What to do when you’re Purchasing a Building that is Occupied by Tenants?
The first step is obtain a copy of all written leases and sub-leases. Carefully review these documents then you want to examine each lease for the duration, if the tenant has the option to renew, rent amount, and security deposit amount. For example, if a tenant has a long duration lease with a small rent payment this may be something to consider when determining a purchase price. In addition, the purchaser should get a rent roll, which should contain the monthly rental amount for each unit and the corresponding security deposit.
In a real estate transaction the purchaser of an occupied building will receive a credit at closing for the amount of security deposits. However, the purchaser will then have to set up accounts for the security deposits. The seller will then keep the security deposits as he gave a credit to the purchaser in order to set up new accounts.
The purchaser should also insist on the tenants signing an Estoppel Letter. An Estoppel Letter is a “signed statement by a party certifying for another’s benefit that certain facts are correct, as that a lease exists, that there are no defaults, and that rent is paid to a certain date. A party’s delivery of this statement estops that party from later claiming a different state of facts.’’ An Estoppel letter should state the security deposit amount and Monthly payment amount, date rent is due, and whether a lease exists or not. Once the Tenant signs the letter he is prevented from later denying the statements in the letter are true.
An Estoppel Letter is particular useful if litigation does arise or if there are no known deposits and tenant later states he made a security deposit because it will be difficult for the purchaser to prove the security deposit amount as it will be your word against the tenants.
Finally, the purchaser should also require the seller to send letters of attornment to all tenants. A letter of attornment goes to each tenant and states that there will be a new owner and rent should be paid over to the new owner as of a certain date. It is important to have such a letter to avoid any confusion or delays in rent payment.
 N.J.S.A. 46:8-20: Procedure on Conveyance of Property
Security Deposit that is withheld or untimely returned to the tenant
A Landlord taking a security deposit must be aware of the regulations in New Jersey. There are many rules that must be complied to avoid penalty under the law. In some circumstances if a security deposit is wrongfully withheld the Landlord may be liable for double the amount of the deposit collected.
In addition, The Security Deposit Act applies to all rental premises except owner occupied premises with 2 units or less. However, the act may be applied to a landlord in an owner occupied premises if the tenant provides 30 days written notice to the landlord invoking the provisions of the Security Deposit Act. N.J.S.A. 46:8-26.
Upon receiving the initial deposit from the tenant the landlord is obligated to place the security deposit from the tenant in an interest bearing account pursuant to N.J.S.A. 46:8-19(a)(1). In addition, within 30 days of receipt of the security deposit the landlord must notify the tenant in writing of the name and address institution that is holding the deposit. N.J.S.A. 46:8-19(c). We recommend that Landlords specify in the lease the name and address of the institution where the deposit will be held.
The landlord is obligated to account for the security deposit to a tenant upon vacating the leased premises within 30 days of the tenant vacating. The landlord is obligated to account for any monies that the landlord believes is owed by the tenant either for damages or rent in writing. Should any of these deductions from the tenant’s security be improper or untimely the tenant is entitled to have the amount wrongfully withheld doubled and paid to the tenant from the landlord. There is statutory and caselaw to support this result. Furthermore, only deductions allowed for in the lease can be made against the security deposit. For example, if the lease is silent on whether the Landlord or tenant makes repairs then it will not be an allowable deduction against the security deposit. We recommend that the landlord inspect the premises immediately after the tenant vacates and send a detailed letter clearly outlining the reasons the deposit is being withheld.
In the event that the landlord wrongfully withholds the security deposit or any portion of it after the tenant vacates, the landlord can be liable for double damages and attorney’s fees if the landlord does not provide an itemized written statement to the tenant within 30 days of the tenant vacating the premises. N.J.S.A. 46:8-21.1
If you are a Landlord and considering taking a security deposit from a tenant be aware that you must comply with statute. The Security Deposit Act is designed to protect the tenant so the Landlord should be cautious when proceeding as the courts will most likely favor the tenant. If you are a landlord or tenant and are unsure about the rules regarding the Security Deposit Act consult an attorney.
Currently the baby boomer generation is aging. It is the largest generational group in US history and they have accumulated the most wealth of any generation. Most Baby boomers are getting ready to retire and transfer their wealth to their heirs. The Boston College Center for Wealth and Philanthropy predicts an estimated 59 Trillion Dollars will be transferred by 2061.
Not only will the baby boomers transferring their wealth need estate planning advice but their heirs that are coming into large sums money will also need estate planning advice that suits their needs. The group known, as millennials will be beneficiaries of the great transfer of wealth. They will need different estate planning techniques and wealth strategies to meet their financial goals.
Some trends that may become relevant in the estate planning field are putting assets into an LLC to use deductions to reduce overall taxes, bequests to grandchildren, and the creation of a pet trust.
Under the new tax bill signed into law by President Trump deductions for property taxes are capped out at $10,000.00. Beneficiaries that are inheriting real property that is not intended to be the primary residence should consider using the property as a rental and creating an LLC to own the property. An LLC can deduct real estate taxes as a business expense. Furthermore, an LLC can depreciate real property and deduct that depreciation from the rental income. Potentially a person that owns second home or vacation home could also use the second property for rental income and place it in an LLC. This is just one factor of many to consider when examining real property taxes and each individuals tax situation is different which may require consideration of special factors.
Today people are living much longer and healthier lives. Many people that are creating there Will may want to leave specific bequests to their Grandchildren or even Great Grandchildren. Many people live to see their Grandchildren mature into there 20’s and 30’s and would like to provide a gift for them upon their passing. There are many options available to the testator when providing for there heirs. Some examples include specific bequests i.e. I bequeath $1,000.00 to my grandson, you could set up a trust for them that protects the principal and only distributes income when necessary or for education, or you could put them as residuary beneficiaries.
Pet ownership stands at 68% for all US households and over the past decade pet ownership has shown a consistent upward trend. The largest segment of pet owners are Millennials followed by baby boomers with the second largest percentage of pet ownership. Pets are a part of our families and many of us would like to care for them if something were to happen to us. One way to address this is to create a will with a bequest that is contingent upon taking care or ownership of deceased’s beloved pet. Another option is a pet trust, which many states have now authorized by statute. Pet trust allows the purpose of a trust to be care for a domesticated animal. In NJ the trust is valid when no living animal is covered by the trust or 21 years whichever is earlier. However, when determining the amount to leave to a pet you must use caution because the Court may reduce the amount of the property transferred if it determines that the amount substantially exceeds the amount required for the intended use.
Why You Should Have a Healthcare Proxy and Durable Power of Attorney for Your 18 Year Old
If your child is 18 years of age or older, he or she should execute a Health Care Proxy and Durable Power of Attorney. Especially, if your child is heading off to College in a different state. Laws regarding dissemination Healthcare information vary from state to state. Many Healthcare providers will not discuss medical treatment with parents of young adults citing privacy concerns. The worst phone call you can get is from your child’s roommate or college informing you that your child has been injured and is in the hospital. Even worse still since your child is over 18 the hospital will not release medical information to you if you are not authorized as your child’s healthcare agent or proxy. No parent should be uninformed about his or her child’s medical condition. You should contact your Attorney to help prepare the necessary documents before your child leaves for college.
Nearly a quarter million of young adults between ages 18 to 25 are hospitalized with non-lethal injuries resulting from accidents.
In the event your child is injured in an accident at college a Healthcare Proxy will allow you access to their medical records and to direct Healthcare decisions on their behalf. If your child is injured or disabled in an accident and they do not have a Healthcare Proxy a parent may need court approval to act on their behalf. Once you have been appointed Healthcare agent on behalf of your child you can discuss medical records and direct your child’s medical care. While this document is typically associated with older people it is essential for younger people to have as well.
Durable Power of Attorney
A Durable Power of Attorney allows you to act on behalf of your child regarding financial decisions. In addition, a Power of Attorney will allow you to enter into to contracts on your Child’s behalf. For example, if you need access to their academic records or to handle car insurance payments if the vehicle is in their own name.
We recommend that all parents have these documents in the event of an accident it will allow the parent to take action and care for their child. The agent or proxy should keep originals of the documents in a safe place if the need arises they can present these documents to the Healthcare provider and direct treatment for their child.