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Updated almost 9 years ago,

User Stats

12
Posts
2
Votes
Craig Osborn
  • Rental Property Investor
  • York, PA
2
Votes |
12
Posts

Made an offer - property has a tenant with no lease

Craig Osborn
  • Rental Property Investor
  • York, PA
Posted

I finally took my first action after years of thinking about it.  I am hours away from signing a contract to purchase on a three unit house.  Two of the units are vacant, but one unit has an existing tenant.  

I am told that the tenant has been there for eight years.  She has no lease.

I read somewhere on this forum that in the absence of a written lease, judges typically will consider this arrangement an oral month to month agreement.

I toured her apartment and it was very clean, uncluttered, and she was very well mannered.  She only had around 24 hours of notice prior to my walk through so I think this is the way she normally maintains the place.  She is probably someone that I would be interested in keeping.  BUT - since this is an estate property, there is no one to talk to in regards to her rental  / payment history.

Here are the options that I thought of:

1. Don't make a big deal out of it and just try to get her to sign a lease after settlement.

 2. Make vacancy of all three units part of the purchase contract.

3. Make as a condition of purchase that the tenant has to pass the tenant qualification screening and execute a lease agreement.  I am not sure how to legally structure something like this.

4. Ask her for cancelled checks or cash receipts to document payment history and security deposit (if any).  Use this info as a decision making tool and as documentation for terms of the current oral month to month.

5. Continue with the oral month to month agreement, since in Pennsylvania this would allow me to evict for any reason with a 10 or 30 day notice depending on the scenario. 

 Do any of you have any additional thoughts / experience.

Thanks, Craig

User Stats

1,817
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831
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Patrick Liska
Pro Member
  • Investor
  • Verona, NJ
831
Votes |
1,817
Posts
Patrick Liska
Pro Member
  • Investor
  • Verona, NJ
Replied

Craig,

i purchased a two family house similar to that in PA, A tenant was in for 20 + years, no record of a security deposit or lease agreement. as the purchaser of the property you have the right to have an updated lease signed because they are now leasing it from you/ your company. have the seller provide records of the rent received as a condition of the sale, you should have been provided with copies of all current leases. because there was no record of a security deposit my PM made sure the tenant signed an agreement stating that because there is no proof, if they leave the property, there will be no security deposit given to them, they have been there for so long and keep the place immaculate and secure ( they watch everything ) we did not go after them to provide a security deposit when i bought the place.

  • Patrick Liska
  • User Stats

    152
    Posts
    52
    Votes
    Dominic Lucarelli
    • Irwin, PA
    52
    Votes |
    152
    Posts
    Dominic Lucarelli
    • Irwin, PA
    Replied

    Good tenants are hard to find. If her place is clean, and she's been there for 8 years in my eyes she's a keeper. 

    Patrick hit the nail on the head already: get documentation of her rent payments as part of the deal. If the seller doesn't pony up the security deposit (or deduct that amount from the deal), write up an agreement stating such.

    Good luck to you and keep us posted how you handle it!

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    User Stats

    56
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    42
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    Tim Steele
    • Investor
    • Jackson, MS
    42
    Votes |
    56
    Posts
    Tim Steele
    • Investor
    • Jackson, MS
    Replied

    I purchased a 4 plex recently that was similar. Vancacies with one long term tenant. No paperwork, no memory of the security deposit. When I had toured the unit, clean organized. The tenant was paying 1/3 of the market rent. 

    I wanted the tenant to stay. But wanted a fair relationship. I sent a notice that there would be a rent increase and paperwork to sign for a new lease. 

    The tenant stayed, and having a unit already rented with a good tenant has been a great thing. It's been 3 months and no issues. 

    But as was said, document the security deposit (if there is one and amount) you don't want to get stuck with a tenant claiming they had paid a security deposit equal to 2 months rent.