Five Commonly Asked Questions About Acquisition Tenants
As always, this article does not provide or imply legal advice. Check with your local, state, and federal laws. This article provides some guidelines to keep in mind as you begin your tenancy with an acquired tenant.
Purchasing a property with an acquired tenant can be a wonderful experience, where you’ll benefit from instant cash flow without having to find and place a tenant. It can also be scary, as you wonder whether you’ll be walking into one headache after another. As you consider a property with an inherited tenant, these are just some of the questions that you may be asking yourself.
1. Should I keep the tenant?
Every owner sells for a reason. As a new owner, it is important to figure out whether the inherited tenant will help you meet your goals or not. If it becomes clear that the tenant you have inherited is not the tenant for you, you will have to take a look at your local and state laws. Tenants have specific rights that will vary by jurisdiction, and tenants who have been in a residence for a long time may have additional legal rights.
2. Can I instantly raise rent on an under-market tenant?
It is not uncommon in an acquired tenant situation to find that the rent has been set below value for the area, especially when tenants have been in the unit for a long time. Never raise rent without knowing the law. Your local and state laws will likely dictate many aspects of raising rent, such as how often, by how much, and how soon you may raise rates on an inherited tenant. Rent-controlled tenants and Section 8 housing will be subject to additional restrictions.
3. Do I have to fulfill their lease?
Yes, unless the lease or local or state laws say otherwise. In most instances, you will have to fulfill the lease requirement. Additionally, check the terms of the lease as well as local laws with reference to renewals. Renewals are typically automatic unless notice is given, and terms for that notice will also vary.
4. Can I make changes to their lease?
No, lease changes cannot be made until the current lease expires, unless your lease provides special permissions. The lease will be specific to the property that has been rented. By the same token, lease violations can still be handled with notices and even eviction actions where they are warranted and allowable by the lease agreement. The time to make changes is once the lease expires. If you will be renewing the inherited tenant, rather than a one-page renewal, be sure to create a brand new lease. The ezLandlordForms lease wizard will walk you through the process of creating a comprehensive lease that will help to cover the landlord.
5. What paperwork should I send to the inherited tenant when I take ownership?
You may wish to send a welcome letter, introducing yourself, giving rent payment details, and contact information. This is a great time to set a positive tone with the tenants.
These represent just a few commonly asked questions when a tenant comes with your purchased property. It is important to keep in mind that this can be a stressful situation for both parties. The tenant will probably feel uneasy with a new landlord, until they can assess the landlord’s intentions and expectations. While it is all business for the landlord (as it should be), for the tenant the home they rent from you is where the hang their hat each night. Keep an open mind regarding what you learn from the selling landlord, and be sure to take time to form your own opinions before taking action. You would not want to write off an inherited renter too quickly, as the acquired tenant provides immediate income, and saves you the work and carrying costs of having to find a renter.