Transfer of Tenants....?

Question

Hey guys.  I am scheduled to close on a property that has 3 doors/3 tenants.  These have been long term (1 tenant has been there 38 years) tenants.  Currently all 3 leases have expired and they are living there month to month with very little security deposit.  Each of the tenants are paying well under market rate for this area.  Here are my questions.

How should I structure the lease agreement in advance of closing?

What else should I be considering to make sure I due my due diligence and are ready to roll once closing happens?

Thanks so much in advance for your help and consideration!

Have a great week guys!@

Joe Orsene · Answer

@Rudy Hayden

It sounds like your situation might be too late for this, but I placed a contingency on the seller to have a tenant vacate by closing.  The rent was less than half of market value and it needed some sprucing up.  I was able to immediately remodel and market the apartment with out the hassle of removing a tenant.

Hajarah Shakir · Answer

@Rudy Hayden

I’m basically in the same situation as you. Except my tenants have no security deposits. I have to renovate the 3rd floor because the tenants animals ruined the floors. By law in my state I have to give 30 day notice of notice between payments. Which ever is longer. I’m thinking of just having a conversation with them. Telling the 3rd floor they have to move out within 30 days. Finding a tenant for that floor Keeping the 2nd floor on month to month but increasing rent. But I’m not sure.

Scott M. · Answer

38 Years, you are not kidding on long term tenant.  While you can prepare things on your side you shouldn't do anything outward until after closing.  That said, you have a choice to keep them on the current lease month to month or you can give them a new lease.  If a new lease be sure to use a good one : )  Great advice eh?  I prefer to work with a local RE attorney with landlord tenant experience for as long as your tenant has been in place.  They person will have a great lease.

Just remember, not everyone can afford market rents and you may not be able to afford all 3 units empty at once.  Consider whatever you say to 1 tenant will get to all 3.

Have an honest and frank conversation with them all and then you can decide how best to move forward. Just be sure you have the finances and crews available to do your turns before you make waves with the tenants.

Tim Herman · Answer

@Rudy Hayden what does the landlord tenant laws say in your jurisdiction. Until you close you cannot do anything.  Upon closing you will notify the tenants that they pay you, You can get a lease ready and give the proper notice of new lease. Prior to closing you need to have an estoppel certificate stating rents and verifying terms of the lease, security deposits and any oral agreements.

Julia Puig Jordan · Answer

Hi, you take over the property with tenants in place. Then you decide: renovate all at once? Terminate all three agreements. This way you can do a quick , efficient fix up. Or: terminate one by one, fix up each, raise rent. Often the termination of all three at once makes more sense if you change rent price drastically. Poor and rich next to each other might not work out well same time