Protecting Yourself when Inheriting Tenants? - Posted by Monique
Posted by Monique on January 30, 2001 at 14:10:46:
We’re working with a generally motivated seller on a property that has tenants in it already. Their lease ends in September 2001.
What tactics have you used to protect your interests when you are inheriting a tenant?
Some other details:
- I’ve seen the inside of the house and have met the tenant. They’re taking care of it like an owner, not like a tenant.
- The tenant is actively looking to buy another house (a bigger one) and would probably want to move sooner than September 2001 anyway. We have suggested to the Seller that he consider modifying the lease agreement to put them on a month-to-month if the tenant is considering leaving anyway. This assumes the tenant would be amenable to modifying the lease.
- We would be buying the property Subject To and putting our own T/B in it on a short-term L/O once we gain possession.
- Risk Factor: The existing mortgage has a balloon coming up. The balance is low enough relative to the value of the house that we could help our new T/B get a 65% LTV loan and take back a 2nd mortgage if we had to.
- We’ve agreed to pay the Seller some cash now and some cash later for their equity. We are thinking about including a clause in our purchase agreement that basically says if the tenant that we inherit (the one the Seller screened and selected) damages the property or must be evicted, we will reduce the amount of the seller’s back end payout by some amount to cover our damages, and some.
Any thoughts on other things we should add to our agreement with the Seller to protect ourselves since we’re inheriting his tenant?