Inherited non-paying tenant with no lease! Help!

[Joe Gugelman]

Sorry for the length, but I have a very specific scenario that I haven't been able to find advice on after extensive searching. 

I just purchased my first rental property, a quad-plex (in Indiana). It was supposed to close on July 1, so on June 30 I met with the one existing tenant and got an estoppel in place with her. After our meeting, I visited the property one last time before closing to see if the repairs we'd agreed upon were completed. They were not. Needless to say, we didn't close on July 1. After threatening to back out, the seller threatening to go to arbitration, we worked it out.

We closed on July 31. Less than 24 hours before closing, my agent mentions that in the period of time that it looked like the deal was dead, the seller's agent/property manager placed a tenant in a unit. At the closing table I find out the details; It was a tenant he'd had at another of his properties who had roommates abandon him, so he let him move into the unit in my building on July 22, collected a $50 security deposit (which I received a credit for on my HUD statement), and $100 for rent to cover 7/22-7/31. He'd planned to meet with him on 8/7 (tenant's next payday) to get a new lease in place and collect for the month of August.

I was a little weird-ed out, since I had no time to do my due-diligence by meeting with the tenant before closing to get an estoppel and talk about getting him under my lease agreement. I was assured that this had been a solid tenant for a year, so I didn't blow the deal up (again) over this. Figured it'd be nice to have two of the units filled from the jump with no turnover/advertising costs.

So, the day after closing (Aug 1), I meet with the tenant to discuss getting him under a lease. I was ok with the rent amount he'd agreed to with the previous manager. He was too, but was under the impression that he wouldn't be paying for gas service, even though the former manager told me that they'd agreed that he would pay all utilities. He also had a small chihuahua that I was told he'd be willing to give to a neighboring family member (I'm going to make this a pet-free building), he didn't seem so keen on the idea. When we suggested pro-rated rent to take us to his payday, he acted like he didn't have any money. 

Trying to keep this thing together, I suggested that he take the weekend and figure out his budget and if he'd be willing to part with his pet. He promised to get back to me on Monday. He did text me bright and early Monday morning and let me know that he'd be moving on, but thanked me and my partner for our time and effort. I thanked him for getting back to me, and suggested that my family members (realtors) would probably be able to help him find a new, pet-friendly place for he and his dog.

No reply for two days, so I text him on Wednesday of this week, asking how the house hunting was going. He said "not my my plan but its still going." I told him I'd be stopping by the house to start a check-list for getting the other units ready that evening, and we could talk about it then. He said he had important errands to run. I told him we'd be there for a while and he could text me when he got home. He said "ok" and I never heard from him.

I text him earlier today (Thursday) and asked him to please contact me when he gets off work. Told him that if he's planning on staying, we need to get him under a lease and collect rent for August, and if not, we need to start prepping the apartment for another tenant and therefore need to discuss his plan to vacate. He never contacted me.

So to recap in case I lost you in the middle, he has no lease agreement with either me or the previous management for this property. He paid $100 for the last week of July, and I hold a $50 deposit that I received at closing. So I ask the experts, what are my options? Do I have to go through the full eviction process? Is paying one week of rent with only a verbal agreement to sign a lease in the near future enough to invoke tenant's rights? I have no leverage with such a paltry deposit, so I worry about damage on the way out. Do I file a pay or quit (not trying to get him to pay anything, just vacate), or just go for an Immediate Possession? Help!

[Marcia Maynard]

Are you familiar with the landlord tenant laws for your state and local jurisdiction?  If not, study up and find a mentor in your town.  In lieu of a lease or month-to-month rental agreement, the verbal agreement will probably default to a month-to-month.  He has established residency, so he is your tenant.  

Sounds like the best solution would be "cash for keys". It is best he move on, so help him on his way. He will be more likely to leave your place undamaged that way and less expensive than eviction. Eviction should be considered only as a last resort, as it would become a lose-lose. You want to go for a win-win. Don't pressure him by talking about a lease. Talk with him about a move out plan, in which you help him along. Offer a moving truck, labor to help him, or cash to vacate.  

[Joe Gugelman]

Thanks for your reply Marcia!

I am as educated as a "newbie" can be (though I understand that like with all things in life, I'll always continue to learn). I studied the laws extensively pre-purchase, and have mentors in the form of my mother and sister, both of whom are real estate agents and the former who is a property manager. I will talk to her in the morning about this, but figured I'd give this forum a shot for an attempt at late night peace of mind (and therefore sleep!). 

I"m pretty confident that I would have known how to approach this better if it weren't for the odd circumstance of this tenant's situation. I've been looking for a way out of this presupposing that he's not an actual tenant because of the "limbo" he was in when the sale took place. You definitively stating that he is my tenant now has cleared it up in my mind. 

I agree that since he doesn't have rent that he's technically late with, an eviction should be the last resort. I like your idea of cash for keys. Think I'll give that a try tomorrow and see if that gets the ball rolling in the right direction.

[Account Closed]

It sounds like at this point that the innkeeper laws would apply. The person does not have a lease and you had a verbal agreement that he stay for a week. You extended the possibility of a lease, but he rejected that. At this point, if he has not paid you, he is trespassing.

I would probably write up a bill based upon the days he has stayed without paying -- basically the balance of what he owes you. Then, I would require him to immediately leave. If he refuses to do so, I would call the police and inform them that you have someone trespassing on your property and that you need assistance removing him from your premises.

[Phil C.]

very interesting but unfortunate situation. I can't but feel suspect about the actions of the seller. I feel like he set this up to get our off a bad situation for himself.  Please let us know how it turns out

[Steve Babiak]

Your agents let you down on this one. Your purchase agreement should have specified the occupancy status of the units at closing so that you didn't get stuck with somebody's buddy at cut rate terms for a several years lease :). And you weren't given any estoppel on this one tenant - but did you do a pre-closing walk-through and not notice furniture in this unit?

Verbal leases are recognized in some places, so you have to determine whether that holds true in your location. Then you have to get that PM to verbalize the terms for you, and of course you are in the proverbial "he said she said" situation that estoppels are intended to avoid. 

[Brandon Hicks]

I'm in Indiana and my course of action would be to file a 10 day pay or quit and then contact the courts for the next step. Quite often they move during the 10 day period. I'm not sure what county your in but in Noble County I'd get a court date for immediate possession within 2 weeks of the 10th day. Whether he showed up for court or not non-payment will get him 14 days to vacate. Non-payment is pretty cut and dry with our judge. Most of the time the tenants don't even show. If they're still there at the deadline I can call a sheriff deputy to come and physically remove them so I change the locks.

Lease or no lease I'd let the judge sort it out. You'll win....document everything.

[Shawn Holsapple]

As mentioned above, I would be offering him a few dollars to leave.  I hate doing this but have done it in the past with success.  It's much faster and way easier to just throw some cash at him to get him gone without damaging the unit.

[Bill S.]

You might want to offer to buy him a hotel room and pay 1 month's rent on a storage unit.

I realize he hasn't paid rent but he could be argued in court that he already paid and you were lied to a closing.

Read your state and local (if any) laws. Here I would give a 10 day notice of end of tenancy. If he stayed past the 10 days, I would evict and he would be gone in two weeks. Hopefully your local knowledge can shed light on the most efficient means of ending your relationship.

[Account Closed]

Boy, I am finding out that most people are nicer than I am! I still think that it comes down to the fact that you had a verbal agreement to allow him to stay in your property for one week. He has stayed longer than that week. The more you treat this like an eviction, the more it begins to look like you extended this person a lease agreement -- which you did not. You offered to him a lease agreement, which he rejected.

I think that the safer route is to treat this person as a trespasser. I would break down the bill to a daily rate, demand immediate payment of that amount and require him to move all of the stuff out of the unit. If he refuses, contact the police and report him as a trespasser. Or, alternatively, if he refuses move his stuff out of the unit and change the locks. Put the ball in his court. I don't think this is any different than if this individual was crashing on your couch, you asked him to leave and he refused.

I know Fort Wayne fairly well. As you know, it is fairly conservative and has a general "no nonsense" approach to situations like this. The judge's I know will recognize when someone is trying to scam you by living at a place without paying. Likewise, the judges I know can spot when a landlord is taking unfair advantage of an unsophisticated tenant. I just don't sense that this is the case here.

[Jerry W.]

@Joe Gugelman  DO NOT CALL THE COPS AND SAY YOU HAVE A TRESPASSER.  Any possible inconvenience you have is nothing to the damages you will pay for a wrongful arrest or illegal eviction.  The tenant is lawfully in your building under color of title from the lawful owner at the time of entry and you had knowledge of his tenancy at the time you purchased.  If you are really worried about timeliness call a local attorney who does eviction and talk with him.  What damages would you expect to get if you paid for a rental car and then got arrested for car theft because there was a dispute between the old owner of the business and the new owner?  Ten thousand?  Fifty thousand?  You get my drift?  Do it the right way call an attorney, if he says call the cops fine, you can go after his malpractice insurance.  You don't use duct tape to fix a leaky pipe in your rental, you do it right, the same goes for evictions.  Good luck Bud

[Account Closed]

Jerry is obviously right -- you will want to contact an experienced real estate attorney. The real question comes down to whether this individual has a lease. Was there an agreement or understanding that he could stay beyond week? That is what this really comes down to. Hopefully everything worked out. I would be interested in getting an update regarding this situation. Good luck.

[John Thedford]

As much as I don't like dealing with them, an attorney might be the best route. Go knock on the door and tell your tenant you need it resolved. If you cannot work with them, hire an attorney. Sometimes receiving a letter from one is what it takes to get their attention.

[James Wise]

Looks like you need to go through the full eviction process on this one.

Lease or no lease it does not matter.

[James Wise]

Not saying you could have done anything to prevent this guy from being an A-hole but I think in general it's a bad idea to inherit a tenant with a pet & try to get them to stay & make them get rid of it.

To most people pets are like family. Only asking for problems.

[Joe Gugelman]

James,

Yeah, obviously moving forward we would never attempt to separate someone from their pet. I only attempted to put this "gentleman" under lease because of the previous property manager telling us that he already agreed to give the dog away before we ever got re-involved.

Anyway, sorry to everyone for the lack of updates. It's been an absolute insanely busy couple of weeks, as I'm sure many of you can understand.

Since my original post, the tenant claimed he would be out on the 15th. He attempted to string me along, but I did my due diligence once his communication faltered even the slightest, and 7 days ago I posted his 10 day notice to comply or quit, which extends past his alleged vacancy date. 

I also offered him cash for keys, as per Marcia's suggestion in the first reply. He was initially interested, but once I explained to him that it would be handed over once the property was vacated and I had a chance to inspect its condition, he claimed he "can't do anything with a check" and "how will the money help me with moving expenses if I won't get it until after I move", etc. So basically he wanted cash up front. Yeah right.

Obviously, I've come to realize the real situation and what needs to be done. I was at the building yesterday to further prepare another unit for rental, and I did see him finally getting his car up and running, so hopefully when I go over there in a few minutes, I'll find that he actually did vacate.

I'll update as soon as I have more news. Thanks to everyone for the advice!

[Joe Gugelman]

Update #2:

He vacated! 

Not sure why he didn't take my $100, but he left either way! What a relief...

[Jerry W.]

@Joe Gugelman  congratulations bud!

[John Hamilton]

easy come, easy go...well, maybe hard come, hard go in this case.

Glad things worked out for you.

On closing day, if I was told a new tenant moved in and I had no information about this tenant other than the seller's word, I would have delayed closing until I found out the situation. The seller had breeched the contract that you brought to closing. If no delay was offered, walk away. Also, repairs were not done. This was another breech and should have been negotiated during closing. Either cash for those damages now or drop the price. Unless they had been repaired prior to closing.