There are important considerations that you should make if you are buying a property which includes one or more rental apartments.
As in other types of purchasing transactions the first step towards buying a rental property is signing a Purchase and Sale Agreement which can be signed in the presence of attorney. When you are buying a rental property as well as any other type of real estate it’s recommended the agreement to be signed with previous consultations with a legal consultant.
David Lichtenstein is real estate attorney who is guiding buyers in the process of buying real estate. He has over 20 years experience in dealing with cases related with purchasing and selling real estate in New York.
We asked David Lichtenstein about buying a rental estate which is considered to be a specific case.
What should the Purchase and Sale Agreement include when it comes to purchasing rental property?
David Lichtenstein: The Purchase and Sale Agreement should include the list of tenants who live in the property in the moment of purchasing the property, the amount of rent they pay, the deposits that are being held for each of the tenants and the expiration date of each tenant’s lease.
The Purchase and Sale Agreement should provide that the seller will transfer the deposits to you at the closing of the purchasing procedure. It Agreement should alsocontain a list of the appliances the property disposes with, such as stoves, dishwashers, air conditioners, and refrigerators, in each apartment are the property of the seller or are part of the sale.
You, as a buyer, should be given copies of any leases and if it is possible your lawyer should ask the seller to obtain an “estoppel certificate” from each of the tenants. You may ask: what is this? – That is a letter, signed by the tenant, where he recite the state of the deposits for that tenant. That will prevent the tenant from later claiming the deposit existed but it wasn’t disclosed to you by the ex owner, said David Lichtenstein.
There is a law which gives the right the tenants to be required to pay only for the utilities for their own apartments. The payment of the bills is an issue which has to be regulated before signing the agreement in order to avoid additional conflicts with the tenants when it comes to paying the bills for electricity or gas or otherwise you could be responsible for paying for the tenant’s utilities. If there are tenants in the first-floor apartment, you may be held responsible for their electric bills unless this is fixed, explained David Lichtenstein.