How can I ensure that a sellers lease contracts are reliable?

[Zach Grabber]

Hey, everyone! This is my first post and I am hoping to gain insight into my first multi-family deal. I am looking at a duplex for sale and it seems like a great deal from every angle except that the current tenants are paying considerably less in rent than what the area average is and the seller refuses to send me the lease contracts. They say the leases are up in August/July respectively so I am not worried about getting rent value down the road, I am just concerned that the language of the current contracts is not ideal or that there is something wrong. I’m not sure how to convey that I’m worried about potential contractual obligations that I’ll be on the hook for without seeming intrusive or demanding. What would you do in my situation? Thanks for any help!

[Erik W.]

As a Buyer, you have the right to see the leases because whatever they say you are contractually obligated to fulfill.  If the lease says, "land lord agrees to do the tenant's laundry...." guess what?  You get to do the tenant's laundry.

I use that ridiculous example to reinforce why it is important to have and read the entire contract.  I have seen some squirrely things over the years such as land lord agreed to buy the tenant a new refrigerator after 4 years.  I've also had tenants tell me all sorts of "agreements" they had with the former land lord, and I want a piece of paper that says all agreements must be in writing to back me up.

If he refuses to provide this information, I would want to know why.  I cannot think of any legit reason to deny it unless he's lost the lease and simply can't provide it.  If he's worried about you revealing his "trade secrets" you can always agree to a non-disclosure of information for whatever period makes him comfy.

Bare minimum: your offer should stipulate that once you go under contract demand the Seller must furnish an estoppel letter listing the terms such as length of the tenancy, who are the approved tenants, who pays which utilities, how much was the security deposit, how much is the monthly rent, who owns the appliances, and are there any other agreements written or oral between land lord and tenant?  Include language that once the letter is sign, there will be no more written or oral agreements unless you also approve them in writing.  Signed and dated by Seller and all tenants.