All Forum Posts by: Christopher Freeman

 Alan, do you not foresee this being an issue for landlords acquiring undervalued commercial assets with below market rents? If a seller is 30 percent under market, it will take 4 years to get the property to market rates. 

Howdy BPers!

I recently came to terms on a 3 family property in New Hampshire, and have included the completion of estoppel certificates as a condition of the sale. Today I learned that the Landlord may not have copies of the lease. I suspect that the same may be true for some or all of the tenants.

My questions are:

1. If nobody can procure a written lease, can I compel the execution of a new lease under my terms by giving notice?

2. If neither party can procure a written lease, but certify that one exists in the TEC, does that bind me to the terms disclosed therein?

3. Can I add a provision to the TEC that requires the presentation of a written agreement in order for it to be binding and that, absent this proof, a month to month tenancy will be established at the disclosed rate?

I understand that the tenants in place have rights and that my preferences have no bearing on that. That said, to the greatest extent legally and ethically permissible, I would prefer not to be subject to term leases when I take possession. One of the tenants is appallingly filthy (think poop on the walls), and another smokes indoors. All rents are severely below market.

My goal here is to understand how much latitude I have during the stabilization process, and to ensure that I don't give up flexibility during the estoppel process.

Thanks,

Christopher M. Freeman | Co-Owner

Parabola, LLC | PO Box 282 | Keene, NH 03431

Thank you to everyone who responded.

I did not offer to change any language in the agreement, as I feel this undermines the authority of the lease; I did provide scope clarifications and will reflect these changes in the language of the lease going forward.

Howdy all,

We use a modified version of the generic lease that comes with @Brandon Turner's [really awesome] Book on Managing Rental Properties. We had to make some changes to conform to New Hampshire state law, but other items we left in, including a provision in which the tenant agrees to have inspected the unit for mold and holds them liable for any mold damage that occurs during their tenancy.

In principle, I think this is a fairly reasonable provision; however, the applicant's co-signer questioned it, stating that:

"’I'm not used to seeing the provision that holds the tenant liable for mold damage.

[Applicant] is not trained to identify any preexisting mold or mold damage.

Do you have a certification that attests that there currently is no mold or mold damage?"

Not an unreasonable question in my opinion, and frankly I'm glad that both the applicant and the co-signer are reading so carefully. Most people just skim and ignore me during their orientation and then get mad when I hold them to their contract down the road.

I don't have a good answer, though. We don't have any sort of certification in place, and I wouldn't know where to obtain one. My interpretation of the provision is that it primarily relates to visible mold and mildew/tenant caused issues.

How would you respond in this situation? Is the provision reasonable to have in there in the first place? Does the requirement that the tenant return the unit in the same condition it was received already cover me here/is making the explicit observation about mold just confusing the issue or making the lease seem more draconian than it really is?

@Adam Batcheller, I don't think I'm fully understanding why your line of reasoning/questioning keeps coming back to whether or not you should pay the electrician who is offering to do it for free. Is it because you feel that transacting for services gives you some sort of recourse?

I would require that the electrician provide proof of license and insurance. If he doesn't have either one, then I would say that the tenant must use an electrical contractor of your choosing at their expense. I would also require stylistic approval to make sure they aren't degrading the character of the property.

Good evening all!

I have a rental applicant who does not currently work, and who wishes to pay for the rent out of a trust fund. His financial advisor reached out directly to explain that he can co-sign the lease and attest that the trust has sufficient funding to pay the rent.

This is the first time I've encountered this particular nuance in an application and, while balance of probability suggests this is most likely legitimate, I'm still a little leery. Has anyone encountered this before? What documents should I be requesting in order to confirm to my satisfaction that the trust is adequately funded?

I looked up the company that represents the applicant and it seems legitimate. The applicant is somewhat eccentric but seems both decent and qualified otherwise.

Thanks for the help!

I don't keep a traditional budget. Instead, I use a balance sheet that tracks assets and automatically accrues liabilities for certain expenses. When the expense is realized and a credit card balance increases or cash decreases, I make a corresponding adjustment to the accrued liability.

I also accrue for certain goal setting activities, such as saving for major discretionary purchases or setting aside money for retirement. This allows me to calculate a "net cash" and "cash net of goal setting" number that I can focus on instead of trying to manage dozens of expense accounts. As long as I keep "cash net of goal setting" above 0, I can spend money on whatever I want because I know I've already paid myself and set funds aside to meet my other expenses.

Bit of an odd take on budgeting, but they say whatever you focus on tends to grow. Using a balance sheet instead of a P&L as my main focus area has been key in helping maintain the discipline needed to grow my net worth. I'm 29 (yuck, I know) and I'm currently increasing my net worth by almost 100% of corporate finance salary each year.

 To clarify, we don't have automated legal notices. When the tenant doesn't pay the late fee we manually give notice.

 Cody, may I ask what software you are using to automatically send notice/order WRIT?

Our software (RentecDirect) automatically applies late fees, but we don't have legal notice functionality.

@Steve Hall, the wife does work in the same town as the rental property. The house in foreclosure is about 30 minutes from here and he works about 1 hour away -- I gathered that she was stopping by on her way home from work, but did not explicitly ask why he wasn't with her.

 She earns a little over 2x the rent, which would not qualify her on her own merits as we require 3x. Her husband makes just under 3x, and between the two they are at 5x.

If I got a bad vibe from the husband, I would defer to that one.

I looked up the house that is being foreclosed. It's likely that her efforts alone would not have stopped the foreclosure, as the PITI on a property like that would be around 60% of her income.

I don't disagree that we need a policy on foreclosures. We'll likely add that to the screening criteria that we give every prospect at first business meeting. This is the first time we've encountered this particular type of applicant.