How would you handle this situation?

Question

I have a quadplex under contract that I am due to sell in late July. One of my tenants is behind on rent. Her rent is $850 per month and she has only paid me $291 for June, nothing for July. Every date she tells me she will have money by, comes and goes with nothing. Her phone is disconnected so I have no way of contacting her except for email. She informed my maintenance guy who lives at the property and collects the rent, that she will be moving out so that she doesn't fall even more behind. She hasn't told me this. I do have last month's rent and security deposit for her. The only notice I sent her was a Notice to Quit on 6/21/16. The timeframe given was, "immediately." No amount of days was given.

Obviously, the sale is all that is important to me. Otherwise, I would have started eviction over a month ago. At this point, what is the best way to insure this sale closes, and closes on schedule? The buyer is using VA financing and plans to live in another unit.

How would you handle this situation at this point?

Obviously, the sale is all that is important to me. Otherwise, I would have started eviction over a month ago. At this point, what is the best way to insure this sale closes, and closes on schedule? The buyer is using VA financing and plans to live in another unit.

How would you handle this situation at this point?

Marcia Maynard · Answer

You need to talk with this tenant face-to-face. Ditch the emails. You also need to keep a closer eye on the property. If the tenant is not paying rent, they are likely not paying their utility bills, so check those as well.

Let the tenant know you will be doing a maintenance inspection and post the proper "Notice to Enter" for your jurisdiction. When you are there, you can actually discuss the matter in person with the tenant and let her know exactly where you stand. You need to negotiate a move-out. Let the tenant know if she doesn't pay, she can't stay. What would it take for her to come up with the funds to pay the rent still due for June and the rent now due for July?  What would it take for her to pack up and move?

Letting her slide on the rent in June was of course a mistake. Serving her a "Notice to Quit" with a time frame of "immediately" was probably illegal... check your landlord tenant law.  You can however come to a mutual agreement (put it in writing) for her to leave now. Tell her if she moves out now and leaves the place broom clean, and without damages, you will forgive her of the back rent (a form of cash for keys). She is probably already holding back the rent for July to save money for her move, so you won't see that money anyway.

Make it easy for her to move by setting up a large trash can with 3mil thick contractor type bags to toss her trash. Give her boxes and newspapers to pack up her things. Give her some of the 3mil thick bags too to quickly bag up soft goods (linens, pillows, clothing, etc.).  If you have some workers and a truck, you could even help her move her furniture. We've done that before.

If she is resistant to leaving on her own, then let her know you will need to evict her and that is not the best way to end the tenancy, for either of you. Understand, an eviction process will cost you more money, time, and anguish, so this should be a last resort. Help her understand an eviction will hurt her prospects for finding another place to live and also will create a court record.

If the tenant agrees to move now and begins to do so, let the prospective buyer know one of the tenants is in the process of moving out. You don't need to go into details about the outgoing tenant. Then do everything you can to deliver the unit empty and clean by closing.

If the tenant doesn't agree to move now, let the prospective buyer know what is happening. Be open and honest, as they will be inheriting this tenant. Good luck!

Bruce Ellerd · Answer

@David Mitro My understanding of what you're saying is that you're worried that she will stress about having another room vacant and back out of the purchase. I think if you talk to her through her agent and let her know that one of the tenants isn't working out and that you need to evict that tenant before the sale finishes. Let her know that you'll assist in reoccupying the room and that could be her first experience (with assistance) of the rental process so that she hopefully won't make mistakes in the future with poor choices of tenants.

She may, and should, see this is a great opportunity so she doesn't stress out and worry about losing a tenant and knows what to do to replace tenants in the future.

I'm in the same process, buying my first quadplex with two open units and buying through VA financing. I see it as a learning experience and am gearing up to find me some good tenants :).

Kelly N. · Answer

We usually buy properties with tenants in place, however our last purchase had one lease end right before we closed and another tenant whose lease had ended, had stopped paying, and had not moved.  The seller asked if we wanted him to evict them or wait until we took possession and do it ourselves, of course we chose to have him evict!  They moved out in a hurry and left all kinds of junk behind, including a fridge full of food.  The electricity had been out for a while before we took possession, so it was a nasty mess to clean up, but still better than dealing having to start the eviction process once we closed on the property.

If the buyer is buying for the first time, this may make them back out, but it's best to be honest and upfront and see what happens.  Offer to work with them on finding a new tenant, waive the rent for the current tenant to get her back on her feet if they want to take a chance with her, do what you can to help the buyer out by giving them options if you want the sale to go through.  Good luck!

Kyle J. · Answer

If your main goal is to get the property sold, you might make some inquiries into what your buyer prefers and go from there.  Speaking from a buyer's perspective, I would MUCH rather acquire a property with 2 vacancies than one with 1 vacancy and 1 non-paying tenant.  Just my preference.

Nancy Curran · Answer

Your obligation is to tell your realtor, who's obligation is to tell the other realtor, who,s obligation is to tell the buyer. Everyone wants the place to close so hopefully the realtors can turn this into lemonade. Frankly, inherited tenants are the worst.

Penny Clark · Answer

@David Mitro, got it! I would make it as easy as possible for the buyer. Provide all these documents to help quell any jitters the buyer might have:

- copies of rental agreements

- current tenant contact information

- payment history of each tenant and any 3 day notices you issued

- copies of six months of utility bills you were responsible for

- CLUE report showing no insurance claims were placed against the property in last seven years

- Estoppel certificates if your state uses these (tenant's signed consent of financial terms of rental agreement (SD, LMR amounts, current rent amount, utilities they are responsible for)

- Any capital improvements with receipts made on any of the units.

I would get current market rate for rents in your area for property similar to yours. If all your current tenants are on month to month, your new buyer should be able to offer a new lease with rent increase provided he gives proper notice. If you are offering the buyers a good deal, this snafu won't dissuade them, especially if you do what you can to help them get the tenant out.

When we bought our first duplex, I would have loved to have had all this documentation from the owner because it helps you as a buyer to properly assess your costs and hope for the best, prepare for the worst.

Good luck with the sale!

Mike Cumbie · Answer

If your only goal is to have her in the property during closing and you do not care about her giving another dime the answer is simple.

"Hi Mary, it's me, I know you are falling on some hard times, you know what just get yourself on your feet and pick back up again in August. Consider the last two months my part in helping you get on your feet. Consider us current. You have a great day"

David Mitro · Answer

@Penny Clark

This would make two vacancies.

I am concerned that this will scare the buyer off or delay the sale.

I don't care about the $1,700 that I have in last month's rent and security deposit and would gladly give every penny to the buyer at settlement.

My main goal is to get this property sold ASAP, with obviously no delays.

I wouldn't even care if the tenants didn't pay me another dime.

Penny Clark · Answer

@David Mitro, I'm assuming that there is one unit already vacant that the buyer intends to occupy and if this tenant leaves that would be two vacancies, right? Are you concerned that this tenant being behind the rent will cause the buyer to back out or that the tenant will drag her feet in vacating the unit before the sale closes? Or is it that you want to be able to take from the security deposit what she owes you in back rent before the sale closes? If this is the case you may want to work something out with the buyer and put it whatever you agree on in the contract. You may want to check with an attorney on where you are in the eviction process and if you have to submit another notice or start the process over. Is the buyer willing to offer an extension so you can get the tenant out and get what is due you?

David Mitro · Answer

Another unit was already cleaned out for her (the buyer).

This buyer already backed out of the deal early on due to feeling pressured by her realtor, overwhelmed etc.

I don't know how this will affect her fragile state and unloading this property is priority #1.

How would you handle this situation?

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