How to manage inherited tenants?

Question

Dear BP community -

I am looking at closing on my very first rental property, but wanted to get some advice before sealing the deal-

Some details:

Location: NEPA , Clarks Summit, PA (close to Scranton)   - Anyone with experience in this area please comment with what may be customary in this area!

2 units - both currently occupied, but one is moving out.  By the time we have transferred ownership I will have one existing tenant and one vacancy.

The occupied unit is being rented ~100$/mo below market rates.

The property is being managed by the current owner.

Here are my questions:

1. Do I honor the existing lease for the tenant already in place (until it ends), or does he sign a new lease when I take over?  Do I ask the owner to send me the current lease agreement?

2. The property has gas heat (boiler) - not split out, so likely I will be paying this as the owner unless I can set up some other arrangement for the tenants to split the bill.  The winters here are freezing - how do the landlords out there manage their thermostat/heating bills?  I could install thermostats that can be controlled via an App on my phone to monitor the heat setting.. does anyone do this?

3.  To add to the heating discussion - does anyone local have an idea how much my gas bill would be in the winter months for this roughly~3,000sq ft house?  Would the gas company be able to provide this information?

4. Garbage/water - Owner pays?  Any way around this?

5. Snow removal - tenant responsibility?

Thanks in advance!

Thomas S. · Answer

When it comes to tenants you first study and learn all your state landlord tenant regulations. As a new business owner you are obligated to know the codes.

The cost for heating is discovered during your Due Diligence stage from the seller. Esstopal letters, past utilities, water , garbage costs etc. all available from seller. If this was not part of the conditions of your purchase you are SOL.

Most other issues are addressed in the tenants existing lease which you inherit upon purchase.

Adam Guiffrida · Answer

Amy,

Congrats on your new purchase. Not as familiar with Clarks Summit as Scranton. But hopefully I can help:

• By law you will need to honor the current lease in place unless they are willing to sign a new one. If it were me, I would raise rent $25-50 to get you closer to market rent without losing them. The winter and holidays are the worst time to lose tenants. At least they will feel like they are getting a deal if you do not raise the full $100. Transitioning tenants are more expensive than most people think.
• If the building has more than one thermostat than you can most likely split the heat which should not be anything major. My advice for thermostats is Landlord Thermostat. These are simple, reasonable, and work great. There are several types. If you want to use an App controlled thermostat you will need to have your own Wi-Fi which could get expensive.
• As for bills, call UGI Penn Natural gas and tell them that you are a new tenant moving in and want an estimated budget amount. This will account for any recent gas price increases and decreases. I always recommend everyone put their gas bills on budget plans. 
• Garbage bills and water bills I am not sure how Clarks Sumit works so I could not comment.
• Snow removal is tough. I always recommend a service to ensure that the snow is taken care of. Even if snow removal is deemed a tenant responsibility in the lease, it still leaves you open to liability.

Hope this helps,

Adam

Ashley Shearer · Answer

Hello! We also just bought a duplex with an inherited tenant in central PA. We'll be occupying one side and had a few of the same questions. UGI quoted us an average of about $75/month with winter bills reaching $120 at highest for the one side (3 small bedroom, 1 bath). When I called to set up my new account, I asked for the monthly averages from the last year and they gave them to me.

Garbage/water - Will be different for your area probably, but they send us a quarterly bill and has to go to owner's name. We will get 2 bills, one for each side of the house. The previous seller said he just made a copy and gave the tenant the exact bill which shows who/where to pay.

Have to honor existing lease (ours is up in one year). At the end of that year, you can decide to term the lease and they will have to leave, or if they're good tenants you can keep them.

We have a shared driveway. Seller told us that in the lease, it states that the tenants have the responsibility to have snow removed from sidewalk by a certain time (I think he said by 7am or something, whatever the local law states). He then told them that he will try to get it done but he works on-call sometimes, so they know that if he doesn't get it done, they have to shovel the sidewalk. I believe driveway doesn't technically matter - it's just sidewalks and public areas like that. And in that case, I think we're leaving it to tenants to essentially split the sidewalk & just shovel their half.

When we move out, we'll likely expect tenants to shovel.

Chris K. · Answer

@Amy Engelhard

1. Clarks Summit is generally considered to be a good area. Of course, there are pockets that are better/worse than others.

2. You have to honor the existing lease unless the lease expressly provides otherwise.

2b. If possible, try to get the tenant and the current owner to sign tenant-estoppel certificates before closing. Unfortunately, you might be too late for that if you are about to close.

3. When it comes to heating, you can install a little thermostat locks if you are dealing with tenants that are okay with it (it generally won't fly with tenants that pay a higher rent). You may also want to see whether it is possible to split the utilities. The difficulty/cost of that depends on how the utilities are running into the house.

4. My personal home is around that size --- I think I pay between $125 a month. But all this depends on insulation of the house and the type of heat you use. Before we made some modifications, the heating bill was closer to $300 a month.

5. You can have the tenants pay water if the utilities are split. Garbage is harder to do because it's not a regular bill and many municipalities refuse to send the bill the tenants or make it their responsibility. Same is true for sewer bills.

6. You can make snow removal the responsibility of the tenant. But then you may risk premise liability. Also when the tenants share the same front yard, it can get difficult to have the tenants remove the snow. In my experience, tenants tend to move the snow on their own since it interferes with their use of the property. Where it gets tricky is when there are massive snowstorms. In those cases, it may make sense to hire someone to do it since it may become physically impossible for the tenants to do it (at least safely). With all that in mind, your best option might be to make snow removal the responsibility of the tenants but intervene as necessary.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it as legal advice. Always consult with your attorney before you rely on the above information.

Kevin D. · Answer

Hi @Amy Engelhard, in PA, I believe that you have to honor an existing lease with a tenant. Also, you will be responsible for the heat and there are strict limits on how low it can drop in the winter.  I haven’t used one of the apps to control the thermostat, but I think it’s a great idea. I always install a locked case if there is a manual thermostat.  Also, I would ask the previous owner to call the gas co to get copies of he bills from last winter, they may not give them to you if you call. When you do transfer the account in to your name, the gas company can put you on a plan where you can pay the same amount all year, so that you don’t have huge bills in the winter, you can spread that cost over the summer months as well.

Marcia Maynard · Answer

There have been many great forum discussions on this topic! If you type "inherited tenants" in the Bigger Pockets search box you will find links to all of those discussions. I'd start there. To find the BP search box, go to the top of the page and click on the magnifying glass. We have no problem working with inherited tenants. The key is to win the tenants over to your style of property management and transition them to your rental agreement as soon as possible.  It's imperative that you know and abide by the landlord-tenant laws for your jurisdiction, so be sure you are on top of that. Since the previous owner also managed the property, he should have some insight to share with you. Ask him for copies of the tenant files for any tenants who are staying. Also, don't forget to get their security deposits transferred to you at closing. Good luck!

Michael Craig · Answer

@Amy Engelhard first off congratulations.

Do you know for certain that the one tenant is moving out or is their lease coming to an end and you are assuming they are? Just make sure you do not get stuck with an inherited tenant you may have to evict.

With my inherited tenants, I found it best to keep things the way they are as much as possible. Example, if garbage removal is paid for by current landlord, you may want to continue paying for it. One reason being is the tenants may not order garbage removal if you cancel and just hoard the garbage on the property until they get around to bringing it to a nearby dumpster.

Good Luck!

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