Merchantville, NJ · Member since 2016 · 33 posts · 11 votes
Hi! Does anyone know what kind of document needs to be included in the sale when selling/buying a property that comes with existing tenants? How can I, the buyer, make sure that everything is transferred to me properly and legally at closing (including security deposits) ? Do you have any sample agreement that you can share?
I bought and sold properties with existing leases.
The seller presents to the buyer a tenant estoppel letter verifying the terms of the leases. See Tenant Estoppel letter
Aside from honoring existing leases, the seller landlord assigns the leases to the buyer landlord via a lease assignment. Tenant is thus notified the rent payments will henceforth be legally paid to the buyer of the property via the assignment. See Lease assignment by landlord
At the closing, buyer landlord gets the assignment, security deposits transferred and pro rated rents for the month collected. These matters are usually handled by seller attorney or title company.
I bought and sold properties with existing leases.
The seller presents to the buyer a tenant estoppel letter verifying the terms of the leases. See Tenant Estoppel letter
Aside from honoring existing leases, the seller landlord assigns the leases to the buyer landlord via a lease assignment. Tenant is thus notified the rent payments will henceforth be legally paid to the buyer of the property via the assignment. See Lease assignment by landlord
At the closing, buyer landlord gets the assignment, security deposits transferred and pro rated rents for the month collected. These matters are usually handled by seller attorney or title company.
Philadelphia, PA · Member since 2017 · 824 posts · 1k+ votes
6y
If you want my opinion, require the existing tenant to go through YOUR requirements for leasing a unit from you. This should include transfer of, or providing, a security deposit, signing YOUR lease, going through your background screening processes, etc. -- OR ask for the property delivered vacant and its up to the tenant to apply/reapply as a candidate.
My duplex had a tenant on the first floor, luckily for me he was a super nice guy, but I could have been screwed if he was a bad tenant, behind on rent, didn't have a deposit, didn't sign a lease, etc.
This is a risk aversion business. Taking on a property from an absentee landlord is bad enough. Having existing tenants comes with its own challenges. Depending on the level of proper protocols established between existing landlord and tenant (proper screening, lease agreement, security deposit, walkthroughs/maintenance, et al), you could put yourself behind the 8 ball.
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
Am a comm broker. In our standard PSA there is an Assignment and Assumption of Leases form.
Ask your title person, maybe they have something similar. It basically gives the buyer the seller's rights to collect/enforce leases which buyer has to honor in any case.
Title should also get an acctng for REFUNDABLE tenant deposits since those go with the property. The amount is usually a seller debit (unless he deposits them in escrow) and buyer credit.
You may want to include something to assume the trade name also if you're not changing it.
Lender · Newark, NJ · Member since 2016 · 695 posts · 252 votes
6y
Your attorney and title company should take care of this. but the main part is leases when involving tenants. on the final walkthrough of the home introduce yourself as the new property manager and be firm for they wont try to walk over you from the begining. best of luck and congrats.
Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
6y
You need an estoppel agreement signed early in the process which outlines all important parts of the agreement, i.e. rent, terms, deposits, any existing verbal agreements, etc. This should be signed by current landlord and tenant to ensure there are no surprises or "misunderstandings."
There is no legal document or process needed to transfer the old owners lease to you. His signature is just as legally binding as yours in this situation, as leases travel with the property. You cannot force the tenant to sign your lease, until the current one expires. His old lease is still in full force and effect.
Confirm this with your local laws.