What is an acquisition tenant?
An acquisition tenant is an inherited renter currently residing at a property that you buy. Acquisition tenants come in all varieties. They may be in typical 12-month leases, or often they have lived at the property for years. In some cases, paperwork for these tenants may be old, incomplete, or nonexistent. Most importantly, these are tenants that you did not get to screen, choose, or have a say in selecting. They come with the property.
What should you request from an acquisition tenant?
Every landlord should be sure to adhere to state and local standards, as they will vary widely. Forms that landlords may want to have in-hand include the current lease, an estoppel, contact information, and the tenant’s original move-in paperwork.
The lender may require an estoppel before the purchase, but you may wish to require one as well. An estoppel is a legal document that confirms or clarifies certain aspects of the rental situation, such as the rent paid to date, the lease expiration date, the security deposit that was paid, and the like. You may wish to clarify any portions of the lease that are murky or unclear. An estoppel is a helpful way to ensure that the lease reflects the actual rental arrangement. Are the people living in the property all named on the lease? Is the rent amount spelled out in the lease the amount that is actually being paid? Is the tenant’s rent paid to date? The tenant will sign the estoppel to validate these terms, and the landlord will gain peace of mind from this extra check that the rental situation is as they expect.
The lease is a legally binding agreement that comes with the property. The lease remains in effect at the time of property transfer, unless the lease itself or state law allows for the landlord to end the current renter’s tenancy with notice. Since the new owner must follow the existing lease, you must be sure to obtain a copy of the agreement, including any addenda.
Without contact information, you will have no way to contact your tenant without speaking with him or her personally, or posting a notice to the door. The estoppel represents a great time to confirm that the contact information you have received is correct.
The move-in paperwork will serve you in a couple of ways. First, it may alert you to issues regarding the condition of the rental unit that you may not have been aware of. The move-in condition document will also make the process much easier when the tenant moves out. It will help ensure the tenant does not try to pass off damage they caused as pre-existing.
Request as much of the landlord-tenant correspondence as the departing landlord can provide to you. It would be ideal to know about any previous run-ins between renter and landlord. You can ask to receive any notices that have been issued, then you will know if a rule has been broken and whether the notice is for a first infraction or a repeated problem.
When purchasing any rental property, one question you should consider is why the owner is selling that unit or getting out of the landlord business altogether. Is the landlord retiring, moving, or facing a health issue? Or is the rental unit losing money, or undesirable to tenants? This is especially important to consider when you will be inheriting a tenant as well as purchasing the property. Consider whether a problem tenant was a final straw in the decision to sell the property before you dive in.