Property abandoned after contract & before closing: rent credit?

Question

I recently had a property under contract that had tenants in place. They were there during our initial tour and again during our inspection/due diligence phase. 2 days before closing the seller mentions that it appears the tenants have abandoned the place, so he didn't provide any contact info to reach out to them to set up new rent payment/etc. A little annoying, but I didn't think too much of it. Probably for the best actually as they didnt appear to be the best tenants in the first place.

But I was in for a surprise when the title company sent over the Closing Disclosures the day before closing and they did not include a credit for the security deposit and prorated rent. Not the title companies fault--they can only use the info provided from the seller. So we reach out to the seller who contended that since the tenants abandoned the property, they never received that months rent so there was no rent to prorate and credit back to us. Additionally, the lease states the security deposit be returned to the original owner. Since the place was left trashed, it didn't take too much convincing to get them to credit the security deposit to us, since that's what it is meant to be for. However, they were pushing hard on not crediting the prorated rent.

I can somewhat sympathize with their position, they really didn't receive any money. If they had been upfront from the beginning I likely would have given in and not made a fuss. But the whole way they handled it left a sour taste in my mouth and I threatened to not close unless they credited the prorated amount. (they gave in)

I'm curious how others would have handled it, and legally--what the proper outcome should have been. Does it depends on the contract? The lease? The lease had an abandonment clause where the unit was considered vacant 15 days after the landlord tried to contact them. The seller/landlord couldnt prove when he first tried to contact them, so in theory the tenant could come back and pay the landlord that months rent.

Bryan Devitt · Answer

I would have pushed closing 16 days. Tell them to give the notice for abandonment and then they have a day to clean the place and get it back to the condition you saw it in. You get no cash but it should be ready to be rented the day you get the keys

Lynnette E. · Answer

I would weigh in differently.  The past landlord has the ability to go to court and collect the back rent, the rent for the period of time that they did not give proper notice that they were leaving,  and also the damages to the property from the tenant.  The new buyer does not have that right as he does not know when the tenant left and has no legal agreement with them.  It makes a difference if they left before the first, or the day before he bought the house, the new owner may not have a contractual obligation with the tenant or he may and also have an obligation to store the junk or may have a tenant still, at least legally, until the proper notice is given.  It makes a difference as if they left before he bought the house, which they likely did, he has no relationship with them to collect the rent for the time they have possession there or for them not giving a notice they were leaving.

It also makes sense that the new owner would get the deposit as he would be doing the clean up, and no he did not get what he was bargaining for--he expected a paying tenant in place, not a clean and repair situation.  if the clean up exceeds the deposit then the original owner has the obligation to send the tenant the close out inspection and cost of repairs paperwork for the deposit and has the  ability to collect the difference and pass that on to the new owner.

Even if the house has the same dirt and holes as when it was originally viewed, its condition has changed because when he saw it it was in rentable condition as it was rented.  Now it is not in rentable condition and has no tenant.  That cost difference is important.  Some buyers would ask for 2 months rent for the vacancy.

And you  get whatever you can negotiate.

Bill B. · Answer

@Kevin Dubina

that’s correct. It would be worse if they still occupied and they hadn’t paid rent. The landlord wouldn’t owe you rent, the tenants would. Hopefully it’s still a good deal or you can work something out that makes you and seller happy. This is better than if you had bought last month and then they stopped paying. Now you can screen your own tenant.

Lynnette E. · Answer

BUT...the tenant did not give notice they were leaving and did not return the key.  And they left it trashed.  According to the lease the landlord has to give a 15 day notice of abandonment, which was not done, so the new owner has a legal tenant until 15 days after that 15 day notice is given.  And we all know that if he enters and cleans out the stuff the irreplaceable diamond tiara would have been left.

Theresa Harris · Answer

@Kevin Dubina  You can make that argument for the deposit, but not the rent as they haven't paid the rent.  So you can't get money from the seller for rent when the tenant hasn't paid the rent.  Hopefully you checked all the utilities that are tied to the house and those have been paid by the seller.

Theresa Harris · Answer

@Kevin Dubina  They don't have to give you the deposit or the prorated rent if no tenants were living there upon possession.  What they do have to do is deliver it to you in the same condition as it was when you viewed it.  So if it was fine when you saw it and is now full of garbage, holes in the walls (not nail holes), doors missing (as examples), they need to fix that or credit you for the repairs.

Dennis Cosgrave · Answer

Jonathan R McLaughlin, a little background is necessary. This took place in the 1980's in Canada when rent controls were in full swing. Tenants had more rights than landlords and it was almost impossible to evict tenants whether they had a lease or not. This particular tenant was on welfare with a 12 year old son who had mental issues. Since she had nothing better to do, she would use any excuse she could dream up to drag me into court to get her rent reduced. The system also provided public defender lawyers so there was no cost to her. The last instance was she wanted her apartment redecorated. I offered to pay for materials but she complained she had allergies and could not do it herself. I suggested she hire someone. She stated that under the law I was required to redecorate every 2 years which was totally incorrect. Under the law, the landlord was required to "maintain the premises in a habitable condition". Needless to say, she lost that one but I wasted a whole day sitting in court waiting for the case to come up.

Since it was next to impossible to evict her, I decided to sell the property. I had enough aggravation. However, as they say, karma is a b*tch. I sold the property to some foreigners who thought electricity and running water constituted a luxury apartment. From all my court appearances, I noticed that foreign landlords were treated much more leniently, especially if they pretended they could not speak english. The last I heard, they made her life a living hell and she eventually moved.

Jonathan R McLaughlin · Answer

@Dennis Cosgrave wow. If you can, what did they do to drive two owners away?

Dennis Cosgrave · Answer

I would have been thankful that the tenants left. You can immediately begin renovations which would allow you to raise the rent and screen your own tenants. Imagine if you had inherited those tenants and they became a nightmare from hell. Sometimes blessings come in disguise.

I once purchased an apartment building only to later discover that the seller sold because of a nightmare tenant. I sold the building several years later for the same reason.

Russell Brazil · Answer

If no tenant is there you are not entitled to rent or security deposit.

Property abandoned after contract & before closing: rent credit?

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