An undisclosed long-term tenant with a handwritten lease surfaces after a probate duplex purchase

Something in this thread keeps tripping me up on the mechanism, not the decision. When someone dies and there's a tenant nobody knew about, does the lease just carry over to whoever buys the building? I thought a lease was between two people and one of them is gone.

I'm asking because I've been reading about estoppel letters as a thing you send to tenants before closing to confirm what they're paying, and it sounds like the whole point of that is to catch exactly this. But you can't send one to a tenant you don't know exists, which seems like a hole in the process that nothing fixes.

@kevin_lombard a lease generally runs with the property, so a sale doesn't erase the tenancy, and death of the landlord doesn't either, the estate steps in. How an unwritten or barely-written tenancy gets characterized varies quite a bit by state, which is why @brandonlee36 has a lawyer call and not a forum answer.

On the estoppel hole, the fix isn't estoppel, it's walking the building. @brandonlee36, did you or anyone you sent go inside Unit B before closing? I ask because I'm at the stage where I'm building my own checklist and this is the kind of thing I want on it in the right order. Feels like "physically enter every door, including the ones the PR says are empty" belongs above "order title."

1. Not 900, not 1,250.

Here's why I'd put a number on it and stop agonizing. You are not deciding between humane and correct, you're deciding whether you want a tenant or a project, and you already told us the unit is in better shape than the vacant one. That means no turn cost, no vacancy, no scope creep, no contractor. Put your 30 into Unit A, get that to 1,250, and let B ride at a number he can actually pay.

The reason 850 and not 900 is that you want room to move it up again next year without it being a shock, and the reason not 1,250 is that a 71 year old on a fixed income with eleven years in a unit is either going to stay and not pay or leave and cost you three months. Either outcome is worse than 850.

One thing you skipped though. Does he have any claim to more than a tenancy? Eleven years, cash, handwritten paper, no written term. I've seen a case where the occupant claimed there'd been a verbal agreement to buy. Ask him directly what he thinks his arrangement is before you send him anything on letterhead, because his answer on a Tuesday over coffee will be more honest than his answer after he's talked to somebody.

@joe_delgado5's last point is the one that should worry you most. Ask the tenant what he thinks he has before you change anything. Also @brandonlee36, on point 3, you said you're not spending money to find out about recourse against the estate. Understood, but did the PR sign anything stating the inventory was accurate to their knowledge, or did the purchase agreement carry any representation about occupancy? Nobody is suggesting you sue anyone. The point is to know what you signed before you decide it's worthless, and reading it costs you an hour.

The detail worth pulling on is the receipt book. Four years of receipts at 600 in cash raises the question of who wrote them. If the decedent wrote them, that is a paper trail the estate arguably should have found and reported, and it also means there was income that may or may not have been reported anywhere. That part is somebody else's problem, but it may be why nobody in the family talked about the second unit. Families know these things. What that changes for you is an open question. It does suggest that the personal representative being surprised is not the same as the family being surprised.

A gentle push back on @joe_delgado5 and @karen_whitfield both. Everyone is treating the below market rent as free money because there is no turn cost. But @brandonlee36 said this deal was supposed to fund the next one, and a unit at 850 forever does not fund anything, it simply does not lose. If the plan was to refinance off stabilized rents at some point, a permanently under market unit sits directly on top of that plan, and in a lot of cases the appraiser is going to look at actual rents. So the real question is whether the next deal comes from this building or from somewhere else, and 850 versus 1,250 is downstream of that. If it comes from somewhere else, take the 850 and sleep. If this building was meant to be the source of the capital, there is a longer conversation to have about whether it was bought as a cash flow building or a value add building, because it was bought before that was decided. @brandonlee36 what was the exit assumption when you signed?