First Closing Issues - Tenant Won't Leave

[Dan Borecki]

Hi Everybody,

I'm in the process of closing on my first multi-family investment (3 units) right outside of Boston, MA which I'll be an owner-occupant and I'm hitting a snag. I was just hoping I could get some input and advice on how to proceed based on your experiences.

I was set to close by 9/20/13 at the latest, which is the date that my loan's rate lock expires. It's an FHA mortgage and since my interest rate was locked the rates have gone up. One of the things that I negotiated within the P&S agreement was to have all of the units delivered vacant (the tenants were all on month-to-month leases & not quality of tenant I want), however I was just notified by my attorney that 1 of the 3 units won't be out before the closing date. Here is what the seller's attorney wrote mine:

"The 2nd floor tenant has not left yet. We terminated her tenancy over a month ago and when she didn't vacate we began summary process. The original hearing date was today but this week she filed discovery which automatically delays the case for two weeks. So we are presently scheduled for September 19. I spoke with her today and she is actively pursuing housing, however, the reality is that even if she finds a place today it won’t likely be for sooner than 10/1.

While not completely out of the question, it is highly unlikely that she will be out by our original closing date of the 20th. I told her to keep me informed and to let me know immediately when she finds something.

Unfortunately, even if we proceed ahead and prevail on our eviction on the 19th, it is not as though we can just move her out. We have to wait for the execution from the court and there are delay tactics tenants can employ to buy more time. I am hopeful that she finds something and we can just make an agreement for judgment wherein she leaves by 10/1."

Have any of you dealt with this before? I know Massachusetts has a reputation of being tougher to deal with removing tenants, so I'm concerned about this dragging out much further than 10/1. Any suggestions on how to proceed? How far back can lenders extend the rate lock? And what are my best options to work this out with the seller if they aren't able to get the tenant out any time soon?

Thank you!

Dan