Yes, the previous owner should have wiped the drive and installed the original OS it shipped with. It is still tied to his Apple ID. If it shipped with Lion or ML, then you can do an erase and Internet Recovery. If 10.6.x or earlier then you need the original install disks. If you don't have them call Apple, give them the serial number and they will ship them at a nominal charge.
Yes, iLife should be part of the original OS.
It shipped with Lion, I upgraded it to Mountain Lion, and it actually worked fine. I then upgraded to Mavericks, but with the new advances with some of the apps, I can't upgrade them. I want to have full control of all the apps, so I just need to know that the iLife apps will work, or will be there, once I do a clean install.
Your thoughts would be greatly appreciated on the issue.