I am closing on a house with an existing tenant. The tenant is on a month to month lease and is wanting to stay. What steps do I need to take during closing and after?
Should I get the tenants security deposit? Can I have tenant sign a new lease when I purchase the property?
Any guidance would be greatly appreciated.
The security deposit and any prorated rent should be transferred to you at closing. Sounds like you have already communicated with the tenant? I would ask if they have any issues. If you want the tenant to stay, then yes have them sign a new lease with you.
Your contract to purchase should require the Seller to provide the contract for review during the inspection phase. At closing, the Seller should provide you with the security deposit, keys, all the tenant records, and any other documents pertaining to the rental.
I also recommend completing an estoppel, but it's too late for that.
After closing, you should immediately notify the renter - in writing - that you are the new owner. Include instructions on how they should pay rent or report maintenance. Try to keep it short and professional without the usual "I want to be the best Landlord and your personal friend" nonsense.
It's generally acceptable to keep them under a month-to-month agreement until you figure out for certain that you want to keep them long-term. You should still have a written agreement with clear expectations on when/how to pay rent, take care of the rental, report maintenance, give notice, and other general terms. If you don't already have a lease, I highly recommend the one available for purchase through BP (look under TOOLS - LANDLORD RESOURCES).
I also recommend you start educating yourself. Don't wait until a problem occurs before figuring out how to handle it. Start making a list of potential problems (late rent, no rent, tenant wants to break lease, tenant abandons property, noise complaints, unauthorized renter or animal, etc.) and then write down step-by-step instructions for how you will deal with each one. Being prepared makes life a lot easier.
I personally recommend "Every Landlord's Legal Guide" by NOLO because it includes state-specific laws and lots of practical information about marketing, screening applications, evictions, and more. I also hear good things about Brandon's book.
Did the previous owner gave you cash or credit in escrow for that security deposit?