Raising Rent as New Owner with current lease month to month

[David Roberts]

Just curious:

If I buy a rental and close on it in the middle of March for example, and there are current tenants with a month to month lease from the previous owner, which are all paid up through March, can I as the new owner raise the rent starting in April with a new lease?  

I am honoring the March month to month lease, but in my opinion that lease dies with the transfer of ownership, so I need to create a new lease between myself and the tenants.  If it's march 15, and I meet with the tenants and say "hey your rent is going to go up 100 a month starting April because I am the new owner and you are just so far under market", can I do that without 30 days notice given that their current contract is month to month and I'm coming in mid month as the new owner?

By the way, they decided to move as they said they're on a budget and can't afford it.  I said they have lived there 3 years with no rent increase and are way below market.

I just want to be fair.  They said they will be leaving at the end of April.  I asked them to write me a formal letter stating they are vacating by April 30.

Thanks for the help.

[Mark B.]

You would need to look at your state's laws - I would be surprised if you didn't at least need to give them 30 days notice.

Leases don't die with the transfer - even if theirs was for 2 more years at half market you would need to honor that. Spend some time learning the law in your state prior to talking with the tenants again. If you goof up and the tenants know it you will be liable for damages that they will collect on. Become very familiar with your states laws on accounting for deposits - mess that up and you can be liable for 3x the deposit in some states. Become very familiar with fair housing laws, as modified by your state.

There is more to this than being at market. Long term under market with people who take care of your property and leave it cleaner then when they found it can be more profitable and less hassle than above market with higher turnover.

BTW - (Not intended to be condescending, just accentuating a very important point) - Your opinion doesn't matter, your local judge is all that matters!