month window gave them an opportunity to look for a new place if they couldn't afford the rent, but more importantly, it allowed me to get a read on the tenants before being tied to them for an entire year. Luckily I did because one of the tenants didn't pay rent, had too many people living in his unit and created non-stop problems for the other tenants. Because he was still on a M2M I didn't have to go through the eviction process. I simply served him a Notice To Quit informing him we weren't renewing his lease and that he had to be out within 30 days. (Your'e bound by the lease and/or state on the amount of time you have to give. Do your research!)
All in all it took a little longer than I would have liked but at least I wasn't contractually obligated to lease to him before I realized what kind of tenant he was. This also gave me the opportunity to renovate the now vacant unit and put my own tenant in at a higher rent than the original tenant was going to be paying.
I didn't collect a security deposit from my remaining 2 tenants only because they have lived there for 20 and 8 years respectively and their units were very well kept. That said, I will be collecting one from the tenant I place into the 3rd unit.
Lastly, don't be afraid to raise rents, your business depends on that income! And your tenants are probably expecting it. (Again, check your local laws on rent control. I am not an attorney)
Best of luck!
-MB
10 Replies
- Member since 2019 · 8 posts · 6 votes6y
@Ben Wenger Do a meet and greet. Also, send out communication about current lease, ending date, rent increase and post the units for rent online.
- Member since 2019 · 215 posts · 122 votes6y
First off are you 100% sure the tenants do not have deposits? If you are assuming their lease it doesn't matter what the owner says or didn't receive. If its in the lease your on the hook. Been burned once and never again.
Not having a deposit is a major liability. If they break anything or move out without notice you have zero security. What kind of condition is this unit in? Just curious if you plan on doing work in the near future or if its great as is. Deferred maintenance typically comes up as soon as ownership ends so make sure you account for that.
- Investor · Allentown, PA · Member since 2016 · 100 posts · 65 votes6y
@Ben Wenger, I just found myself in a similar situation. I recently purchased a triplex that was fully occupied. I sent new landlord letters to all of them informing them of the change in management and advised them how to pay rent, when rent was due, who to contact for maintenance issues, and upgrades we planned to carryout on the property. I also informed them that their rent would be going up and that, should they stay, they would be shifted into 1 year leases. However, I gave them 2 months before the rate increase and lease signings took place. This 2 month window gave them an opportunity to look for a new place if they couldn't afford the rent, but more importantly, it allowed me to get a read on the tenants before being tied to them for an entire year. Luckily I did because one of the tenants didn't pay rent, had too many people living in his unit and created non-stop problems for the other tenants. Because he was still on a M2M I didn't have to go through the eviction process. I simply served him a Notice To Quit informing him we weren't renewing his lease and that he had to be out within 30 days. (Your'e bound by the lease and/or state on the amount of time you have to give. Do your research!)
All in all it took a little longer than I would have liked but at least I wasn't contractually obligated to lease to him before I realized what kind of tenant he was. This also gave me the opportunity to renovate the now vacant unit and put my own tenant in at a higher rent than the original tenant was going to be paying.
I didn't collect a security deposit from my remaining 2 tenants only because they have lived there for 20 and 8 years respectively and their units were very well kept. That said, I will be collecting one from the tenant I place into the 3rd unit.
Lastly, don't be afraid to raise rents, your business depends on that income! And your tenants are probably expecting it. (Again, check your local laws on rent control. I am not an attorney)
Best of luck!
-MB
- Investor · Lititz, PA · Member since 2015 · 38 posts · 3 votes6y
Michael- yes i am sure they dont have deposits, it turns out that one tenant was the son of the last owner and the other tenant was a employee of the owner. Also why the rents are so low
- Investor · Lititz, PA · Member since 2015 · 38 posts · 3 votes6y
Michael- also borg units were rehabbed in 2018 and in great condition
- Investor · Lititz, PA · Member since 2015 · 38 posts · 3 votes6y
Matt- thanks for the insight. I am thinking about giving them a 2 month notice on rent increase and signing the lease, that way i can make sure they are tenants i want to have
- Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes6y
Originally posted by @Ben Wenger:
Michael- yes i am sure they dont have deposits, it turns out that one tenant was the son of the last owner and the other tenant was a employee of the owner. Also why the rents are so low
I don't care if the tenants are the owners first and second born. You have nothing to stand on unless you get signed estoppel agreements, prior to close. These would be signed by landlord and tenant and state what the current rent, deposit, and/or other verbal agreements are between landlord and tenant. Without one, the tenant could ask dear old dad to sign a lease that's backdated to last year and says he had a security deposit of $5k. Then its your obligation to prove it's fake. - Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
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.
I would get this done so everyone is in agreement regarding what you are buying. On the day of closing, I would verbally let the tenants know that I will require them to pass my screening, rents will go up to market rate, and that I will require a security deposit equal to a month's rent. The new rent rate and security deposit will be due on the first day of the first full month after notice.
I would do this verbally to see if they intend to try and stay. If they don't want to participate or pay the new price, hand them a form letter to give their 30-Day Notice and bid them goodbye. If they intend to apply and try to stay, give them 72 hours to complete the application process or hit them with a 30-Day Notice. If they apply and pass, give them the new lease agreement with the new terms and hold them to it.
The DIY Landlord Book4.7248 Reviews - Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes6y
@Ben Wenger In the situation you described, I would have written in the Purchase Agreement that the duplex needs to be delivered empty, and "broom clean". Now, it appears we are past that situation. Also, the PA always includes security deposits in XXX amount, and prorated rents, are to be handed over at closing.
Barring that, do what Nathan says.
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