Inheriting a Long-Term Tenant

[Ryan Nolan]

Hello BP, I'm new to BP and we recently had our offer accepted to purchase our first rental, a condo.  The same tenant has been in the condo since 2006 and wishes to stay.  I am fine with keeping her and her rent at its current level.  The property is currently managed by a third party (not the seller), and I plan on self-managing.  The condo does need significant updating, but is livable right now.  I have a few questions relating to inheriting this tenant:

-What information am I allowed to see about this tenant and her rental history?  

-Am I required to honor her current lease (even though I intend to), in the state of Virginia?

-Give me your thoughts regarding a security deposit.  I'm inclined to waive any deposit, since she's been there so long and I'd have to update pretty much everything when she left anyways...if she ever leaves.  She does take good care of the place - very clean, decorated, etc.  But, if she gets some of her very old deposit back from the previous PM company, I like to think I should be entitled to it. 

-Can I see the PM company's financial agreement with the tenant?  Do I just need to ask? 

-What do people think about waiving a deposit in exchange for signing a two year lease?  

-What else should I be thinking about in a situation like this, with such a long term tenant?

Thanks!  Cheers

[John Warren]

@Ryan Nolan inheriting a tenant always comes with an inherent level of risk but it sounds like this particular tenant is a keeper. When someone has lived in a property for a long time they tend to start regarding it as their home. This means that you can get away without doing expensive upgrades to the property, etc. I have inherited quite a few tenants over the years, and many of them have been wonderful tenants. My first property in Lyons, IL had four tenants in place and I have all of them today except for one who passed recently. I could not have found better tenants if I had tried. 

In your situation, I would make sure you get whatever her initial security deposit was at closing (or as customary in your area). I would definitely examine the lease. I imagine it runs with the land, but verify this with your attorney. Lastly ,I would recommend against doing a 2 year lease. I did this in the past, but it locks YOU into a lower rental amount. I would rather keep raising the rent gradually ($20-30 per year) instead of locking it and losing that bit of rental income.