If you’re purchasing a property with existing tenants, there are a few important steps to take to protect your investment and ensure a smooth transition. Here’s what you need to know:

1. The Current Lease Carries Over

When you buy a tenant-occupied property, the existing lease terms remain in place. You will step into the role of the landlord and must honor those agreements.

2. Assignment of Leases and Rents

At closing, you will need an assignment of leases and rents to officially transfer the landlord’s rights to you. This ensures you can collect rent and enforce the lease.

3. Request an Estoppel Certificate

Have the tenants confirm key lease details—such as rent amounts and term—through an estoppel certificate. This helps prevent surprises down the road. Note that the tenant is not obligated to sign, but it is worth the ask.

4. Review the Lease Carefully

It’s essential to understand the terms of the lease, including rent schedules, security deposits, last’s month’s rent and any obligations you will need to fulfill as the new landlord.

5. Adjust Leases, Rents, and Deposits in the P&S

Make sure the Purchase and Sale Agreement (“P&S”) accounts for all leases, rents, and security deposits to avoid financial discrepancies at closing. It is also helpful to have a tenant rent schedule in the P&S, especially if there is an “at will” tenant (meaning there is no lease).

6. Send a New Owner Letter to Tenants

After closing, notify tenants of the ownership change, how to contact you, and where to send rent payments. Clear communication is key to a successful transition.

7. A Buyer Not the Landlord Until the Closing is Complete

Please make sure not to negotiate new rents, speak directly with the tenant, or serve notice until you are the Owner.

Please reach out with any other questions. We try to make the change seamless.