Given incorrect information on rents and lease

Multi-Family and Apartment Investing
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Given incorrect information on rents and lease

James Kirby
UT · Member since 2019 · 53 posts · 14 votes

Hello all,

          I am at a loss on what to do next. I am fixing to close on a fourplex in the next couple of days. However, I just received the current Lease agreements of the tenants and 1 tenant doesn't pay what was said (only off $25.00 per month, but it's still incorrect information) and I was originally told that all tenants are month to month. Current Leases are 2 at 6 months and 2 at 12 months. 

I have not closed on the property yet. However, this is an FHA house hack loan which states I need to take residency within 60 days of closing with the earliest Lease expiring in April 2020. I am wondering what my recourses are due to the incorrect information on the property and what your advice would be moving forward before closing.

       If the current owner does a cash for keys before I close and has it in writing that said tenant will be out by X date is there a particular set of verbiage you would suggest having on the agreement? Would it be okay to close with this agreement knowing that they only have until X date to be out and at that point I would be safe to start my eviction process? 

     I am new to investing and I have learned so much during this deal. However, I know there is much, much more for me to learn. Please be kind but any and all advice is appreciated.

Thanks,

James Kirby

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y

If the seller gave you wrong information, get them to do the cash for keys offer explaining that you can't close unless the tenant is out as you need to move in within 60 days of closing.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    @James Kirby  When are the 6 month leases up?  Have the owner do cash for keys or delay the closing as you need to move in within 4 months.

    0Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    6y

    This is a situation where I'd start by talking to the lender and see what suffices for them. Any agreement with the seller should absolutely be in writing. Can your broker provide any guidance on what documentation you'll need to evict in case the tenants do not move out? They should hopefully have some experience with cash for keys

    0Reply
  • James Kirby
    OP
    UT · Member since 2019 · 53 posts · 14 votes
    6y
    Originally posted by @Theresa Harris:

    @James Kirby  When are the 6 month leases up?  Have the owner do cash for keys or delay the closing as you need to move in within 4 months.

    The earliest one is up in April. However, I think I need to be in a unit with 60 days of closing. I was thinking about the cash for keys but, not sure what kind of verbiage would need to be on it in order for it to hold up for me if I was to sign before the tenant was to move out.

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  • James Kirby
    OP
    UT · Member since 2019 · 53 posts · 14 votes
    6y
    Originally posted by @Taylor L.:

    This is a situation where I'd start by talking to the lender and see what suffices for them. Any agreement with the seller should absolutely be in writing. Can your broker provide any guidance on what documentation you'll need to evict in case the tenants do not move out? They should hopefully have some experience with cash for keys

    I will double-check with them, I am certain that they would have information on what I would need. This all just happened today and caught me off guard. I am really disturbed with it, just due to the plain out purposefully giving me incorrect information. At this time the only thing that I have found is:
    I can sue them (I dont want to as I feel like that would cost more than it would be worth) 
    They can do cash for keys if any of them will work it out with them
    Or I am stuck without the place which puts me in a bind because I sold my old place to purchase this one

    Thanks for the information. 

    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    If the seller gave you wrong information, get them to do the cash for keys offer explaining that you can't close unless the tenant is out as you need to move in within 60 days of closing.

    2Reply
  • Dominique Palmer
    Rental Property Investor · New Orleans, LA · Member since 2018 · 87 posts · 45 votes
    6y

    @James Kirby I will look more in to it but I believe you moving into the property would allow you to evict.

    1Reply
  • Dominique Palmer
    Rental Property Investor · New Orleans, LA · Member since 2018 · 87 posts · 45 votes
    6y

    Believe its called an "Owner Move-in" eviction. You may not want to do it but it's an option.

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    6y

    I know you know now, but you shouldof gotten copies of all leases during due dilligence..... were you able to get all the relevant utility etc info? I would be concerned you are missing other info.  

    And yes, you can evict to move into a unit in most places. 

    1Reply
  • James Kirby
    OP
    UT · Member since 2019 · 53 posts · 14 votes
    6y
    Originally posted by @Dominique Palmer:

    Believe its called an "Owner Move-in" eviction. You may not want to do it but it's an option.

    Thank you Dominique. I need to figure something out. I had 2 units that I was looking to clear out soon so that I could fix the one up as it's in desperate need of repairs and maintenance and the other let's just say is tenants that most would not lease to. I guess time will allow those to happen but I do need to live there. Thanks for the information.

    0Reply
  • James Kirby
    OP
    UT · Member since 2019 · 53 posts · 14 votes
    6y
    Originally posted by @Mary M.:

    I know you know now, but you shouldof gotten copies of all leases during due dilligence..... were you able to get all the relevant utility etc info? I would be concerned you are missing other info.  

    And yes, you can evict to move into a unit in most places. 

    Mary,

          I asked about all utilities but never received anything other than costs of water/sewer/trash. I am hoping that it is all that I needed. What exactly should I have asked for? I believe I am in a pretty good position to hold this against them on my closing and if not I will just not close the deal and eat the money vs getting into something too nasty with them. Although as mentioned before it puts me in a bind as I sold my house in order to purchase this place and I am not in a good spot right now.

    Thanks,

    0Reply
  • James Kirby
    OP
    UT · Member since 2019 · 53 posts · 14 votes
    6y
    Originally posted by @Theresa Harris:

    If the seller gave you wrong information, get them to do the cash for keys offer explaining that you can't close unless the tenant is out as you need to move in within 60 days of closing.

    It's looking like this may be my only recourse :(   thank you!

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    6y

    @James Kirby just delay closing until they leave or put it in your contract that one of them is out before closing. If this was a house hack, that contingency should have been in there regardless

    1Reply
  • James Kirby
    OP
    UT · Member since 2019 · 53 posts · 14 votes
    6y
    Originally posted by @Caleb Heimsoth:

    @James Kirby just delay closing until they leave or put it in your contract that one of them is out before closing. If this was a house hack, that contingency should have been in there regardless

    This is what I will have to do. This just puts me in a bad spot as I am living in a hotel until this closes which costs me a lot more money. I was just hoping that there was something else out there that would get us there a little quicker. 

    Thank you for the advice. 

    0Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    6y

    I am not sure why your agent didn't recommend you put a "Unit to be made vacant upon sale" clause in your contract. That would have made things a lot easier and theoretically if the tenants were month to month like you were told it should have made it easier to make a unit vacant. Evicting a paying tenant is pretty difficult no matter the circumstances. 

    The seller may not even know you need a unit vacant for your financing or they probably definitely don't know you have 60 days to move into a unit.

    1Reply
  • Bill F.
    Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @James Kirby:
    Originally posted by @Mary M.:

    I know you know now, but you shouldof gotten copies of all leases during due dilligence..... were you able to get all the relevant utility etc info? I would be concerned you are missing other info.  

    And yes, you can evict to move into a unit in most places. 

    Mary,

          I asked about all utilities but never received anything other than costs of water/sewer/trash. I am hoping that it is all that I needed. What exactly should I have asked for? I believe I am in a pretty good position to hold this against them on my closing and if not I will just not close the deal and eat the money vs getting into something too nasty with them. Although as mentioned before it puts me in a bind as I sold my house in order to purchase this place and I am not in a good spot right now.

    Thanks,

    You should have made Due Diligence ending contingent upon you receiving all the documents and records you wanted. That way the buyer has the incentive to get you the paperwork in a timely manner.

    Has DD ended and when is closing scheduled for? Like Caleb suggested, get closing pushed until a unit is vacant, re-trade on price if you have to do an owner occupied eviction, or walk.

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y
    Originally posted by @Dominique Palmer:

    Believe its called an "Owner Move-in" eviction. You may not want to do it but it's an option.

     The leases are tied to the property and are legally binding for a new owner who purchases. You can generally give someone 30 day notice for owner move-in, provided they are month-to-moth. If there is a lease term, you cannot force someone out. He has the choice of not buying the property. 

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