Buying Duplex With Tenants: Removing existing tenants

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Buying Duplex With Tenants: Removing existing tenants

Craig Rout Gallant
Cornwall, PE · Member since 2017 · 4 posts · 0 votes

I'm about to put an offer in on a duplex contingent on the current lessor/owner going through the proper channels for removal of tenants before closing date. I will be living in one half but the tenant who lives in the other half is paying below market rate (imo) for the unit. My concern is if I've overlooked anything in terms of tenant law to make sure I can legally remove both tenants. This is an excerpt from the local Rental of Residential Property Act:

"...

Notice of termination where purchaser seeks vacant possession

(1. 1) Where

(a) the lessor is the owner of residential premises comprising not more than two rental units;

(b) the lessor enters into an agreement of sale of the residential premises to a purchaser; and

(c) the purchaser has sworn an affidavit that he wishes to have possession of the premises for occupation by himself, his spouse, children or parents or the parents of his spouse,

the lessor may serve the lessee with a notice of termination to be effective not less than two months after it is served and the notice shall be accompanied by a copy of the affidavit referred to in clause (c).

..."

One of the tenants is currently on month to month, while the other is on a 1 year lease which ends August 1, 2017. Based on the aforementioned rules, would I be able to put as a contingency in the offer that the current owner/lessor provide notice of termination effective Oct 1st, 2017 or would it be Nov 1, 2017? Am I missing something here?

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  • Anthony Sandvig
    Denver, CO · Member since 2017 · 2 posts · 0 votes
    9y

    I don't have the direct answer you may be looking for, but I would consider talking with a local attorney or experienced agent. With that said, I'm actually in a similar position. I'm looking to buy a MFR to house hack in the Denver area, but am finding that listed properties are often occupied.

    Here are my initial ideas on how to address this issue:

    1. Offer more on the purchase price and simply have the current owner handle the termination/buyout, with a contingency in my offer that the unit must be vacant at closing.
    2. Have my agent or an attorney draw up an agreement/offer for the tenants in one of the units, to allow me to simply pay them to agree to terminate the lease early...around 30 days after my closing. With current rent around $1500 and pretty comparable for the size location, I'm thinking $3000 might do the trick.

    Does anyone have any thoughts or experience on this idea? I'm also completely new to this, so if my dollar amounts are way off, I'd like to hear your feedback.

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  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    9y

    @Craig Rout Gallant so I don't know PA law so would suggest you contact a local attorney that specializes in landlord/tenant law and represents landlords. It seems like from what you said, you could close on the property and give notice to the MTM tenant and also use the "I'm going to occupy your unit" card on the lease tenant and end up with the whole property unoccupied in 60 days after close. What I am not sure about is if the seller can use that card before the closing. Certainly the MTM tenant can be sent packing by the seller. As an owner, I would be very hesitant to go that route because it leaves me with an empty property if for some reason you don't want to close or can't close. It tips the negotiating scales if there is some financial hipcup at the 11th hour. In your sellers shoes, I would want some non-refundable money so that if the deal want completely South, have some funds to cover costs of the 2 vacant units.

    @Anthony Sandvig so pretty much any agreement can be terminated with the consent of both parties so sure if you and the tenant can come to terms then no problem. The hitch comes in what if the tenant doesn't want to move for any price or at a very large price. You are stuck. Colorado does not have any requirement that tenants move out if the new owner wants to occupy. In fact, I have been told by an attorney that a clause in a lease requiring the tenant to vacate if the property is sold would not be enforced by the courts. If you do plan to negotiate you would definitely want it in writing. My approach would be to have the agreement drawn up with the $ amount blank and move-out the date blank. I would approach the tenant and verbally negotiate the terms. When you strike a deal, get out the agreement, fill in the blanks and both parties sign it. This should all be done prior to closing with a contingency in the agreement that it is only in effect if you close on the property. This time frame greatly reduces the tenants power. Your purchase agreement should have a contingency clause allowing you to negotiate with the tenant and if you are unsuccessful, you can get out of the contract. 

    There is no specific magic dollar amount. Some tenants will leave with no compensation (if you play it right) and some tenants wouldn't leave for $10k. It's real estate so it's open to negotiation.

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