Inheriting Tenants with NO LEASE who are living for free

[Laura Thorne]

We close on a duplex at the end of the month (yay!) and will be inheriting tenants who have not paid rent since the duplex went into short sale in January (boo).  I am sending them a rental application but they are likely not going to meet the criteria for credit or pass a background check.

I live in Minnesota, what are my options?  The house needs a month's worth of rehab so I thought of offering them a discount rate while the work is done and then telling them they have to leave.

Do they have any rights?  Do I have to give them 30 days notice even if they have no formal lease?  Would I have to evict if they refused to leave?  

[Michele Fischer]

In my state a verbal contract is enforceable even if there is not a written contract.  In that case it operates as a month to month agreement and we have to give the required notice by law (20 days before the end of a month) to end the contract.

If they have not been paying, they are not keeping up their end of any contract they may have, so you can start the eviction process as soon as you close.  In my state this starts with a 3 day pay or quit notice, then filing for eviction, and can take longer than the 20 days noted above.

If I were you, on the day it closes, I would knock on their door, have a friendly conversation with them, and provide and explain: an application to rent, a 3 day pay or quit for prorated rent for the first partial month, a 20 day notice to end tenancy (that you will rip up if things can be worked out), and a new month to month rental agreement with a reduced rate for the month of repairs then up to market rent.  Of course, you need to adjust this to match your state rules.  The month to month gives you more flexibility to end tenancy later if they aren't good tenants; convert it to a lease later if desired).  Set up a time in a few days to meet again to get a signed agreement and complete signed application.

Whether the tenant qualifies is not really a big consideration with an inherited tenant.  I might run their credit to see if they have any credit to protect (if they do, the threat of eviction should help, if not you may want to consider keys for cash as soon as you decide they need to go).  But if you have someone in place, and you can get them to pay, it is often valuable to keep them, especially if they have lived there a long time.