Purchasing a property that is already rented
What if the tenant does not have a written lease?
Before signing an agreement to purchase a property that is tenant occupied, you should make sure that all tenants are under a current lease.
If you purchase the property and do not have a written lease for each tenant (believe it or not some landlords only have a verbal lease) it could lead to future problems. For example the tenant could say, “What do you mean my rent is not $750 per month it is $450”. Or I have never paid any of the utilities, the landlord does. This could be the tenant trying to get out of paying what they really owe but it could also be that the seller is inflating the income on the property to make it look more attractive to a buyer.
Also, make sure that the seller gives you a copy of the tenants’ application. This information could be helpful for many reasons. One example: if the tenant should move without notifying you and leaving a forwarding address, you could use the information from the application to contact one of their relative to try and track them down.
So I recommend if you are interested in purchasing a property and the seller does not have a lease and application for each tenant, you should make the agreement contingent upon the tenant signing a new one. For example you could add a clause that would state “this agreement is contingent upon the seller providing buyer with a signed lease and an application to be completed by all tenants”.
Mark Fichtner, Managing Member
Penn Pioneer Enterprises LLC