Our First Multi Family - And We Were Duped

[Sarah Karakaian]

Well, we just closed on a 4plex. 

We did everything we were supposed to. We used the calculator. We calculated for CapEx and even put aside 12K for each door for emergencies.

We hired a home inspector.

Thank goodness we're experienced contractors.

One of the tenants moved out 3 weeks before we closed. The sellers let her move out early. We thought they were being nice b/c they knew we needed to live in one of the spaces. 

Nope, it's because Unit C experienced a major leak in her living room window each time it rained. She noticed mold growing on her carpet. The old owners refused to fix the problem...so she moved out.

Before our final walk through, the owners had the carpet cleaned. And never disclosed the leak. 

Not only that, but when we introduced ourselves to Unit A he also told us Unit C's shower was leaking into his bathroom and had been for some time. 

This 4plex is in Columbus, OH is one of the best neighborhoods, so we have that going for us. 

Do we have any rights here? The home warranty allows for $320 per unit...hardly enough to address these issues. 

Thanks for any words of encouragement or advice on how to deal. 

[Al D.]

I am not a lawyer, but let's start with the basics: The Disclosure Form in Ohio specifically addresses the question of "water intrusion."  It sounds like the seller(s) did not answer the question honestly.  On top of that, you are suggesting that the seller likely knew about the water intrusion and attempted to cover evidence of it, which may be fraud.  I should note that the Disclosures form does not appear to have the language of "under penalty of purjury."

Whether you end up hiring an attorney (who is not necessarily an investigator in his/her other life,) suing the seller yourself, or attempting to resolve this with the seller out of court on your own, you need proof that (1) the seller (as opposed to, say, property manager, actually knew about the water intrusion.  The Disclosure is not filled out by any party such as a property manager - only the owner(s).  If the former tenant has any proof of actually contacting the seller about the water intrusion, such as by email, take the tenant out to dinner and get all that proof asap, especially if the seller emailed the tenant back.  This would, at the very least, prove the knowledge by the seller of "any previous or current" water intrusion.

(2) Proof of the "cover up."  Ask the old tenant whether the cleaning was done while the tenant was still there.  You can also ask the other units' tenants whether they recall seeing any carpet cleaning vans around the time in question - if they recall the cleaning company name, contact the company in person with a box of chocolates to get a copy of the invoice.  If the invoice is vague about the reason for the cleaning, try to contact the actual cleaner for his recollection of the events - you may want to do this regardless of how detailed the invoice may be.

For both points, it's "best" if the evidence would show that the sellers knew - and covered up the evidence - of the water intrusion before signing the Disclosures.

The listing agent may also have photos of the property from earlier times that may show the problem.  It would behoove the agent to be ethical and share anything that he/she may know about this issue.  Unless you are familiar with the listing agent, try to get your own agent to ask the right questions of the seller's agent.

The more proof you have, the easier the case, faster/likelier settlement, the less it will cost you.  At this point, you don't even know how expensive the potential mold remediation may be.

Again, I am not an attorney - what I said above is how I would deal with this.  Sorry that this happened to you.