Tenant Didn't Pay- Wierd Senario

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Tenant Didn't Pay- Wierd Senario

Anna Buffkin
Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes

So I closed on a duplex Friday.  I had a sick child so my husband closed in my absence, so this is all being relayed second hand, but here goes.  

Before closing, I made sure prorated rent and security deposits were included on the HUD; however, the seller shows up at closing and said they just found out that tenant B had not paid their rent this month per the property manager. The closing attorney pretty much told them that the time to dispute the closing statement was passed unless they want to move the closing. If they wanted to close today, they should accept the closing HUD statement and get their check. They came from out of town and went ahead and closed.

Here is my issue.  How do I deal with the new tenant?  The seller basically paid my portion of their rent owed and it's not my problem that they basically stiffed the seller a month's rent.  I feel like trying to collect on it would be like double dipping unless I want to track down the seller if they paid and their is no upside for me in trying to collect in that case.  I don't think I can start an eviction as technically I was paid their rent by someone (the seller).  I am leaning toward just starting fresh on Dec 1 and keeping them on a short lease (i.e. start the eviction as soon as I legally can on day 5 rather than waiting until my customary day 10.)  When I toured the unit before purchase, the tenant keep the place very clean and no issue beyond nonpayment appears to be going on as far a lease violations.    

Thoughts?

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y
@Anna Buffkin start the eviction process and do not accept any rent, partial or full. Give them the option of moving out voluntarily or being forcibly evicted. The son is not your tenant, has no written agreement, and is highly unlikely to ever make a good tenant so there's no point in even trying.
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  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    7y

    Agreed...fresh start but let the resident know that the lease will be enforced going forward.

    My wife Anne is from Greenwood.

    4Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    7y

    First i would repay the seller. 

    Second i would get a new lease signed and ensure if tenant does not pay that you move quickly. 

    2Reply
  • Anna Buffkin
    OP
    Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes
    7y

    Unsurprisingly, the tenant didn't pay rent on the 1st and gave me excuses when I called yesterday on the 5th.  I will be sending in the eviction paperwork tomorrow.  

    12Reply
  • Dan Maciejewski
    Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
    7y
    Originally posted by @Anna Buffkin:

    Unsurprisingly, the tenant didn't pay rent on the 1st and gave me excuses when I called yesterday on the 5th.  I will be sending in the eviction paperwork tomorrow.  

    At least the seller let you know and you could be prepared!  Good luck -- I hope it ends well!

    2Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y
    be firm right out of the gate . Use that rent to fix some deferred maintenance on the building
    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y
    @Anna Buffkin the seller paid you what was owed but the tenant did not pay rent and is legally subject to eviction. If you end up in court, your only obligation is to tell the court that the tenant failed to pay rent. If any money is collected, pay the Seller back the prorated amount.
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  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    7y

    I had this happen. We are collecting the owed rent in payments and holding it to be applied toward the tenant's last month's rent. I'm not paying the seller-- I'm not obligated to, they were a pita and I'm not in the business of collecting rent for former owners. These tenants are in a hardship situation and they are liable to try to use the security as last month when they do leave-- I think the only way I'll be able to get them out without a loss to me is to hold that extra money.

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    7y

    @Anna Buffkin

    Please keep us posted but I agree that you have to push the eviction through as you're doing. I don't see a good out unless the tenant shows up with the two months' rent and gives you a legitimate reason. Other than that, she's probably doesn't even know how badly she's screwing herself.

    As for repaying the former owner that rent they gave up to close, if the money came my way, yeah, I would do it. In a heartbeat. It's a duplex. The former owner's probably local, you self-manage, and in my city, it's not wise for local landlords not to go the extra mile to help out other local landlords, ever. I don't know about Greenwood by the 'Burgh is a small city and everyone in the business here ends up knowing everyone else. Next thing you know on your next deal, your seller will look across the table and tell you "I heard what you did for so-and-so and we've been friends for thirty years..." Good and bad karma really does go around with smart and honest people who have some money.

    2Reply
  • Anna Buffkin
    OP
    Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes
    7y

    @Jim K., @Nathan Gesner

    This keeps getting weirder.  The tenant who has insisted she paid the rent produced her receipt for the money order.  She said she hand delivered it to the PM's office as she was already late.    She apparently was angry that she was basically accused of not paying her rent and called the old PM who stated he never told anyone she had not paid her rent that month. 

    As for the seller, this is the first adversarial close I have every had.   I agree its a good idea to stay on the sellers good side, Jim.  Usually we chat politely with the seller at close.  I've had 2 closing with a older landlord who I was downsizing his portfolio.  He gave me advise on preventative maintenance, a couple of tips he had learned along the way, and gave me his cell phone number and said to give him a call if I ever had a question or needed advise on a rental matter.   

    My husband went in my stead this time as one of my sons broke his collarbone 3 days before closing.  He stated it was the most hostile closing he had ever been to.   We were initially were under contract for 2 of the seller's properties.  We backed out of one after the inspection found several problems including 2 bad HVAC units, roofing concerns, a tenant who had torn up his unit, and dry rot on soffets.   We provided the inspection and my GC's estimate as reason for renegotiation.  They insisted this was just $8k worth of work and gave a $3k reduction in price stating they factored in $5k for repairs in the price already.  Even doing it yourself with no labor cost factored in, $8k would be a stretch in my opinion even before the eviction of the destructive pit bull owning tenant.  They had originally told me 1 of the tenants (this was also a duplex) had a dog, but described him as a medium size dog but weren't sure of the bred.  They seem to hold us backing out against us rather than it just being business.  I did my due diligence, sent a counter addendum, and finally sent a notice to cancel the contract within the contract terms.  They asked my husband to reconsider and argued as to how both my contractor and inspector didn't know what they are doing.  At the closing itself the seller and PM (acting as the seller's realtor) stated the one tenant didn't pay the rent, but the attorney stated (per my husband) that unless they want to move the closing they were currently in, they would need to agree to settlement statement.  The statement had been available for almost 2 days.  They should have contested a line item then as we had done when security deposits and commission to the buyers agent was not listed.  The were from out of town and signed to agree to the statement. 

    While all this is interesting, it really has no baring on the current situation.  The tenant, who I have now found out is the occupant's mother who longer lives there, has not paid rent.  The occupant is about 20 and has a job, that's about all I know about him.  He is not listed on the lease, he has not called me nor will his mother provide me a phone number for him.  I was told he will call me.  She says he can pay me on the 14th.  I stated I will have to start the eviction process.  They story continues, but I will spare you any more details.  I have given them the option to give up the unit within 7 days in good condition in exchange, I will void the lease and take no further legal action providing no major damage is found.   I generally keep the security deposit the few times I have done this in the past. 

    To be continued, I'm sure...

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    @Anna Buffkin  it always astounds me that out your way the buyer and seller would be in the same room at the same time. that simply NEVER happens on the west coast the two parties never meet.. or basically never.. LOL

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  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    I'm with Jay. I just closed on a duplex on Monday. No idea who the owner is (LLC). Never met them. Didn't see them at close. However, my other duplex I bought this year did have the tenants apparently paying the seller late on rent. Not my problem. Took my prorated rent and damage deposits at close. Talked with the inherited tenants, who stated they are paid once a month on the 5th of the month. I moved their rent due date to the 5th, with late fees starting the 6th. They haven't been late the entire year.

    0Reply
  • Anna Buffkin
    OP
    Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes
    7y
    Originally posted by @Jay Hinrichs:

    @Anna Buffkin  it always astounds me that out your way the buyer and seller would be in the same room at the same time. that simply NEVER happens on the west coast the two parties never meet.. or basically never.. LOL

     It's always been a pleasant experience until now.  As stated,  I had a great experience with a retiring landlord.  My purchase prior to this one was a distressed property from an older widow who was relieved to sell as she could not afford to fix and sell or rent. 

    I generally like to learn why they sold at closing.  They generally just tell me with no prompting.   I've heard things like tax debt, remarriage, and sadly a senior couple who could no longer live alone.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Anna Buffkin:
    Originally posted by @Jay Hinrichs:

    @Anna Buffkin  it always astounds me that out your way the buyer and seller would be in the same room at the same time. that simply NEVER happens on the west coast the two parties never meet.. or basically never.. LOL

     It's always been a pleasant experience until now.  As stated,  I had a great experience with a retiring landlord.  My purchase prior to this one was a distressed property from an older widow who was relieved to sell as she could not afford to fix and sell or rent. 

    I generally like to learn why they sold at closing.  They generally just tell me with no prompting.   I've heard things like tax debt, remarriage, and sadly a senior couple who could no longer live alone.

    part of that Is the wet closings you do we do dry closings.. we sign anywhere from 1 week to a few days before the actual recording of the deeds.. then funds are dispersed the next day.. no one gets checks on the spot like you guys do..  some realtors will come to the closings my wife does and I used to when I did retail .. but as a general practice we never actually go to a closing. I mean rarely. unless I just want to chat with the Escrow officer or something. 

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    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y
    @Anna Buffkin start the eviction process and do not accept any rent, partial or full. Give them the option of moving out voluntarily or being forcibly evicted. The son is not your tenant, has no written agreement, and is highly unlikely to ever make a good tenant so there's no point in even trying.
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    7Reply
  • Maurice D.
    Coppell, TX · Member since 2015 · 485 posts · 310 votes
    7y

    tenant got wind of the sale and took advantage by stiffing old owner and you during the transaction.   out with them..

    4Reply
  • Anna Buffkin
    OP
    Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes
    7y
    Originally posted by @Nathan Gesner:
    @Anna Buffkin start the eviction process and do not accept any rent, partial or full. Give them the option of moving out voluntarily or being forcibly evicted. The son is not your tenant, has no written agreement, and is highly unlikely to ever make a good tenant so there's no point in even trying.

    Good advice.  I've learned the hard way how good this advice actually is.

    0Reply
  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    7y

    @Nathan Gesner Gotta get that hammer out! I couldn't agree more with you. The tenant is young and trying to take advantage of the situation.  

    1Reply
  • Tim Kiser
    Rental Property Investor · Member since 2018 · 15 posts · 4 votes
    7y

    Best to get a new tenant and cut your aggravation.

    1Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y
    @Anna Buffkin. It’s an interesting situation I guess but this whole scenario is borderline another one of those “my tenant didn’t pay rent, now what?” Posts I see all the time. At least you have the notion to file for eviction right away. I was in a similar situation on my last purchase where the inherited tenant was late, then paid October rent in early November. At this point we had already filed eviction. The tenant got served with the notice and paid rent in full with all the fees a couple days later. For those with money, getting evicted sucks. If they just can’t pay that’s different.
    0Reply
  • Kelly Iannone
    Rental Property Investor · Orlando, FL · Member since 2018 · 301 posts · 354 votes
    7y
    @Anthony Wick amazing what a little communication and understanding will do. Win-win for tenants and you (you know what to expect and it’s happened omg)
    1Reply
  • Mitch Coluzzi
    Investor · Des Moines, IA · Member since 2014 · 238 posts · 230 votes
    7y
    @Anna Buffkin I utilize Estoppel certificates and RELY on these (they are a term of our contract) for all occupied rental purchases. I've been baulked at that it's not necessary by several folks, but it absolutely is. Simply explain their 5 minutes of inconvenience to get these reviewed / signed is imperative to the transaction (and your future sanity). While it may not be traditional it alleviates problems like you're dealing with on-change over... It also helps with the more obscure issues of "the old landlord let me pay on the 10th with late fees" or "I handle snow care (on my SFD) for a $50/mo reductions" or "so and so always provided window air conditioners in the summer". At any rate, Estoppel Certificates... Fannie Mae has a robust one available :)
    1Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    @Anna Buffkin

    Unsurprisingly, the tenant didn't pay rent on the 1st and gave me excuses when I called yesterday on the 5th. I will be sending in the eviction paperwork tomorrow.

    Why do you wait until the 6th of the month to start the eviction process. Rent is late a midnight on the 1st and should begin with a pay or quit notice issued first thing in the morning on the 2nd. Do your state landlord tenant regulations force you to wait 5 days or are you confusing the late fee language with the definition of when rent is late. This is a common mistake of novice landlords.

    0Reply
  • Anna Buffkin
    OP
    Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes
    7y
    Originally posted by @Thomas S.:

    @Anna Buffkin

    Unsurprisingly, the tenant didn't pay rent on the 1st and gave me excuses when I called yesterday on the 5th. I will be sending in the eviction paperwork tomorrow.

    Why do you wait until the 6th of the month to start the eviction process. Rent is late a midnight on the 1st and should begin with a pay or quit notice issued first thing in the morning on the 2nd. Do your state landlord tenant regulations force you to wait 5 days or are you confusing the late fee language with the definition of when rent is late. This is a common mistake of novice landlords.

    South Carolina tenant law requires a 5 day grace before eviction process can begin.

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Anna Buffkin:

    So I closed on a duplex Friday.  I had a sick child so my husband closed in my absence, so this is all being relayed second hand, but here goes.  

    Before closing, I made sure prorated rent and security deposits were included on the HUD; however, the seller shows up at closing and said they just found out that tenant B had not paid their rent this month per the property manager. The closing attorney pretty much told them that the time to dispute the closing statement was passed unless they want to move the closing. If they wanted to close today, they should accept the closing HUD statement and get their check. They came from out of town and went ahead and closed.

    Here is my issue.  How do I deal with the new tenant?  The seller basically paid my portion of their rent owed and it's not my problem that they basically stiffed the seller a month's rent.  I feel like trying to collect on it would be like double dipping unless I want to track down the seller if they paid and their is no upside for me in trying to collect in that case.  I don't think I can start an eviction as technically I was paid their rent by someone (the seller).  I am leaning toward just starting fresh on Dec 1 and keeping them on a short lease (i.e. start the eviction as soon as I legally can on day 5 rather than waiting until my customary day 10.)  When I toured the unit before purchase, the tenant keep the place very clean and no issue beyond nonpayment appears to be going on as far a lease violations.    

    Thoughts?

     Don't give it a 2nd thought. Start fresh with the rent being due on the next scheduled date. If the tenant doesn't pay evict them per your normal eviction procedure.

    1Reply
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