Acquiring Tenants - Any Tips?

Question

I'll be closing on my first occupied property this week and wanted to check and see if anyone has any tips they could pass along. It's a duplex with one side rented.

At one point I thought I had seen a document to have filled out prior to closing and signed by the tenant and the previous landlord basically clarifying the lease, what they pay, how much deposit was put down and those types of details just to make sure there aren't any surprise or miscommunications later. I wasn't able to find this document again though.

Any help would be great!

Tom Goans · Answer

@Elizabeth S.

,

To add to my previous posts, it may be wise for you to get an executed Attornment Agreement prior to closing. Your attorney will be able to help you with drawing up this agreement.

An attornment agreement is the written acknowledgement of a tenant that the tenant will remain in the leased premises under a new owner according to the original terms of the lease. The tenant acknowledges the rights of the new owner in the lease, and the new owner acknowledges those of the tenant.

David Beard · Answer

Elizabeth, since you're about to close, make sure the settlement statement credits you with the pro-rated portion of August rent from the current tenant, as well as credit you with the security deposit.

In addition to verifying the info0 noted (lease end date, lease amt, sec deposit), you want to get written verification that there are no special tenant incentives in place (such as last month's rent free), or other tenant arrangements such as provision of lawn care.  Also confirm with the tenant who is paying unit utilities and verify that these are in the tenant's name unless your city requires something to be in your name.

Tom Goans · Answer

An estoppel letter is typically used in a transfer or conveyance of real property before the Closing transaction.

It is a document sent to a bank (or other lender), from a homeowners' association (or condo association), to a city/municipality, or a tenant requesting a payoff of a mortgage, assessments or taxes due, or rental amounts due on a lease, to incorporate these amounts into the Settlement Statement for the buyer and seller of the real estate. All assessments and payments due must be incorporated into the amounts due at Closing and paid at the time of the Closing. Some amounts may be pro-rated, but all must be included in the Settlement Statement. The estoppel letter facilitates this process.

Tom Goans · Answer

@Elizabeth S.,

It should have been a part of your purchase agreement to have all of the current lease agreements presented to you 15 or more days prior to closing. You purchase should have been contingent to having received the lease agreements and approval of the lease agreements.

I also require a complete payment history. I am not taking about someone listing the payment is due and paid on the 1st of each month. I am talking about a computerized printout report of the actual day every payment was made.

If you are picky about the tenants credit and financial history, you should require this as well.

You should also require the seller to have the tenant(s) sign 2 forms:

1) Form giving you permission to access the tenant's credit history any time in the future.

2) Notice of a new property owner and where the lease payments must be sent in the future.

3) Tenant acknowledgement of a new person/company having total access to the tenant's credit, financial, and personal history.

I feel all of this is just the beginning of the requirements prior to closing. I want all the ducks in the row and make sure there are now issues that pop up before I am on the line.

Your attorney will be a good support person who will make sure all is done within the limits of the law, especially when it comes to the personal credit information.

Matt Devincenzo · Answer

You're looking for an e-stoppel letter. It basically just reiterates the lease conditions and makes sure that everyone is on the same page for what is and isn't included/provided. I'd ask the seller for a copy of the current lease if there is one and the tenant's application/background information.

The e-stoppel should match what is in the current lease, but gives the tenant an opportunity to bring up things that may not be spelled out, and if they bring it up later you can show that they signed agreeing to what the agreement was prior to you taking over.