The first 30 days after you inherit an apartment building

What should happen in the first week?

Protect the building and hold off on deciding anything about it. Nothing on this list commits the family to keeping or selling.

• Find out who can act. If the building goes through probate, no one can administer it for the estate until the court issues letters, under Probate Code section 8400. If it was in a trust, the successor trustee acts. If it was held in joint tenancy, the survivor records an affidavit of death, as Probate Code section 210 provides. Until you know which of these applies, sign no leases, contracts or checks for the building in your own name.
• Call the insurance carrier. Report the death, confirm the policy stays in force for whoever now holds the building, and tell the carrier about any vacant unit.
• Keep the utilities on. Common-area electricity, water, gas and trash service in the owner's name should not lapse over an unpaid bill. Move the accounts once someone has authority to sign.
• Secure the building. Collect the keys, change the locks on any vacant unit, and list every vendor with access, such as the gardener, pest control, the laundry company and elevator service.
• Gather the paper. Leases, the rent roll, the deposit ledger, the property tax bill, LAHD notices, the loan statement and the insurance policy. Forward the owner's mail so nothing from a tenant, a lender or the City goes missing.

How do you tell the tenants who to pay?

Send each tenant a letter within 15 days of taking over, because Civil Code section 1962 gives a successor owner or manager that long to comply. The statute requires the rental agreement to disclose the name, phone number and usual street address of whoever is authorized to manage the building, of the owner or agent who accepts service of process and legal notices, and of the person or entity rent is paid to. If rent can be paid in person, the usual days and hours have to be listed too. All of it has to be kept current.

A short letter covers it:

• Who is managing the building now and how to reach them, including in an emergency
• Where and how to pay rent, starting with the next payment, and which account the payment goes to
• That the lease terms, the rent and the deposit have not changed

Rent belongs in an account held by whoever has authority, such as an estate account, a trust account or an account for the new owners. It should never go into an heir's personal account. Keep a receipt for every payment, since a clean rent history is what a buyer or a lender will ask for later.

What do you do about the security deposits?

Find out exactly what is held for each unit, then put the handoff on paper. Civil Code section 1950.5 gives the owner whose interest is passing a choice for each deposit. One choice is to hand the balance left after lawful deductions to the new owner, then send the tenant a notice, delivered in person or by first-class mail, saying the deposit moved, what claims were made against it, how much it is, and the new owner's name, address and phone number. The other is to refund the balance to the tenant along with an accounting.

The part an heir should watch is what happens when neither is done. The new owner and the old one are then each liable, jointly and severally, for paying the deposits back. An heir who takes title without the deposit money can still owe it to the tenants when they move out. Match the ledger against the leases now, while the records are in one place.

What does LAHD require in the City of Los Angeles?

LAHD requires every residential rental unit in the City to be registered each year, and after a change in ownership the new owner has to register the units.

• The yearly bill combines whichever program fees apply to the units, for rent stabilization, just cause and systematic code enforcement, and it goes with a Rent Registry filing. The amounts change, so use the figures on LAHD's annual bill page.
• For each RSO unit, LAHD has to receive the Rent Registry by the end of February, according to LAHD's Rent Registry page.
• A new owner has 45 days to register, counted from recording of the change in ownership or from close of escrow, under LAHD's RSO registration bulletin, which takes a recorded deed as proof of who owns the building. The bulletin also says rent cannot legally be collected without a registration certificate, and that tenants receive a copy of it.
• The RSO covers City rental units with a certificate of occupancy dated no later than October 1, 1978, with exceptions such as a lot holding one single-family home and nothing else. Look the address up on LAHD's RSO property search. For the year ending June 30, 2027, LAHD allows RSO units a 3 percent increase.

If the building is in another city in Los Angeles County, look up that city's own rental program before assuming none applies.

What do the Assessor and the IRS need?

The Assessor needs to hear about the death. A change in ownership statement, form BOE-502-D, has to be filed within 150 days of the date of death, or in a probate before or with the inventory and appraisal. The trustee files it for property that was in a trust, and otherwise the person receiving the property does. The LA County Assessor's page on the death of an owner has the county's version of the form. A child claiming the family-home exclusion under Prop 19 files form BOE-19-P on a deadline of its own.

The IRS needs a number more than a form at this stage. Your basis is generally the building's fair market value on the date of death, under Internal Revenue Code section 1014, so get a written valuation as of that date while the leases and the condition can still be documented. That figure becomes the starting point for the gain on any later sale and for depreciation after the step-up.

Questions about how title passes go to an estate attorney, and questions about your basis and your returns go to a CPA. Shaya's license is in real estate, so neither is his to answer.

Should you manage the building yourself?

You can, if one heir has the time, lives nearby and has the other heirs' trust, but decide within the month, because every tenant call needs an answer from someone. Doing it yourself saves the management fee and costs your time. A property manager costs money and takes the calls, the repairs, the rent collection and the paperwork off the family.

The person you choose goes in the Civil Code section 1962 disclosure to tenants. Whoever signs the management agreement needs authority to sign it, which means the personal representative or trustee while the estate or trust is open, or the owners once title has passed. If a sale is likely, tell the manager up front, since showings, estoppel requests and document requests will land on their desk.