Advice Needed: Purchasing a home with tenants in place

[Brogan Rossi]

Hi everyone! Looking for some insight for some buyers of mine - we are looking at a triplex for sale that has current leases in place through June, 2023. However, the sticky piece is that some of the bedrooms are non-conforming. For example one upstairs room does not have a window and the basement only has 1 egress in the living room but no egress in bedrooms. How would you go about absorbing that lease upon the purchase but also making sure you are covered as the new landlord/owner?? Any creative ideas?? 

[Karl McGarvey]

Will your lender lend on it? That's question number one. After they answer that, you need to look into insurance. Easiest would be to assume the existing policy and then shop around on the backside.

[Bjorn Ahlblad]

@Brogan Rossi  There is way too much risk here. You could not say you did not know  you would be sued and have to pay a whole lot more for being negligent. Insurance could even deny, if there were a fire. The city code enforcement could shut you down. Better to spend your time finding a new candidate. This one is DOA, at least would be for me.

[Nathan Gesner]

Quote from @Brogan Rossi:

Explain it to your insurer and see what they say. People have lived with non-egress windows for hundreds of years, so the risk is extremely low. If you can insure it as is, move forward with the purchase and figure out how to make it conforming as quickly as possible.

[Greg Weik]

If the leases only go for another 7 months, I'm not sure there is all that much risk.  I would verify the presence and operation of smoke and CO detectors, ensure there are no apparent safety hazards in the home, and make a plan to non-renew the leases when they come up for renewal. 

Another consideration is to review the leases.  There may be language in the lease permitting termination of the leases for specific situations related to habitability.  If the property cannot be insured due to the non-conforming bedrooms, it could well be argued that this is prima facie evidence of a habitability issue and you could terminate the lease(s) needed.