Legal questions about closing on a property that has renters
We have an accepted offer on a place that has tenants currently in it, and all of their leases are up in May 08. We are planning on taking over the space for 2 of the units (2 sets of tenants currently reside.) However, I just spoke to a lawyer and he was pretty discouraging…
We have an accepted offer on a place that has tenants currently in it, and all of their leases are up in May 08. We are planning on taking over the space for 2 of the units (2 sets of tenants currently reside.)
However, I just spoke to a lawyer and he was pretty discouraging about this idea. He said that tenants don’t have to vacate and then we’d have to go to court to evict them and that would of course cost money and time. But does this mean that most people will NOT buy a property if there are current tenants in it, unless they plan on using it solely as an investment property (and not living there themselves when people vacate)? Seems strange to me given that most brownstones are occupied at time of sale, but I’d like to get some laypeoples opinions on this. (Maybe the lawyer is overzealous).
Secondly – and this is a bigger problem – one of the units that is currently occupied has residents that are illegally residing in it, b/c they are living in bedrooms in the cellar. The tenants I’m sure are unaware that this is illegal space but the owner I’m sure is fully aware of this.
Is there a way to protect ourselves against the liability associated with renting out illegally for the time between close and when their leases expire? Any thoughts would be appreciated. We are not planning on using the space illegally once the current tenants are out of it. But we cannot evict them of course b/c renters have the right to stay through the term of the lease.
Any advice would be much appreciated – thanks!
dont buy unless vacant. waste of your time and money. if they landlord really could delivery vacant they would have already done so, instead of waiting for their leases to expire when you buy it.
Regarding legal tenants, you must respect their leases and then if they don’t move, you have to go through the process of eviction. You should consult with a tenant/landlord lawyer to aquaint yourself with that process to see if you want to risk having to experience that route.
Regarding illegal tenants, this is BAD and under no circumstances should you buy a building with illegal tenants in it. Buying the building MUST be contingent upon having those tenants out of there. Sleeping in basements, is illegal and for a good reason. It is dangerous to tenants to live in areas which are not proper for human habitation – they risk illness or death from fumes, mold, mildew, etc which is normal for basements. God forbid you should have some carbon monoxide leakage from boilers. If anything happens to these tenants, it is YOUR RESPONSIBILITY and you are liable for their illness or death.
I bought a building with two sets of tenants – one set were great and one was a nightmare and I discovered after closing that the basement was being used as a “guest” room and there were lots of “guests”. Lovely. It was quite a battle I had with these lunatics who overstayed their lease and I had to go to court.
Anyway, know what you are doing and get the advice of a reputable tenant landlord lawyer before you do anything. You can deal with legal tenants but under no circumstances should you knowingly buy a place with illegal tenants in place.
Good luck.
OP here – VERY interesting and useful comments- thank you all! We had no idea what the risks were associated with an occupied space, so that is all very useful to know. We will ammend our offer to ensure that we won’t close unless the bottom 2 units are delivered vacant, and if the seller isn’t interested, then so be it!
Thanks very much!!! (And any other advice would be appreciated as well.)
As long as the leases are stabilized or rent controlled, you don’t have to offer a renewal. But when the tenants have little to lose by giving you a hard time, you run a real risk they will. The more notice you give, the better chance of it being a smooth transition. You will also get a better feel if this will be a problem and you can prepare. As far as the illegal tenant, I would think you step into the shoes of the landlord renting an illegal apartment when you buy the place. God help you if there is a fire. This is why people insist on buying empty space, often paying more to avoid the potential nightmares.
I wouldn’t have bought my brownstone if there were tenants. Actually there was some issue with a prior tenant that the broker told me about and i even had my lawyer put in extra language that the house had to be delivered vacant and without any issues from any past tenant or the contract was void.
Are these tenants rent controlled or stabilized? I don’t understand why your lawyer said they don’t have to leave once the lease is up unless the above is the case?
This is a good question. That said, the difficulty of evicting tenants has been well discussed on other posts. While you certianlyt have the right to not renew leases at the end of their term, the tenants may overstay their leases and you may have to take them to housing court. You win in the end, but it may take months. The other issue is the illegal apartment or space. My faint memory is that housing court will not adjudicate a dispute involving illegal apartments. I’ve always assumed that means you have to do a legal action in Civil Court with the attendent higher costs. For all these reasons most people I know have avoided buying houses with tenants or at the least make sure that they have some space to live in while they await the other tenants to depart. One idea might be to make an offer contingent on it being delivered vacant. Let the current owner buy out the tenants.
OP here- Thanks 3:32 #1!
3:32 # 2- Often times you don’t have the luxury of figuring all of this out pre-offer. And since an offer is non-binding for 10 biz days and we were pressured into putting in an offer before we had the chance to do the due diligence on the place (b/c of a “best and final” call), we are now using this time to figure this stuff out. Basically, we have secured the real estate while we sort through the details.
I hate to say this but why didn’t you check this all out BEFORE submitting an offer??
AS the potential new owner, I would absolutely have a conversation with those renters. You’re bound to get information that the seller didn’t give you. As for the tenants that are legally staying there under lease…. They are “tenants” and understand the risks of being a renter in a building that is being sold. They are bound by their lease. If they refuse to leave, it’s not to difficult to have them evicted. You must give them 30 days notice of your intention to reclaim the apartment. http://www.nycourts.gov/courts/nyc/housing/pdfs/Landlordbooklet.pdf
Here’s something that can help guide you a bit through the court system. We bought our 3 family with 1 tenant in place, and we couldn’t be happier with her. And she understands that we will eventually take the space over for ourselves.
Good luck!