Seller Disclosure of Current Tenants Rents

[Thomas Fawcett]

Hey guys, This is my first post! I love BiggerPockets and thank you all for this great community!! My wife and I are looking at a FSBO triplex. The numbers look good but I will be inheriting 3 tenants. The rents look a little high for the area and I am wondering if there is a way to ensure the disclosed rent is accurate? Can I legally get the signed leases before closing? What should we do to make sure things are in place legally when inheriting tenants. Thanks!

-Thomas 

[Nathan Gesner]

@Thomas Fawcett I would take it one step further.

Your offer to purchase should include a requirement that they provide all documentation and agree to sign an estoppel certificate (also called estoppel form or agreement). The estoppel certificate is a form filled out by the tenant and then confirmed by the Landlord. It's supposed to ensure there are no surprises after closing. For example, you buy the place and the tenant could claim the Seller allowed them to paint the walls black or that their security deposit was twice what the Seller claimed. 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

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.