HELP! NEW TAKEOVER AND NO RECORDS!

I'm reaching out to you all for some advice. My company has recently taken over a property (bought from a foreclosure) and we have NO records for the residents! No leases, no accurate rent roll, just about everything is missing. How do I work this? How do I figure out what people's rental rates were, etc. Oh, and to make matters worse, I've no information on previous pricing. I believe that this was done intentionally, but I'm not sure. I'm trying to get ready for the first and I'm a little worried. Please help!

The residents / tenants should have completed estoppel certificates as a condition of the sale.

RUN!!!!!!

Seriously; this is a case where a well crafted letter to residents is key to getting their assistance.

I would do a market survey and treat this like a lease up:

Have all residents complete a new application and sign a new lease. If you have long term residents, use this opportunity to offer transfers to newly turned units before marketing the vacant units to new residents. You can also ask if the residents were provided copies of their leases at move in/renewal. If you have HCV recipients; you can make contact with the local housing authority and explain the situation. You can ask them to provide you with copies of what they were provided by the previous team.

To determine what residents were paying; ask residents to provide you with copies of their last rent payment. It sounds like that may not even give an accurate picture; so you will probably have to offer the residents a new lease at $100 below current market rent if they were to reapply. You can sweeten the pot and get them to respond by offering them a fresh coat of paint (assuming the units were last painted >2 years ago), or new flooring (assuming this was last done >5 years ago); but NOT both unless the residents have been there for longer than 8 years. When you do this; you do need to have the residents take ownership of moving stuff out of the unit while work is completed; if you are able to, offer a nearby vacant unit for storage and contract the work to be done over the course of a 3 day weekend.

It sounds like the property is going to need a rehab and residents are going to need to leave so your team can reposition it. I have successfully completed a repositioning within 9 months (having the need to turn over 50% of the units and welcome a number of people to leave).

Give residents 30 days to provide you with their most recent lease, or reapply. If no response; issue 90 day notices to terminate. You may also be able to get information from the bank.

Where is this property? I am looking for a new challenge.

Hello Denny,

Yes, for sure this sounds like it was on purpose. I would findout the name of the company that had the property before. You know all of the records may be in a legal office, or being held by the previous owner. I am thinking that there is some legal entity that may have the records since this was a foreclosure to assertain how much money should be coming in.

I would say before going to the residents right up front is to talk to your management company/owners to find out where the tenant records are. The records should be a part of that property and there were sensitive information such as maybe even social security numbers on the documents.

The landlord is the business man. He is expected to maintain important records. The tenant is the defenseless consumer. As between landlord and tenant, if records are missing, the landlord loses.

You want to report this ASAP and document your actions. Let your owners and management company take the lead on this. You have raised the flag now keep good notes of who you talked to and when and stay on top of it until those records are recovered or someone is held criminally liable!

I might also suggest to the owners that they offer a year of Lifelock (or something similar) service since you do not know where the records went to and have no idea how many people have looked at them.

I would never draft a letter or notice to all residents without having it proofread and approved by a mind better than mine. I might even consider asking an attorney to draft it and address it to all current households.

I do agree with Nate that getting your management company involved in locating the records (and determining what efforts have been made to date by whom) is key. These records must be kept somewhere; and to withhold them from the new team is simply bad business; putting the property and anyone connected with it in danger of facing a class action lawsuit representing current and former residents.

Definitely create a paper trail of all efforts made by your team to locate and obtain these records so the new team is a protected party to any potential legal action.

Well, this will be a fun year ahead! First off, this is a serious situation, as you know. I think during a foreclosure, details like leases fall through the cracks until the new owner realizes he needs those details. Yes, part of the due diligence and the closing process would ideally have provided estoppel certificates; however it appears this did not happen for you. First things first, notify all tenants in writing of the change in ownership and management, providing the name, contact information, and where to send rent payments and by what date it is due and will be accepted. Also, include the late fee date. If the property bought was in receivership, you should have received all security deposit monies, as well as all other monies minus the prorated amounts. Since the property was in foreclosure, if the current tenant cannot produce a signed lease agreement, the new owner may offer/demand a new one be created and signed at the time of possession. (I am not an attorney, so check that out with yours.) Then you may indeed have to treat this as a "lease up." Usually Residents will approach you especially since rent will be due very soon on the first, and this will give the new Manager a chance to talk to each person. I am sure there will be many things that you will find that occurred without regard to property rules: pets present and unaccounted for, missing tenants and more vacants than known, renewals not in place and inspections not completed ... but with patience, good communication between all parties and a good manager, the problems will be resolved. Very occasionally, tenants will have gone to the city and registered their leases, but this sounds doubtful in this case. It may work out to your advantage! Good luck!

I would suggest a community meeting (or series of them) and ask that one person in each household be present. At this meeting; I would take the opportunity to discuss with residents their general concerns about the transition and give them an opportunity to ask general questions that would apply to all residents. I would follow this up with individual discussions with each household to discuss matters that are unique to them. Set appointments for 20 minute intervals, and follow up appointments as needed. When you announce this plan; ask that they be ON time for this meeting; explain the challenge you are faced with and that you need their assistance to resolve it. Have them bring with them a copy of their most recent lease agreement and/or their most recent pet agreement. In the event that the resident cannot produce a lease agreement, have them complete your rental application and run their background (if you have created a resident selection plan, and your new market rents; have this information available to residents); explain that this information is vital if they do not want their rent to increase until the end of their lease. If they cannot provide a current lease, or meet your selection criteria; I believe you can serve them with a 60 day notice to terminate tenancy. If you have resident ledgers, you can discuss any discrepancies at the individual meetings.

You do not indicate how many units are at this property; but you can do this another way:

Schedule the individual appointments as unit inspections. When you do the unit inspections; have with you a supply of common replacement items (smoke / CO detectors and batteries, air filters, vertical blind vanes, light bulbs, drip pans) and replace as needed. Make this a 'adult household member must be present' inspection and discuss any issues in their home. Bring with you any documentation you have and any blank documents you may need to start a new file if you cannot recover any documents.

If this is a HUD or MSHDA site, they have access to most current certifications and other accounting data.

I would add that if the property is 'project based section 8', meaning that the residents pay $xx of the total rent, and the local housing authority pays $yy for ALL residents, and the residents lose the assistance if they move (or are forced to move); then the housing authority should have copies of all certifications and leases.

If this property is NOT a section 8 property, yet has residents receiving HCV assistance, then the housing authority should have copies for THOSE residents and this should give you a place to start.