Buying Property with a non-paying family tenant? How to handle?

Question

A motivated seller called me and wants to sell his small 600 sq. ft. home within a couple months. He says it's renting for $800 a month.

I go look at it, seems fine..

I meet with them later in the day and find out that:

Their Sister and Sister-in-law lived there for a couple years. His sister died about a year ago and now it's just the sister-in-law living there and he hasn't paid rent in 9 months.

I want to buy the property because they only want about $20,000 for it.

I've never dealt with a rented property yet and I don't think the owner has a clue of what to do. I don't think they can legally claim the past due rent but is it worth a try ($7,200)? He's squatting the property so from my understanding we wouldn't even need to give the guy notice to go inside the property..

What should I do? What should they do?

Dawn Anastasi · Answer

You might also do this ... go to the property and have a talk with the person living there.  I'm not sure if it's a man or woman ... you said "sister in law" but then referred to "he".  (Maybe you meant "sister and brother in law"?)

Have a talk with the tenant and tell him that you're looking to buy the property.  Let them know that the seller indicates he hasn't been paying rent, and that you're not sure if that person was saving up money to move somewhere or what the issue is.  Be clear that you don't want to get in the middle of "family issues", that you just want to find out if they would like to stay and would sign a lease with you.

If $800 per month is a reasonable amount of rent for the area, you would want to keep it that way.  But if it's not reasonable, you need to get it to market rates.

Basically you want to talk to the person adult to adult.  If the conversation goes in a particular direction, then you'll know where the person is coming from.  There could be any number of reasons why the "tenant" isn't paying -- they believe they should own the house, they believe they shouldn't be paying family, they think the seller "owes" them something, they are saving up to move, etc.

Jon Waters · Answer

They have nothing. It was a verbal agreement.

Dawn Anastasi · Answer

The owner doesn't want them freaking out ... well if the tenant doesn't know, you probably don't want to get in the middle of that.  Sorry, but you didn't mention that part in your first post.

I still think that having a conversation with the tenant is a good thing, but since the owner doesn't want them to know, you may want to first contact the owner and ask them if you can have that conversation.  It might be better NOT to have the owner there if they are family.

Most people can be logical and rational.  Some people may not want to pick up on a non-paying tenant, but this is an OPPORTUNITY to take over a situation that someone else doesn't want.

You could speculate all you want about the situation but if you are really interested, you need to find out all the information.  The key is to not get emotional.

Lynn McGeein · Answer

Jon, be very careful when dealing with family issues, and find out exactly what type of lease they had or have, as for all you know, there may be a long-term lease and you could be stuck honoring it.  I would definitely tell the seller you will have to speak with the tenant before any contract is signed, and I, personally, would not close on the property until it is vacant.  Maybe the seller hasn't had the courage to tell the family tenant to leave, but he can totally use you as his excuse to now give them notice and clear them out before closing.   I certainly would not want anyone still in there who hasn't paid rent in 9 months.  And family works both ways, so when they speak to you and realize it is definitely being sold, they might just move on instead of causing more problems for their relatives who have let them stay rent-free for so long.

Jon Waters · Answer

Thanks! I appreciate the responses.  I suppose I haven't talked to the tenant already because the owner doesn't want them to know they're selling it..they're worried of them "freaking out"...erm..Well they're going to find out eventually! I don't want them taking the kitchen sink once I buy the place. Plus I don't have a lease to even track them down by name!

I was thinking of telling the owner to give a "Notice of Rent Past Due" that states the 9 months of past rent. This would probably stir up conflict.

I will go knock on the door today and see what the tenants story is.

Any other suggestions?

Suzie B. · Answer

It's different everywhere, so check with your state, but....

I would think that if there is no standing lease and non-payment, you would have the right to file for eviction as soon as you take possession of the property.

As far as back-rent, that is the problem of the previous owner.  Likely can't sue for it if there is no proof he has tried to collect and attempted eviction.  I'm sure it's hard to rent to family, especially when they fall on "hard times"... another example of why to avoid it.

Buying Property with a non-paying family tenant? How to handle?

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