What rental documents should be included in disclosure?

[Nuo Shi]

HI BP,

1. What should be the rental documents included in property disclosure when buying with existing tenants? I'm thinking about estoppel certificates sent to and received back from tenants; leases; rental agreements; and current income and expense statements. Anything missing?

2. Is that legal to ask seller to provide current tenants' occupation/income? May I ask how many people live in current property? Since I found the lease it's signed by "one tenant name + his parents/families (no name for each adult)"

3. For a month-to-month lease, should I wait until close and send out 30day/60day notification to change lease term (e.g. rent, regular inspection timeline)? Ideally, I'd like to cover the new terms when I sign the lease with existing tenants before close, but since there is a pre-notification period and the property still belongs to seller, I don't know how to manage the timeline. This is in California.

Thanks for advice

[Andrew Syrios]

1. I ask for the rent roll, aged receiables reports, operating statement, capital expenses, copies of the leases and some sort of proof of deposit (tax returns, bank statements, deposit receipts, etc.) I would only get estoppel certificates with commercial properties that have a few large tenants. 

2. I believe you would need the tenant's permission to get this. It's probably not necessary either as you should be able to get their payment history.

3. You would need to negotiate this with the seller. I wouldn't allow such things to be sent out until the property closed because it might fall through. It would also be legally tricky as I believe only the owner can send out such a notice, so the owner would need to and it might (?) become invalid once ownership transfers. I would just wait until you take ownership.

[Nuo Shi]

@Andrew Syrios

Thanks Andrew.

1. I have put your list down :) 

2. Ya, the seller can provide me the payment history. Btw, may I ask seller how many people living in the property now? Is that legal?

3. Got it!

[Steve Morris]

Here's what I ask for, noit saying I get them all, but it's a checklist.  You should also have some sort of assignment/assumption agreement on leases and other contracts:

Current rent roll certified by Seller.

Current rent roll, leases and rental agreements for all units, including a complete list of all refundable tenant and/or cleaning deposits. If there are more than 45 units, Seller shall not be required to copy and deliver the leases and/or rental agreements, but rather will make them available to Buyer for inspection at the Property or another office of Seller’s property manager. Should Buyer wish to make copies of said agreements, they will be made at the Buyer’s sole cost and expense.

Operating statements pertaining to the property for the two prior years as well as the current year to date If not provided by an independent third party management company, provide supporting tax returns for the 2 previous years.

Copies of any notes, security or financing agreements, mortgages, trust deeds or other encumbrances which will remain of record after closing.

Current tax assessment statements and copies of the most recent tax bills.

Current property insurance binder and a 3-year loss history.

As-built mechanical, electrical, and structural plans and specifications for each building (if available).

An ALTA survey of the Property (if available).

Soils report (if available).

Environmental/Hazardous Materials reports and studies (if available).

A site plan and parking plan of the Property (if available).

Service contracts and other contracts affecting the Property, including supply, maintenance, and service, including correspondence related thereto and correspondence, if any, with governmental agencies concerning the Property.

Occupancy permits (if available).

Project brochure and other marketing material currently in use.

Third-party warranties and guarantees affecting the Property, if any.

An inventory of personal property.

Utility bills for preceding 12 months.

Copy of standard lease form.

Other:

[Nuo Shi]

Thanks Steve

@Steve Morris

For "Copies of any notes, security or financing agreements, mortgages, trust deeds or other encumbrances which will remain of record after closing." 

Do I need to investigate this myself? Will the escrow help verify the title and any potential lien on the property?

[Steve Morris]

"Do I need to investigate this myself? Will the escrow help verify the title and any potential lien on the property?"

You should get a Prelim TItle report from Escrow.  It will tell you which liens will be removed and which'll survive.

Usually liens that survive are loan assumptions of some sort, but you need to understand what you're assuming, hence the note.

[Cal Dunagan]

@Nuo Shi
You're asking a ton of legal related questions. Though you have some great advice in this thread, have you considered reaching out to a real estate attorney who is familiar with the landlord-tenant laws in your area? If you decide on this route, make sure you educate yourself on what questions to ask the attorney so you pick the right one to work with. This article goes over some important questions to bring up with an interview with potential attorneys. Best of luck!