Listing or writing an offer on a property that is currently rented by a tenant can add an additional layer of complexity to an already complicated process. There are some WRA forms that can be used to help buyers and sellers smooth out the issues that might pop up in a transaction involving a rental property. Two WRA forms that can be useful in a transaction involving rental property are the WRA Addendum R to the Offer to Purchase and the WRA Assignment of Leases/Rental Contracts and Security Deposits.  

WRA Addendum R to the Offer to Purchase 

The WRA’s Addendum R to the Offer to Purchase — Rental Properties should be a buyer’s go-to addendum to include with an offer on a property that is rented. Of course, if the property is target housing constructed before 1978, the buyer’s offer will also include the Addendum S to address lead-based paint (LBP) disclosures. In addition to these addenda, a buyer’s WRA Addendum or offer may also include any one of the local versions of an Addendum A and additional addenda as needed to address extra testing and inspections that may be needed or any other terms necessary to create a meeting of the minds between the seller and the buyer. But since we are directing our attention to transactions involving rental properties, let’s focus our attention on Addendum R. 

Lines 1-6: The Basics

Lines 1-6 are where the buyer identifies the offer to which they are adding this addendum. Additionally, this section states that the property is subject to rental agreements, which can be written or oral leases, and that the length of the leases may be for a definite period of time or may be for periodic tenants. The buyer acknowledges that the buyer takes the property subject to the tenant’s rights. 

Lines 7-20: Rent Schedules

The parties use lines 7-20 to agree on rental information, such as whether the rental agreement is oral or written, lease expiration date/tenancy type, rent amount, rent due date, security deposits, delinquent rents and whether there are any penalty fees due. There is a chart that allows the parties to identify the units by number and complete the corresponding details per unit. Line 20 instructs the parties to include additional schedules if needed. The existing chart has entries for up to 10 units, but if there are more than 10 units, the parties can include the additional details for the extra units in an additional schedule. 

Lines 21-25: Leases

This section allows the parties to negotiate how and when the buyer will have the chance to review written leases and current rental applications. If the buyer is already in possession of these documents, the buyer can attach them to the offer. If the buyer does not have these documents at the time of drafting the offer, the buyer can make the buyer’s offer contingent on the seller furnishing the leases and rental applications to the buyer within the deadline specified in this section. If the seller does not timely furnish the documents, or if the terms are materially different than what was represented to the buyer, the buyer can deliver a written notice to the seller within the deadline in this section and make the offer null and void.

Lines 26-34: Personal Property 

The buyer and seller can use this section to identify which items of personal property, if any, will be included in the sale. Listed items include refrigerators, unit window coverings, dryers, stoves, water softeners, snow blowers, window air conditioners, washing machines and lawn mowers. Additionally, there are three boxes labeled “other” so the parties can identify other personal property to be included in the sale. This section also states that at the time of completing Addendum R, the personal property items are in good working order and will remain so at closing. The parties can use this section to agree as to the value of the personal property included in the transaction and that the value of the personal property will be excluded from the purchase price on the Wisconsin Real Estate Transfer Return. Finally, this section indicates that the seller will transfer ownership of the personal property to the buyer at closing with a bill of sale. 

Lines 35-37: Indemnification

The seller agrees to assign all rights, title and interest in the leases to the buyer; and the buyer agrees to assume all duties, liabilities and obligations as the new landlord. Further, the buyer agrees to indemnify and hold the seller harmless from any claim or loss first arising from events that occur after closing. 

Lines 38-39: Rent 

The buyer and seller agree that all rent will be prorated at closing and that the seller may collect any delinquent rent that was due before closing for the seller’s account. This section prohibits a seller from using security deposits for delinquent rent. 

Lines 40-42: Maintain Rental Operations 

This section obligates the seller to give appropriate notice of default to delinquent tenants and to evict tenants who do not timely cure their default. Additionally, the seller is to sue evicted tenants for delinquent rents and damages that exceed the security deposit amount and to repair any damaged units. 

Lines 43-44: Vacant Units

The parties negotiate whether the seller shall or shall not rent vacant units. 

Lines 45-47: Change in Tenant Status

This section obligates a seller to promptly notify the buyer in writing of any tenancy termination, unit abandonment or a tenant’s plans to vacate a unit. Additionally, a seller must promptly notify a buyer of a material breach of lease terms or a rent delinquency continuing for more than the number of days agreed to in this section. 

Lines 48-50: Rental Agreement Extensions and Renewal

The seller agrees that they will not renew any expiring leases or extend a lease term, change the terms or conditions of a lease, a month-to-month tenancy or other periodic tenancy or enter into a written lease with a month-to-month or periodic tenant without the buyer’s written consent.

Lines 51-53: Security Deposits

The seller agrees to transfer the full amount of any security deposits to the buyer at closing without offset unless the parties otherwise agree in writing. The seller can pursue any claims the seller may have against a tenant directly against the tenant. 

Lines 54-55: Tenant Records

In this section, the seller agrees to provide the buyer with a copy of all tenant records including any check-in reports, payment records, correspondence or notices. The seller will provide these documents at closing. 

Lines 56-58: Notice of Contact Person Changes

The parties can use this section to negotiate which party is responsible for notifying tenants within 10 business days of closing that the property has sold. The responsible party must also provide tenants with the new contact information for rent payments, maintenance requests, and receipt of legal processes and notice. Providing the contact information is required by Wis. Admin. Code § ATCP 134.06(1). 

Lines 59-63: Eviction

This section addresses evictions that the seller initiated prior to closing. The seller is to complete any eviction started before closing at the seller’s cost unless the buyer moves the court to be substituted or joined as a plaintiff. The section also addresses the scenario where the seller had given a notice to vacate to a tenant, but the tenant has not vacated by the time of closing. The parties can negotiate which one is responsible for taking steps to remove the tenants, including filing the eviction action. 

Lines 64-65: Delinquent Rent Collected

If the buyer collects delinquent rent or fees after closing, they should be paid to the seller’s account unless otherwise agreed to in writing.

Lines 66-72: Optional Provisions Regarding Vacancies

This section provides the parties with two optional provisions. One is for Requested Vacancies and the other is for New Vacancies. If the parties want to include the provision for Requested Vacancies, they check the box on line 67. This provision obligates the seller to give all necessary notices to terminate the tenancy of tenants in an identified unit or units with the goal that the unit be vacant at closing, or another date specified in this provision. 

The New Vacancies provision allows a buyer to deliver a notice to a seller, making the offer null and void, if new vacancies occur after the date on line 1 of the offer and the number of new vacancies exceeds the number specified in this section. 

Lines 73-74: Default Number of Days 

This provision creates a default deadline of 20 days for any deadline not completed in Addendum R and where there is not an existing default deadline stated in that provision. 

Lines 75-81: Additional Provisions

Like many other forms, there may be additional terms that the buyer and seller need to add to a contract that do not fit elsewhere. Those terms can be added as additional provisions in this section. 

Lines 82-83: Smoke and Carbon Monoxide Detectors

These lines provide links to DSPS brochures that describe and illustrate the law as it relates to smoke and carbon monoxide detectors in properties. 

Lines 84-87: Initials and Dates

The final portion of Addendum R gives the parties an opportunity to initial and date it to acknowledge that they have read and understand the form and received it. 

WRA Assignment of Leases/Rental Contracts and Security Deposits

The WRA Assignment of Leases/Rental Contracts and Security Deposits can be used by a seller to transfer “ownership” of leases and security deposits to a buyer of a rental property. “Ownership” is in quotes because the seller and buyer do not really own the contracts or security deposits, but rather they are parties to the contracts and fiduciaries holding the security deposits. Conceptually, this form works in a similar way as a bill of sale, which is used to transfer ownership of personal property from a seller to a buyer.

Lines 1-5: The Basics

In these initial lines, the seller, the buyer and the property are identified. This section also states the purpose of the form, which is to assign leases and/or rental contracts and create agreements about rent proration and security deposits. 

Lines 6-14: Leases/Rental Contracts

In this section, the seller assigns and transfers to the buyer all rights, title and interest in all current leases and rental contracts pertaining to the property. The buyer and seller can negotiate whether the seller retains the right and responsibility to collect delinquent rent due prior to closing and/or complete eviction actions commenced prior to closing. Additionally, there is a blank line in case the parties want to negotiate that the seller retains any other rights or responsibilities. The seller also makes a representation to the buyer that the leases or rental contracts represent the full agreement between the seller and the tenant(s) and that the leases or rental contracts previously delivered to the buyer are complete. Lastly, the seller represents that there are no other current leases or rental contracts for the property. 

Lines 15-30: Rent Schedule

The parties can use this section to identify unit numbers, lease expiration dates and the types of tenancies, tenant names, rent amounts and security deposits for up to 13 units. The parties can attach additional schedules if there are more than 13 units. 

Lines 31-36: Rents 

The seller can use this section to represent to the buyer the amount of prepaid rent for future months or rental periods in the seller’s possession that are assigned to the buyer. The seller also uses this section to represent the prorated rent amount that is assigned to the buyer. All the assigned rent will be a credit against the purchase price. 

Lines 37-39: Rent Proration Formula

This section gives the parties a formula for prorating rent and further indicates where the prorated rent amount should go in this form.

Lines 40-41: Security Deposit

In this section, the seller assigns and transfers the security deposits to the buyer and indicates where the total amount of security deposits being transferred should be noted in the rent schedule. It also specifies that the security deposits will be a credit to the buyer at closing.

Lines 42-46: Buyer Indemnification 

The buyer assumes the seller’s duties, liabilities and responsibilities as landlord under the leases and rental contracts assigned to the buyer by this form. The buyer indemnifies the seller from any claim or loss with respect to the property and tenants resulting from injury or damages that first arise at or after closing. 

Lines 47-49: Seller Indemnification

The seller agrees to indemnify the buyer from any claim or loss the buyer incurs due to inaccuracy of the rent schedule or a result of any breach of the seller’s warranties and representations. 

Lines 50-62: Additional Provisions 

As with most forms, there are lines for additional provisions for any other provisions the parties need included that are not addressed elsewhere on the form. 

Lines 63-74: Signatures 

The parties sign, and thus the assignment of leases, rental contracts and security deposits is complete. 

Conclusion

In addition to these forms that buyers and sellers can use to negotiate the additional details that are encountered in the sale of a rental property, landlords who are members of the WRA have a whole host of other forms to assist with their rental properties, including leases, rental agreements, rental applications, notices, lead-based paint disclosure forms, check-in sheets, check-out sheets and more! If a landlord has a need, there is a probably a WRA form for it — and if not, give us a call and maybe there is enough of a need that we will create one.

WRA Addendum R and the WRA Assignment of Leases/Rental Contracts and Security Deposits are available in Transactions (zipForm Edition) as well as the WRA PDF Forms Library subscription. 

For additional discussion about Addendum R and the WRA Assignment of Leases/Rental Contracts and Security Deposits, see pages 1-6 of the October 2021 Legal Update, “WRA Addenda R and O 2021,” at www.wra.org/LU2110. See a discussion of the WRA Residential Lease and Rental Agreement as well as a listing of the property management forms available from the WRA in the October 2018 Legal Update, “WRA Residential Lease and Rental Contract,” at www.wra.org/LU1810.