Inherited tenants

[Wesley W.]

Hello all,

I'm currently under contract to buy a fully-occupied multi-family property.  This is the first time I will have inherited tenants that are on a year lease (as opposed to month-to-month).

One lease expires in January 2016; the other in April of 2016.

My concern is, even though I am obligated to honor their leases, I don't know anything about them beyond their names.  When I rent out to tenants, I have them fill out an application and do background/credit checks on them.  The current owner has none of that.

I have two questions (thusfar):

(1)  Is there anything I can do to compel the tenants to provide me that information?  The lease (obviously) doesn't speak to this issue.  If not, any ideas/advice if I encounter resistance from them?  (There is typically a "power struggle" when one inherits tenants, in my experience.)

(2)  Is this something I should be concerned about and dig my heels in with the seller?  Is that a reasonable request?  Or should I let sleeping dogs lie until lease expiration?  I'm assuming they are not "problem tenants", but I have almost no information upon which to base this assumption.

I know there are dozens of you out there that have had a similar situation over the course of your own ventures.  How did you handle it?

Thanks in advance for your collective wisdom!

[Marcia Maynard]

@Wesley W. No need to be overly concerned about what the seller or tenants will or won't reveal to you. Take it in stride.

PRIOR TO ACQUISITION: 

1. Request as much background information from the seller about the property and the tenants as you need but don't sweat it if they have little to tell you. Do your due diligence. If you can't get a copy of the leases or suspect they are not accurate, you can ask the tenants to give you a copy of theirs or have them sign a tenant estoppel certificate. Obtain all tenant security deposits at closing and the tenant files, if they exist, from the seller.

2. Talk to the neighbors about their impressions of the property. Let them know you are considering purchasing the property and share with them that you intend to manage the property well so it will be an asset to the neighborhood. If there has been trouble there, the neighbors are likely to be upfront with you (if they see you as sincerely interested in the greater good.) Don't ask specifically about the tenants, if there is a problem it will be revealed.

3. Observe the property at all times of the day. Take note of what you see. If you see something undesirable, but not a deal breaker, then you will be better prepared to handle it once the acquisition is complete.

4. You can check public records as soon as you have the legal names of the current tenants/occupants. No need to do background checks (rental, income, credit, legal) of current tenants. It is what it is. The more you know the better prepared you will be, but if the information doesn't come easy, don't press for it.

POST ACQUISITION:

1. Introduce yourself to all of the tenants. Provide them with a letter of introduction that outlines who you are, your contact details, where to pay rent, how to notify you of maintenance/repair needs, what to do in an emergency.

2. Create a tenant information sheet and let the tenants know you need to make note of the full legal name of each occupant, pet information, vehicle information, and contact details (phone, text, email). Provide the same for them and show them your photo ID. Ask to see a their driver's license or government issued photo ID. They will gladly do so, if not... it could indicate a problem tenant that you will need to watch.

3. Be at the property often during the early days to attend to deferred maintenance and to get to know the tenants. Start at a point of trust. Give them every opportunity to learn your management style. Be responsive to tenant needs, inquiries and requests. Be friendly and respectful. Let them know what you value. Demonstrate that you address issues swiftly, firmly and fairly.

4. Review the lease agreements. Then make an appointment with each tenant to sit down with them and review their current lease agreement together. Find out from them what is working for them and what is not. The tenant and you can change your lease agreement at any time if all parties agree. If your agreement is more favorable to the tenant than the one from the previous owner, then the tenant is likely to want to change to yours. Your lease agreement will be easier for you to work with than that of the other owner, but both are likely to have similar standard clauses and have your interests covered. At the time you change to your lease agreement, ask the tenant to fill in a rental application so you can capture key information you may lack.