Purchasing Property Where Seller Does Not Disclose Evictions***

4 Replies

Hi All,

I have a buyer who purchased a property (prior to my time) in which the seller had 4 evictions in a 16 unit building going on. None of these evictions were ever disclosed to them during the purchase. They found out the day before closing that there were several evictions going on by the tenants. I am curious if this is only an ethical dilemma or if there might be legal action that could be had. And would the results change if the buyers did not find out the day before closing? 

Thanks!

Matt

Current evictions in 25% of the units is a material matter.   By not disclosing the vendor has not conducted him/herself in good faith and, quite possible has breached the terms of the purchase agreement or, as a minimum to delay Close and reopen negotiations.  {Note: in the Agreement of Purchase and Sale we use, such a material failure to disclose would render the contract void at the buyers discretion}.

 It sounds like the buyer proceeded with the transaction regardless of the last minute discovery.  Hopefully, {a portion of} funds were held back in escrow.   There may be a case for legal action: the question would be best put to the buyers attorney.

Updated almost 6 years ago

Sometimes my fingers and my brain do not work well together: There was a missing clause above: "... quite possible has breached the terms of the purchase agreement giving the buyer the ability to walk away or, as a minimum to delay ..."

@Matt N. I am curious, how big of a deal does it really make for the buyer at the end of the day? Existing tenants don't come with a guarantee they will stay for a certain period of time. You could have 6 evictions after closing without any of them being in process at the time of sale just by pure circumstance. It definitely sounds like the seller was unethical (without me knowing the laws in your area) and is a sleeze ball. Could this possibly be an opportunity to rehab a few units, select better tenants, and raise rents? Also, the seller having the four evictions is probably the reason the buyer got the deal in the first place. Will the legal expenses, mental energy and stress be worth what the buyer could reasonable gain? Was the buyer's purchase price so closing tied to all tenants staying in place with no turnover and no estimation of kicking some people out that the 4 evictions crush the investment? I get it, knowing that you will have 4 rehab/make ready/lease ups is important to know but if everything was 100% sweet with the seller old boy or ole girl probably would not be selling.

It is funny, so often people crush investors for taking advantage of the poor little seller. Some sellers are sharks and will eat you alive.

Yes, that's a material breach, it's also fraudulently dealing as the seller ties you into pending legal actions, contingent liabilities, cost to cure the misrepresentation of units leased. I suggest you see an attorney. :)