Recourse for improper disclosure??

[Richard Lovering]

Hey BP peeps! 

I'm looking for opinions based on the following situation:

Closed on a 6 unit last month with 2 other inventors. At closing we were told there were no security deposits in house, by both the former owner and his agent. Not great news at closing, but nothing that would hold our deal up. We decided to move on and would let tenants know we would be requiring security deposits. Property manager delivers notice to 6 tenants that rents will be increasing between $25-$50 (based on #BR) and we require security deposits. 

Short version of the story is the tenants show proof that they had security deposits in place with former owners and that our small rent increases were more than we thought as the disclosure provided had slightly inflated amounts (rent was disclosed at $750 when it was actually $725 as an example). Tenants have reached out to the previous owner regarding security deposits and got a "I have no financial responsibility to that property any longer" response. I feel for the tenants. They were duped, as were we in some regard. 

What would you do in this situation? We feel we need security deposits in place. Rent adjustments can be dealt with fairly but we feel the security deposits are necessary. Part of our strategy is to rehab all the units, which would mean not renewing some of the leases anyway, so if some tenants leave over this it's not the end of the world. The selling agent, who we know, says he only disclosed what the seller provided him and he's not on the hook for any of it. I feel like there's some ethical responsibility on the part of the selling agent. He has stated he'll pass all our requests to the owner but is very hands off about the whole situation. 

Looking forward to your feedback!

Thanks,

Rick