Buying 12-unit with eviction in process

[Mark Strobel]

Hi BP friends!

We are in the process of acquiring a 12-unit apartment complex (3 quads) in Wisconsin with an April 15 closing. Today we were notified that the current owner is serving a 5-day notice to Pay or Quit on one of the tenants.

I am wondering if anyone has dealt with acquiring a property with an eviction in process.  In Wisconsin, the 5-day notice is the first step in the eviction process.  Generally the tenant will pay, but if they do not, the owner then needs to proceed to the next step, which is formally serving papers for a hearing in small claims court.  A full eviction often takes 60 to 90 days in our county.

I can imagine that there all kinds of issues that might be handed to me.  Today is March 17 and closing is in four weeks on April 15.  If the eviction is started, I suspect that the incoming owner is stuck with whatever situation is present at the time of the transfer.  I am guessing that a tenant in this situation would not pay April rent, and the incoming owner would not even be the plaintiff in the small claims case, but they would be left holding the bag of an angry tenant.

We did include a clause in the offer to purchase requiring the seller to have us authorize any new tenants (we get to do the tenant screening) prior to signing any new leases, but we didn’t envision this situation.

Does anyone have any suggestions or experience with this type of issue?

[Sean O'Gorman]

@Mark Strobel, I agree with @Al Williamson about trying to hold money in escrow, however as for the eviction process you could just ask seller for an assignment of rights as to the eviction of this Tenant. Then you get to step into the Seller's shoes at where he left off with the eviction once you close. Concern is always any counterclaims tenant may have will be a bear to deal with, but it can save you some time at least with not having to start the eviction process over again. Also, it might be worth considering asking the Seller to cash for keys this tenant, might be good for both parties, saves you from having to deal with eviction and him from having to put money into escrow until eviction is settled.

Please note this is not legal advice nor should it be construed as such.