Buying Subject to a Lease, which is being Violated

Member since 2019 · 5 posts · 0 votes

I am doing due diligence on a triplex in DE. One unit is rented. Its lease has been provided, and the standard real estate contract states that the sale is subject to this lease.

The tenant has at least 2 additional people living there and a dog, too - three violations. When I mention that the seller needs to cure the violations, the agent replies that the tenants pay on time and the seller is not going to "rock the boat" with paying tenants. Seller is not providing proof that the tenants are paying and paying on time. Top it off with the seller being an attorney, which the agent uses in attempts to intimidate me into dropping my concerns.

What recourse do I have? The agent says loudly that I will lose my deposit if i do not close. All comments appreciated!

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Bryan L.Pro Member

Rental Property Investor · Brewer, ME · Member since 2016 · 45 posts · 20 votes

I assume you still want the deal? I would think you could find a better way out if you don’t.

Sounds like the current owner didn’t manage the place very well if he let these things get overlooked - probably why the other two are empty.

If it’s a good deal, just buy, enforce the lease and get new tenants!

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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
7y
@Darlene Oliver I doubt you have a legitimate out, unless the issue you bring up is specifically mentioned in the sales contract. All sales whether it is in the contract or not, the buyer is required to honor existing leases.
I don't know how you found this out but that is part of due diligence you should do in advance or during a due diligence period.
If they are violating the lease evict based on breach of lease.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
most contracts have mandatory non binding mediation clauses for EM disputes.. you need to back out during your due diligence period or extend it if your not getting the info you need to make a decision.
if you waived your due diligence then you can bring these things. up.
Keep in mind your EM is at the lawyer if your east coast or title and escrow in those states and cannot be release without both parties signing. so just dont sign the release and go to non binding mediation.. usually at that point you split the baby down the middle is my experience.. if you dont settle there then its cost more money to litigate further.. but you dont need to just roll over.
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Bryan L.Pro Member
Rental Property Investor · Brewer, ME · Member since 2016 · 45 posts · 20 votes
7y
I assume you still want the deal? I would think you could find a better way out if you don’t.
Sounds like the current owner didn’t manage the place very well if he let these things get overlooked - probably why the other two are empty.
If it’s a good deal, just buy, enforce the lease and get new tenants!
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Devin D.
none · Member since 2017 · 49 posts · 24 votes
7y
Originally posted by @Bryan L.:

I assume you still want the deal? I would think you could find a better way out if you don’t.
Sounds like the current owner didn’t manage the place very well if he let these things get overlooked - probably why the other two are empty.
If it’s a good deal, just buy, enforce the lease and get new tenants!
I agree with Bryan. If it's a good deal and you have done your homework and you have seen the lease agreements for all units then you know what extent you can take things. Buy, enforce the lease, and if they refuse to comply then evict. Or as another option provide them with a notice of violation and give them the choice to comply, vacate, or if these other individuals are still taking care of the place give the tenant the option to terminate their current lease and sign a new lease with a higher rate and include the other individuals as signing tenants and collect security deposits from them.
Sounds like a shady seller and shady agent though.
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