Seller can’t find leases

[Tim Kaminski]

I am closing on a duplex Monday and the seller has been dragging his feet on sending over the leases of the current tenants and now he is telling my realtor that he cannot find the leases.

He has said verbally how much they are paying a month but does not know the deposit amounts nor terms of their agreement. Who is paying which utilities etc. Obviously my concern is that I have nothing to stand on if the tenants claimed that their security deposit was any amount of money at moveout.

I have not encountered this before. Any suggestions?

My only idea is to ask the current tenants for an email copy of their current lease.

[Charlie MacPherson]

You need estoppel certificates signed by the tenants ASAP - and assuming that your P&S made that a condition of the sale, you should refuse to close without them.

[Dustin Allen]

@Tim Kaminski

@Charlie MacPherson nailed it. Estoppel Certificates spell out the rent and deposits paid by each tenant and they are signed by both the Seller and the Tenant. These are much more reliable than a lease that may have turned into a month to month agreement and might have been signed years ago.

[Tim Kaminski]

@Charlie MacPherson Thank you. Working on it now.

[Wale Lawal]

@Tim Kaminski

Yes as mentioned by other, estoppel certificates are must.

You need them before closing.

Good luck!

[Joe Minteer]

Quote from @Charlie MacPherson:

You need estoppel certificates signed by the tenants ASAP - and assuming that your P&S made that a condition of the sale, you should refuse to close without them.

 Thanks for the information.  I've never heard of the estoppel certificate, though I've only bought one property that had tenants in it, they are Section 8 so I already knew the income and terms beforehand.

[Anthony King]

@Tim Kaminski second the estoppel agreements. The title company should also have the prorated rents on the closing docs as well as the security deposits to convey. How is that not already acconplished? Your realtor dropped the ball on this. Do not close until prorated rents, estoppels, and security deposits are figured out.

[Theresa Harris]

He has to know who is paying utilities-if the tenants aren't then he is paying them and would know.

He can write up something simple and get the tenants to sign it (person X moved in around Sept 2018, paid a deposit of $y and monthly rent of $z is due on the first of each month.  All utilities are paid for by the tenant).  Even if rents went up since the tenants moved in, have him give you what the standard deposit is (eg 1/2 months' rent) based on their current rent.  If the tenant's deposit was really $500 and he gives you $600 and they get $600 back when they move out, who cares as it is the seller's money.

If both the tenant and the seller sign the form, make that the new shortened version of the lease.

[Eliott Elias]

Make him sign a new one with tenants for the duration of the original lease. No lease can be a nightmare 

[Nathan Gesner]

Quote from @Tim Kaminski:

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.