Seller refuses to sign estoppel agreement
Weronika JedrakPro Member
Investor · NJ · Member since 2023 · 26 posts · 11 votesSeller refuses to sign estoppel agreement
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3yQuote from @Weronika Jedrak:
The estoppel is a means of confirming the terms between Seller and Tenant. If you can't confirm them, then you'll have to accept the risk that something was innaccurate or hidden. I don't think there's much risk. The Landlord may claim the Tenant paid $1,000 for a deposit and the Tenant may claim it was $2,000. You'll have to deal with those issues when they occur.
If the numbers are good, the numbers are good and you should move forward with the purchase.
Here's a NJ guide to removing Tenants: https://www.nj.gov/dca/divisions/codes/publications/pdf_lti/...
The day you close on the purchase, deliver a written introduction letter to each tenant with instructions for paying rent, reporting maintenance, etc.
At the same time, notify them of the pending changes. Tenants that are 50% below market were probably never screened, likely to be problematic, and unable to afford the increase. I would give them notice to vacate within 60 days. Offer incentives if they leave early (e.g. give them 60 days to move out but offer $200 bonus if out two weeks early, $400 if out a month early).
If they fail to move out, have a good eviction attorney lined up to start the eviction on the very first day legally possibly. Be kind, but be professional. Tenants typically don't screw around when they see you mean business.
The DIY Landlord Book4.7247 Reviews
12 Replies
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes3y
Estoppel agreements are not common in residential (under 4 units) real estate.
Most landlords do not want to alert tenants to the fact that the property is being sold. Many a time, a tenant uses that as an opportunity to stop paying. That will cause the buyer to walk away usually, and now the seller is stuck holding the bag while he has a non-paying tenant.
District Invest Group545 Reviews - Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Weronika Jedrak:
The estoppel is a means of confirming the terms between Seller and Tenant. If you can't confirm them, then you'll have to accept the risk that something was innaccurate or hidden. I don't think there's much risk. The Landlord may claim the Tenant paid $1,000 for a deposit and the Tenant may claim it was $2,000. You'll have to deal with those issues when they occur.
If the numbers are good, the numbers are good and you should move forward with the purchase.
Here's a NJ guide to removing Tenants: https://www.nj.gov/dca/divisions/codes/publications/pdf_lti/...
The day you close on the purchase, deliver a written introduction letter to each tenant with instructions for paying rent, reporting maintenance, etc.
At the same time, notify them of the pending changes. Tenants that are 50% below market were probably never screened, likely to be problematic, and unable to afford the increase. I would give them notice to vacate within 60 days. Offer incentives if they leave early (e.g. give them 60 days to move out but offer $200 bonus if out two weeks early, $400 if out a month early).
If they fail to move out, have a good eviction attorney lined up to start the eviction on the very first day legally possibly. Be kind, but be professional. Tenants typically don't screw around when they see you mean business.
The DIY Landlord Book4.7247 Reviews - Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes3y
Quote from @Weronika Jedrak:
We agreed on the price with the seller on two duplexes, however 3 units are occupied and tenants pay 50% below market value rent. We want to renovate it and rise the rents. Tenants are on month-to-month leases. The seller is refusing to deliver it vacant, she also refuses to have tenants sign estoppel agreement. We want this deal to work but we also have a lot to risk. She can provide all the financial records, lease and insurance docs, but that’s all the she’s willing to do. Agent says we can hand the tenants 60 days notice once we close on the property, but what if they refuse to leave ? What can we do in this situation to be protected ? Any advice? We are in New Jersey.
You are making this much more complicated than it needs to be. Close, and evict. But 1st HIRE a PM co,
All the best
- 3yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
I can see the seller not wanting to remove the tenants because what if the sale falls through? If you are going to give them notice, then do it yourself.
My understanding is the estoppel agreement simply states what the terms of the lease are and if you are going to ask all of the tenants to move as soon as you buy it, they are not necessary. you will need the security deposits transferred and given you don't know the move in condition, those should be returned in full to all of the tenants when they move out.
- Investor · NJ · Member since 2023 · 26 posts · 11 votes3y
Quote from @Nathan Gesner:
Thank you, that’s really helpful. Is there anyway I can protect myself from the tenants claiming the amount of security deposit given? Can I request something from the seller that will be legally binding what security deposit (if any) has been received etc?
The estoppel is a means of confirming the terms between Seller and Tenant. If you can't confirm them, then you'll have to accept the risk that something was innaccurate or hidden. I don't think there's much risk. The Landlord may claim the Tenant paid $1,000 for a deposit and the Tenant may claim it was $2,000. You'll have to deal with those issues when they occur.
If the numbers are good, the numbers are good and you should move forward with the purchase.
Here's a NJ guide to removing Tenants: https://www.nj.gov/dca/divisions/codes/publications/pdf_lti/...
The day you close on the purchase, deliver a written introduction letter to each tenant with instructions for paying rent, reporting maintenance, etc.
At the same time, notify them of the pending changes. Tenants that are 50% below market were probably never screened, likely to be problematic, and unable to afford the increase. I would give them notice to vacate within 60 days. Offer incentives if they leave early (e.g. give them 60 days to move out but offer $200 bonus if out two weeks early, $400 if out a month early).
If they fail to move out, have a good eviction attorney lined up to start the eviction on the very first day legally possibly. Be kind, but be professional. Tenants typically don't screw around when they see you mean business.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Weronika Jedrak:
You said she can provide copies of the lease. That should be sufficient.
If Tenant claims something that contradicts the lease, they will have to fight you in court to win. It could be problematic, but it's an unlikely scenario and won't be very expensive to handle. I wouldn't normally sweat it.
The DIY Landlord Book4.7247 Reviews - 3yEarl WhitePro MemberAttorney · Rutherford, NJ · Member since 2020 · 60 posts · 37 votes
In New Jersey, sellers are very resistant to tenant estoppels for residential units. I always try to get it in the contract/rider - 50/50 on getting them signed. I'm not going to kill a deal over it. Commerical deals are different and usually we'll get them.
The real issue here is fraud, landlord confusion, or landlord unawarness.
As an alterative to the estoppels, basically have a post-closing landlord certification drawn up before the closing and signed. Not as good as an estoppel - but it is enough to hold the landlord liable for intentional or reckless misrepresentations after the closing. You could then go to court on this issue if the magnitude was large enough.
Obviously that isn't a ideal but my clients would lose many investment properties if estoppels were insisted upon.
As far as removing the tenant after the closing, that is not the law that you can give 60-days notice and tenant has to leave. You could do that for 3-famly if (i) you intend to move-in to the property for personal occupancy but this needs to be legit or you could be held liable; (ii) you have a contract of sale to a party intending to move in.
Your option with the month-to-month tenants, if neither of two solutions work, is to offer a new lease at market rent and hope they do not accept it. Renovations is NOT a grounds - unless you are curing code violations and willing to pay relocation costs.
- Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes3y
Be very careful in NJ. As mentioned by @Earl White you can't just evict tenants here in NJ. Honestly, general advice here is to take possession vacant unless you are able/knowledgable in handling getting the tenants out somehow, legally.
I've done estoppels before. Didn't realize people didn't like doing them... Seems kinda sketchy since how to also handle the security deposits? Would really suck if the amount the seller transferred to you isn't the amount the tenant provided...
- Rental Property Investor · Member since 2019 · 411 posts · 148 votes3y
@Weronika Jedrak Hey Weroniks.. Unfortunately you can't just provide 60 days notice and have them leave. You can certainly negotiate with them to leave (cash for keys) though. You can provide a lease renewal with appropriate notice, if they do not abide by the lease renewal than you could go thru the eviction process after that. Hopefully you are acquiring a property in a city where there isn't rent control so you can raise it higher, but still has to be within reason. I'd consult an attorney that works with tenant landlord issues exclusively
- Lender · Jersey City, NJ · Member since 2020 · 102 posts · 43 votes3y
I've never done a Cash For Keys and hear it has mixed reviews from landlords. Worth googling to see if that method can suit your needs.
- Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes3y
@Vanessa Ivonne Hernandez @Weronika Jedrak
Cash for keys is one alternative if you are stuck. But, its still a crap shoot whether its something they would take, and for how much. With the way our market is around here, since they can't easily find some place to go, I'm sure it will be a high price. But, you never know until you ask, and I think the buyer isn't technically supposed to be talking to the renters until AFTER closing.
- 3yEarl WhitePro MemberAttorney · Rutherford, NJ · Member since 2020 · 60 posts · 37 votes
Quote from @David M.:
Be very careful in NJ. As mentioned by @Earl White you can't just evict tenants here in NJ. Honestly, general advice here is to take possession vacant unless you are able/knowledgable in handling getting the tenants out somehow, legally.
I've done estoppels before. Didn't realize people didn't like doing them... Seems kinda sketchy since how to also handle the security deposits? Would really suck if the amount the seller transferred to you isn't the amount the tenant provided...
The way I've approached this is to either: (1) insist on collecting the leases - which generally speaking identify the security deposit; (2) get a rent roll or statement from the seller prior to/at time of contracting. Obviously, seller could fabricate. I would note however - once you increase units beyond 4+, it isn't really feasible for a seller to get tenant estoppels.
That all being said, I've had some luck just dropping in a contract provision like the one below and sometimes seller/their attorney will just roll along.
Seller shall provide the Buyer tenant estoppels executed by each tenant at least seven (7) days prior to closing stating: (a) the rent, term and expiration of the tenancy, amount of security deposit, all agreements between the landlord and tenant, and all rights tenant has to the Property; (b) if rent and/or other payments are current, and if not, overdue amounts; (c) identification of the current written lease, and if none exists, the last expired written lease or statement there has been no written lease; (d) the landlord and tenant have performed all of their obligations to each other; (e) the tenant has no defenses, rights of offset, or counter claims against rent due or to become due; and (f) there has been no free rent, abatements, or concessions, except as disclosed in the estoppel.
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