How to get rent payment from previous owner?

Question

I recently closed on a duplex with an inherited tenant. The date of closing was Dec 20. At the closing table I received the rest of December’s rent from the previous owner. Later I find out from the tenant that the tenant pays their rent early and has already paid January’s rent. Coincidentally, Januarys rent was paid on Dec 20 according to the tenant. The tenant has proof that the rent payment went through successfully and was processed. Now me, my agent, and the sellers agent have been trying to get in contact with the previous owner to receive these funds. The seller hasn’t responded to anyone after the deal close. Any advice on what I should do to retrieve January’s rent?

Patricia Steiner · Answer

Contact the Title Company; it is their responsibility to 'settle' the transaction at closing. Sellers sign a settlement disclosure regarding rent and escrows that is enforceable. Let Title put the heat on the seller to remit through them. In some states, the Title Company would be responsible for paying the rent out of their pocket for failure to settle. But bottom line: January rent is due to you provided the tenants were informed of the sale on or prior to closing. The early-paying tenant owes you the rent; paying the seller was their mistake and theirs to resolve. I would let the tenant know that you're attempting to resolve this further with the Title Company on their behalf however they should remit rent to you immediately and file a small claims filing against the seller to recoup the rent.

Hope this helps...

Peter Falk · Answer

It sounds like the Title Co. was not aware that the tenant prepaid rent and just prorated the current rent for the month of closing, so agree if they had no knowledge of it, would not have ever gone on the settlement statement as a credit to the buyer and they likely will not do anything post closing to help obtain those funds.  I am guessing that the tenant may be short on funds to pay twice for Jan, until reimbursed by the old owner, so would first make your case to the old owner who has the funds you are owed and certainly hope once reminded of that will refund them.  It sounds like the tenant has solid evidence their check or auto payment was received by the wrong party.

If the seller isn't responsive, then do like the idea of telling the tenant you tried, and see if they can get some free legal assistance from a tenant resource center.

It is a good reminder as closing approaches to ask the seller to keep tenants updated on the pending sale and when ownership is scheduled to change.

Matt Devincenzo · Answer

You can reach out to the Title company and see if there are any funds remaining for dispersement, if so then ask if there is a way to make a claim to those funds. The other thought, is there a way that the tenant can reverse their payment? I'm not sure how they paid so that may or may not be a solution here...

The other thing is technically your tenant owes you still, and the prior LL may be liable for fraud. They accepted rent for a time period they knew would not entitle them to the funds. Your tenants obligation was to pay you on Jan 1, so it doesn't matter if they paid someone else they still owe you...obviously details re: notice and dates all come into play here and from a practical perspective I'd work with the tenant and not move to evict over this. But maybe your tenant reaching out and mentioning that they're going to be forced to file a police report for fraud could generate some traction...obviously the real objective here is to just get the seller to call you back...

Michael Dumler · Answer

@Jaron Jackson, unfortunately, this one is going to be tough. The lease agreement should have noted when the tenant pays rent. If the lease was not provided during due diligence, then this one is on you and your agent, which should have been stipulated within the purchase and sale agreement. Since the deal has closed, the seller has no incentive whatsoever to credit January's rental payment. Is the tenant on a fixed lease or month-to-month?

Michael K Gallagher · Answer

I'm not sure what leverage you would have outside of taking legal action, these are generally things that should all have been on the closing statment along with deposits etc.  You may be able to lean on the title company if they missed something, but generally if the deal closed and its not an issue of material disclosure or title or something its generally your issue now, the owner doesn't really have an obligation to comply if they closed according to the CD you signed.

Marcus Auerbach · Answer

It's always hard to fix things after closing, but you should try anyway. Title is not at fault, they settled December correctly. And agents are legally prohibited to engage after closing - at least per Wisconsin State law.

This may sound harsh, but I would actually put this on the tenant to get his rent payment back. January rent has not been paid to the property owner, as I am sure the lease spells out, but to someone else. As much as I feel for the tenant, that is technically not your problem. It is also the seller's fault for accepting it, they full well knew this was not right.

If you were to file for eviction for non-payment of rent, you'd probably win. Important that you follow the necessary steps, deliver 5 day notice etc.

But from a moral & ethical perspective, you may want to decide at some point to just eat it and accept write it off as cost of doing business. Not worth time & effort to go to court, your first meeting with an attorney will cost you as much as the rent.

Caleb Brown · Answer

No other way then getting in contact or showing up on his doorstep. Might be something you eat if he's ghosted you.

How to get rent payment from previous owner?

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