Buy a tenant occupied property-This newbie needs help.

[David Travieso]

Good day BP family. I’m in the middle of purchasing a duplex with one unit occupied and the other I’m going to live in to make it my primary residence so I get a lower down payment.

The problem is, I don’t know how to even begin to discuss the current tenant with the owner. My realtor mentioned that they’re on a month to month lease and is paying less than the current fair market value. Legally, I don't know what to ask the owner about the tenant and how to move forward when I take ownership. Please if there is any advice anyone can share I would greatly appreciate it.

Thank you.

[Nathan Gesner]

If your REALTOR is not answering these questions for you, then you've got a stinker for an agent.

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.