Inheriting Tenants, Help Needed

[Sahil Relan]

Hi All,

I am about to purchase a 2-unit property in Chicago for 100k. It is an REO so I am not getting good responses from the seller. Here is my concern:

The property is already rented. 

a. The seller says one of the unit is occupied by tenants who get CHA assistance for 75% of the rent. 

b. The second unit is cash MTM tenant. I am worried that the second tenant might not be paying etc and I dont want to deal with eviction since it will be my first RE investment.

What do you suggest from your experience that I should do?

I am still in the 5-day period for the contract. What can I ask from the seller like receipts for rent paid etc?

[Nathan Gesner]

Your offer to purchase should include a requirement that they provide all documentation and agree to sign an estoppel certificate (also called estoppel form or agreement). The estoppel certificate is a form filled out by the tenant and then confirmed by the Landlord. It's supposed to ensure there are no surprises after closing. For example, you buy the place and the tenant could claim the Seller allowed them to paint the walls black or that their security deposit was twice what the Seller claimed. How will you know? An estoppel certificate fixes this problem. 

Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.

Here is an example and explanation: https://eforms.com/rental/esto...

Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.

I would also recommend you communicate with the seller about possibly removing the M2M tenant prior to closing. This wipes out the problem before you take over, saving you a lot of time, trouble, and possibly money. If they can't or won't, be prepared to start the process on the day of purchase.