Buying property with a tenant

10 Replies

I bought a property which had a tenant for the past 20 days only. When I asked the seller to give me the security deposit, he/she refused saying that it was hers to keep. Intermediary broker vehemently defends this stand of the seller. Can any one make me wiser? Can I get this reply on my email: [email protected]

Syed,

Was the security deposit not listed on the closing statement? If not you may be out of luck...

I had the exact same thing happen to me in Memphis, TN. The difference was that the previous owner had promised the renter a 1 month rebate if they finished the lease terms. I wound up having to honor that in order to get the tenant to sign an extension of the lease.  You may be able to get free advice from the closing attorney. However, in my example I used the same closing service as the bank and then they refused to give me legal advice because they represent the bank (even though I paid them a fee also).

I often recommend keeping the existing tenant, just to limit overall vacancy, but a number of users here recommend against keeping existing tenants without putting them through screening.

I'm sorry that you had to deal with it, but you are not the only one.

Good luck,

Tristan

I have Closing Affidavit and Settlement Statement. Where do I look? I did not have an attorney. Broker was representing both of us, the seller and the buyer. She literally was looking only after herself. Obviously if you wish to save money on an attorney you got to run some risks.

I just closed two deals and put it in the contract that I got the security deposit. If not in writing could be out of luck with that one.

It should definitely be in the contract that the deposit is transferred to you at close. It's also wise to screen the Tennent before close and then decide if you want to keep them in there or not. If they want to stay and meet your criteria then a lease should be signed before close. All of this should be included in the contract.

In my situation I had a tenant that stopped paying the rent the day I closed. My PM had to hound her all month long. We were about to evict her but eventually she paid a month late. She had never signed a lease so if I was to evict her it would have no affect on her report. She had nothing to lose in this situation. Except her damage deposit of course. All the more reason to have the lease signed prior to close. From this experience it seems easier to buy a vacant property and place someone to mine or my PM's standards in there after close. If the tenant really wants to stay than she should apply with my PM and see if she gets accepted. Otherwise the home would have to be vacant, cleaned, and small repairs fixed before I would close.

The lease signed with the previous owner isnt good enough? The seller has given me the lease agreement signed by the tenant.

In my state, SC, the tenant lease agreement survives the sale of the property. I've purchased 2 properties recently where tenants were in place and the security deposits were transferred to me off the closing statement.

If the security deposit language is on the tenant lease you received a copy of...and of course the binding contract between the tenant and previous owner is there, you could specify the repayment of the deposit is on the previous owners hands when the tenant leaves...according to the lease.

Ideally, you should check your local laws pertaining to deposits and transfer of tenant leases.

Your situation does make me rethink my usual offer to purchase document and I'll start including that in my other conditions.

in oklahoma the purchase contract specifically states that all deposits and prorated rents go to the buyer.  i would think this is standard in most states.  just look over your purchase contract line by line, should be in there, if not i would review your states landlord tenant laws.  it does seem that the deposit technically does not belong to the seller, it is the tenants until such time as they vacate and then (assuming the property is in good condition) would be returned to them.  I would maybe look at the lease as well as it should state who/how the deposit is returned.  If it goes back to the tenant then technically it is not the sellers nor yours.  

I've always received them on standard purchases, only foreclosures have lacked security deposit transfers - but only since the bank did not have the details and stated that no security deposits would be transferred early on in the process.

I don't like getting somebody else's tenant choices, I like to choose my own. When buying a property like a SFH or small apt, a couple to three units that can be done by the contract to purchase.

With a multi or commercial its not feasible or practical to get an empty building.

Thanks you all for being so solicitous to my concerns. I will take it up with my 'broker'.

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