Keeping tenants in rental building you just purchased
Member since 2023 · 52 posts · 25 votes
Keeping tenants in rental building you just purchased
Most Popular Reply
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3yThe only thing you can do is abide by the current lease. If they break the lease, that is grounds for eviction. If they honor the lease, you have to wait till the end to remove them.
4 Replies
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes3yAloha,
Generally speaking, any current, valid Rental Agreement remains in effect for the stated terms. You can give written notice of the change in Management- contact info, where to send/deliver rent; your office hours; procedures for requesting maintenance, but term, rate, late charges, all remain the same until properly terminated at the end of the current term. You also need to be sure to have the Security Deposit transferred, and verify with the Tenants, either by Estoppel letter, or interview, what they have been paying and what they believe they have as SD. You may also want to confirm who OWNS the various major appliances, and other aspects specific to the property such as parking spots, utility responsibility, etc. This should all be requested in your original purchase offer, along with current financials and rent roll.
Once you DO give proper notice to terminate the current agreement, you absolutely want every adult to complete a new application and perform your standard screening to see if they meet your requirements. Then have them sign a new Rental Agreement, with your terms and conditions if you decide to keep them. Provide a deadline for return of the application and for signing new agreement. Do not hesitate to initiate eviction once your deadline has passed if they balk at vacating. - Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Richard nailed it, but I'll add some additional detail.
Determine if they are under a lease. If they are, you have to keep them for the remainder of that lease unless you are able to negotiate something different with them. For example, if they have six months left on their lease and are $400 below market, you could offer them a financial incentive to leave early, large enough that it benefits them but small enough that you'll make it up by renting to someone else at a higher rate.
When their lease ends, or if they are on a month-to-month, you should determine whether to keep them. Is their rent too low? Do they regularly pay late? Maybe they have multiple lease violations or four dogs or six broken-down cars in the parking lot. Only keep them if they are excellent renters and paying market rate, or very close to it. Otherwise, consider getting rid of them, cleaning the place up, and renting at market rate to someone you've screened.
Your offer to purchase should include a requirement that the Seller provide all documentation and agree to sign an estoppel certificate (also called estoppel form or agreement). The estoppel is a form filled out by the tenant, then confirmed by the Landlord, then accepted by the Buyer. It's supposed to ensure there are no surprises after closing. For example, I often see Buyers purchase property thinking there is a $1,000 deposit but then the tenant claims it was actually $2,000 because they paid the last month's rent. 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: Sample Estoppel
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.
The DIY Landlord Book4.7243 Reviews - Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
The only thing you can do is abide by the current lease. If they break the lease, that is grounds for eviction. If they honor the lease, you have to wait till the end to remove them.
- Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes3y
Quote from @Nolan Mahoney:
Any insight on keeping tennants in a 2-4 unit building you just purchased in IL? I asume that you can look at the leases and agreements between tennants and owner before you buy, but you dont like thoes terms or what they didint screen the tenant for. What should you do? request the owner to vacate the tennants? Re screen the tenants before you let them back in?
Yes when you're under contract you can request a rent roll, tenant leases, and a record of tenant payment history.
If you're inheriting tenants the leases are binding and you have to abide by the terms until the leases expires. If the leases are expiring soon or the tenants are month to month, you can ask the seller if they would deliver the property vacant although you will likely have a longer escrow period. If you inherit tenants that are month to month where there are no written leases, request the seller and tenants sign estoppel letters to outline the terms of their agreement.
Many times when you inherit tenants the rent they are paying is below market. If that's the case, you want to determine by how much is rent below market? If it's a bit below market it may be worth keeping them as long as they've consistently been paying rent.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.