Inheriting tenants-at-will in Massachusetts

[Michael Cutting]

Hello, BP!

I've been doing some diligence on an 8 unit apartment building by obtaining details from the seller's agent and running some analysis. Outside of the numbers, I've got a few details around this potential opportunity that I'm hoping to run by the BP community to see if anyone has any guidance/experience with my specific queries.

The building in question is fully rented. However, the agent says that there are no leases in place - only tenancy at will agreements. Additionally, the seller has no security deposits, and he only has the last months rent for two of the units.

I've reviewed the landlording info on the mass.gov website, but wanted to check with any more experienced Massachusetts investors here on BP:

- Is a new owner allowed to step in and require signed lease agreements if no lease was previously in place in Massachusetts?

- Has anyone had any experience with taking such a step, and any guidance on that front? Are tenants put off by this? Do you advise allowing the tenants to remain on a month-to-month arrangement in order to make sure they are good tenants and the relationship will work?

- Can a new owner ask for a security deposit from existing residents if they didn't have to provide one to a previous landlord?

I'm not particularly enamored with the idea of not having a lease agreement in place, even if its a month-to-month lease, so am wondering how this would play out.

Thanks in advance!

Mike

[Rob Beland]

To address your questions @Michael Cutting...

1 Yes you can purchase the property and then require all tenants to sign leases. Since they are tenants at will now you will have to give them at least 30 days notice. As a TAW you don't need the agreement to be in writing but it's a good idea. You can find a Greater Boston Real Estate Board TAW agreement free online and print a few copies. 

2 - Personally, I would say if you have good tenants (clean apartments, long-term tenancy, good payment history, etc...)it might be best to leave them as TAWs but just have them sign a written agreement. 

3 - I'm not  a fan of long term leases for apartments. I prefer the 30 day TAW. It gives you more flexibility if you need to evict, raise rent, etc...

4 - You can ask for a security deposit but you need to be sure you are familiar with the laws. Massachusetts has extremely strict laws for handling security deposits. You will have to have a statement of conditions filled out, give the tenant a receipt with the bank name and account number, you must pay interest, etc..

This could be a turn-off for an existing tenant that has never been required to pay a security deposit. Personally, I don't collect security deposits. It's not worth it, in my opinion, to jump through all the hoops that this state requires. I only rent to tenants by word-of mouth and don't advertise so I always know who I'm renting to usually friends of friends. 

I have heard way too many stories of landlords not handling a security deposit properly and if the judge finds out about this during an eviction you could be ordered to pay the tenant 3X the amount of the deposit in damages. 

Good luck. PM me anytime if I can be of help.