The park I’m acquiring has a property manager who is a relative of the seller. They are living there rent free and utility bill free. I am planning on firing him and self-manage once I take over. The park is small, only 7 occupied units. However, the seller is essentially paying them 11% of collected rent in the form of free everything. How do I go about it the best way. I am not only going to fire them, but I am going to charge them rent and ask them to set up utilities. They do have a lease with the seller, but the rent is just waived. Any suggestions would be appreciated! Any dangers I need to be careful with?
First you need to understand he does have a lease, it s verbal.
You have the seller inform his relative/manager that his services will no longer be required upon closing. If the manager owns the home he is in you provided him with a new lease to sign with all details. He does not have to sign it for the lease to become legal and binding. If the home is a POH and comes with the purchase I would terminate his lease since you will not likely want a disgruntled ex-manager as a tenant going forward.
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Not mentioned above is that you also need to confirm if the “manager” is considered a contractor or employee to ensure that you do this in accordance with the state’s labor laws.
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Yes he does have a lease signed. It’s written. The seller literally just waives his rent and utilities but without any contracts…
Good idea. I will find out a out employee and contractor part. The seller lists him as a “partner” on their tax returns… I think that will probably make him an employee, right? Who should I be asking for laws on this? He is the seller’s employee. Not mine though…
Why does he not have to sign it for it to become legal and binding?
State regulations will normally indicate that signing a new lease with a existing tenant is not necessary. Simply providing the tenant with a copy of the lease makes it binding unless the tenant terminates the relationship. This is intended to prevent tenants from attempting to abuse a landlords rights by refusing to sign. Normally a existing lease automatically becomes a M2M auto renewed monthly, no signing required.
It is only necessary for a new tenant to sign a lease to make their tenancy legal.
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Got it. So without signing a new lease, that just means they are on m2m, not a 12-months lease. That would make the tenancy not very stable, right?
If you do not offer them a new lease they remain on the old. If you do offer a new lease, M2M or term, it takes effect without signing or you could choose to non renew and possibly have to evict should they choose not to leave.
M2M is preferred from a landlords perspective. A term lease places the tenant in control for the term of the lease while M2M allows the landlord full control over the tenant. Terminating a tenant on M2M only requires notice of non renewal, you do not need to evict as with a term lease (unless they refuse to leave).
Keep in mind the length of a lease, term or M2M, has no relation to on when a tenant may choose to leave. It is a misconception to believe that tenants respect a lease term. Term leases do not guarantee stability.
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You have very specific legal questions that are relevant to your particular state. I would consult an attorney.
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Understood. So if they are current on M2M, and I give them 30 days required by my state and then raise the rent by $50, still on M2M. It should totally fine, right? With a M2M lease, I can pretty change the terms and prices anytime I want as long as I give them property notice, correct?
Correct. Your state regulations dictate what you can do without being restricted by a term lease. When a tenant hits a significant financial bump in the road or for some reason turns bad you give them the boot. It is not always that simple but much simpler than dealing with a tenant on a term lease.
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Labor laws are not relevant to this topic. I assume you are forming a new company to buy the park. The new company that you form is not the employer and has no responsibility for the former owner’s employment agreements. After you buy the park, the manager is still employed by the former owner per the terms of their agreement and that continues in force until it is terminated by them absent of your input.
A practical way to handle this is to draft your lease and terms and take inventory of all company equipment, keys, supplies, documents, contacts, passwords, etc during due diligence. Insist that these materials be physically available on settlement day. On settlement day the first priority is to secure the materials and change the passwords so the manager can not access them.
Next, I would hand deliver a new lease to the former manager at which point you could tell him that you are not going to hire or contract him (do not say he is being terminated because that is not your business to do). If he doesn’t sign, so be it. If he doesn’t pay rent, evict him.
Last, I would hand deliver notices to all tenants announcing the new manager name.
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the VERY FIRST thing is to NOT mention a peep of this to the seller - ever. I have blown two deals in my 38 yrs - trying to strut all my knowledge - only to pi$$ off the seller and refuse to sell to me.
It is a lesson I will never forget.
Thank me later.
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How could I check if my states allows that unsigned new leases can be binding? I live in Georgia. Thanks.
Is the signing for existing tenants unnecessary for all states?
The information should be contained in your state landlord tenant regulations which you are required to know. Learn all the regulations now before you take ownership. You can not operate the business or deal with tenants until you know and understand all the regulations that govern your business.
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A park this size and with good tenants usually self manages itself with its very own tenants.
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