Who is Liable in this scenario?

Question

I am bidding on a condominium that is in short sale, and plan to pay it off in cash.  The current owner is willing to stay in the place and pay rent so I don't have to worry about advertising and vacancy for the mean time.

What I learned is that the owner is babysitting or taking care of neigborhood children, a pseudo day care from the condominium.

If one of those kids gets hurt, who is liable, the me the new owner or the person taking care of those kids?  Do i need homeowners insurance too since it's a condominium.  If it's a pseudo day care, doesn't she need a license to practice?

I like this place, it will give me a good return, but if there is a lot of liability involved, I should just look the other way.

Or in a renter's contract, how should i word it in order to protect my assets or keep me from being liable if any of those kids gets hurt in my condo.

I can always not rent it to her, but another tenant can do the same thing and I would not know it.

George P. · Answer

If she didn't pay her mortgage before, what makes you think she will pay you rent?

Account Closed · Answer

by owning a rental, you'll always be open to liabilities and potential lawsuits..get some good insurance and a liability umbrella..hold the property in some entity other than your personal name...

as for letting the owner stay, heck no!  there are plenty of horror stories just on this forum about previous owners that received short sales staying in the house...i wouldn't let them stay...sorry to sound harsh, but it can really come back to bite you..this is business unfortunately..

Steve Babiak · Answer

The short sale approval letter will probably say something to the effect that the previous owner is to receive no benefit from the short sale.  Allowing the former owner to remain in place is usually considered to benefit the former owner.  So from this perspective, it might not be permitted.

But I also agree with those above who already said that: If they couldn't pay for their housing expense when they had ownership, then why would you expect them to pay for housing when they no longer have ownership?

James Hamling · Answer

I agree strongly with all above.

You made yourself liable by knowing of the day care operation, so yes, a good lawyer could attach you into it. Know your local laws, insure the snot out of yourself. CYA!

And about leaving them there, not to sound harsh, but there in a financial troubled spot on there home currently, do you want that to be with you at some point?  Really know there situation, and how they got there. If they couldnt pay $1,500 per mnth before, don't expect $1,250 to be so different. ~BUT~ IF you change the financials, hey, it could be great.  Personally, I'd say do a lease option with them instead. You get a non refundable lease fee, you hold title, get monthly payments, and they are responsable for the place (on paper) and hopefully in mind.  Remember to seperate the lease contract from the option contract, that way if they default it is real ez to give em the boot. If that works out for a year, you can always have them cancel there option and keep the lease, and you still got that fee.

Mel Rosario · Answer

thank you for the helpful comments!  I hope I get the property and she complies.

Will Barnard · Answer

Smells like a can of worms to me, be careful.

Kyle Meyers · Answer

Check the laws in the area to see if a license is required, if it is make her get one. Check the CC&Rs too, they may exclude home businesses. Make sure she gets liability insurance for her daycare business. You will still need insurance yourself, get a policy with a high liability coverage for the property and ideally you should have an umbrella policy too.

You are open to more liability since you know about the daycare than if you did not. In my leases I clearly state that tenants may not run a home business, I would recommend you do the same unless you have worked out an agreement with the tenant that allows them to run a business and in that case, spell out exactly what business is allowed and that no other business is permitted.

Additionally, I would encourage you to have a home inspection done and fix any safety hazards or code violations prior to allowing a daycare be run, try to make sure the place is as child-proofed as possible.

Of course, if you can get her to agree not to run the daycare, or if you can find a different tenant, that is the best way to limit your liability.

Who is Liable in this scenario?

Most Popular Reply