Closing tomorrow and found out there's a tenant 24 days late

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Closing tomorrow and found out there's a tenant 24 days late

Jeremiah H.
Investor · Tavares, FL · Member since 2015 · 110 posts · 24 votes

I've never had this situation arise before and I'm looking for advice. We are closing tomorrow on a duplex that is currently rented out. One side has a tenant that is month to month and below market value. We were going to approach this tenant immediately to sign a yearly contract for market rent or ask them to move out in X number of days, being completely reasonable about the timing. 

The second tenant is 3 months into a year lease and hasn't paid for this month, which was due 9/1. The seller is suppose to pay the prorated rent amount until the end of the month and when they sent over the HUD they said they were going to pay this amount "even though they haven't collected rent this month yet". This was how we found out about the late tenant, not a call from the realtor. I'm not sure if this is common with multifamily properties, but these are nice units in a good neighborhood. It would be abnormal to have a bad tenant in one of these properties and I feel like it's something that should have been brought to our attention much earlier than 24 hours before closing.

What should I do, both before now and the closing and immediately afterwards? I don't want to take over a unit with a tenant that will likely turn into an immediate eviction (which I've never done before).

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Nat C.
Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
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I see this kind of thing happening all the time. It is not the end of the world. You just need to move forward in the best way you can. Start the eviction process ASAP. It's not as scary as you might think. You can also pay an eviction company about $200 to handle it for you. Get the tenant out and get a good tenant in. You say it's a good area so you should have no problem finding a good tenant.
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  • Edward Debbs
    Philadelphia, PA · Member since 2015 · 45 posts · 15 votes
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    That's too bad.  I bet you asked for rent rolls and accounting documents before you put an offer together, did the documentation demonstrate any late rents?

    What does the lease you're taking over say about late rents (there must be a date/penalty amount)?

    If you don't have the above info, maybe you can get an idea if this person is chronically late.  It sounds like they are, because a second rent check is due in 6 days and you haven't even gotten the last one yet.  

    Not sure about Florida, but where I used to live in Jersey a real estate attorney had to be involved in every deal.  If you have one talk to them.  Failing that, I would get your concerns in writing to your realtor immediately and see if you can sit down with a lawyer in short order.  Might be worth a 2-400 dollar retainer to get some clarity on this deal before it turns into a real headache. 

    Sounds to me your impression was you were going into a situation with rents that were up to date.  

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  • Carlos Enriquez
    Santa Rosa, CA · Member since 2015 · 191 posts · 75 votes
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    I would direct escrow to delay closing until that is settled.  Escrow should have known to take that rent amount from the seller settlement.  Someone was hiding something.  Good thing you found out!

    If you don't delay closing, then it'll be up to you to start the eviction process, and that will take a long time and money.  Let the seller handle it before you own it!

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  • Luka Milicevic
    Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
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    Originally posted by @Carlos Enriquez:

    I would direct escrow to delay closing until that is settled.  Escrow should have known to take that rent amount from the seller settlement.  Someone was hiding something.  Good thing you found out!

    If you don't delay closing, then it'll be up to you to start the eviction process, and that will take a long time and money.  Let the seller handle it before you own it!

     Completely agree with the above post. This is exactly what I was about to say. 

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    11y

    There is likely no contractual right to delay closing, for this.  I'm guessing you didn't do tenant estoppels?  The seller doesn't guarantee rents.  Escrow would/will prorate the rents, just like everything else.  In this case, seems like you will be double dipping for this month.  After that, your problem.

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  • Nat C.
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    11y
    I see this kind of thing happening all the time. It is not the end of the world. You just need to move forward in the best way you can. Start the eviction process ASAP. It's not as scary as you might think. You can also pay an eviction company about $200 to handle it for you. Get the tenant out and get a good tenant in. You say it's a good area so you should have no problem finding a good tenant.
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  • Jeremiah H.
    OP
    Investor · Tavares, FL · Member since 2015 · 110 posts · 24 votes
    11y

    thank you for all the advice. It seems as if the seller is only obligated to pay the prorated amount and it's not our concern that they weren't forth coming with the fact the tenant was late this month. I'm ok with paying to have the tenant evicted, I'm just not familiar with the process so I'm uncomfortable not being on fimilar turf. I knew this day would come as a landlord so it's fine. 

    The information provided by the seller and their agent dated back to last month and at the time all was fine with the rent. This problem seems to be limited to September. 

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  • Nat C.
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    11y
    Unfortunately tenants with poor ethics see a sale of a property as an opportunity to get out of paying rent whilst the transaction is going through. They know the seller isn't going to rock the boat and jeopardize the sale. It becomes the new owners problem whilst the tenant has scammed possibly several months of free rent. Don't be daunted by the eviction process. You can PM me with any questions. The first thing you need to do immediately is serve them a 3 day notice to get the ball rolling.
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  • Douglas Snook
    Attorney · Attleboro, MA · Member since 2015 · 412 posts · 165 votes
    11y

    Not sure about FL as I am here in MA but be sure to get all documents regarding both tenants. Like the leases (and any applications that may list SS#, place of employment) and if there are any first last security deposits or signed conditions regarding the units. The day (or day after) you close be sure to serve both tenants with a letter introducing yourself and where to send rents etc.  I would also serve the late tenant with any kind of notice required in FL regarding late rent. Who knows they may pay and come current then you can decide to renew the lease or terminate down the road.

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  • Dilpreet Singh
    Investor · Des Moines, IA · Member since 2015 · 40 posts · 10 votes
    11y

    See if you can delay the closing by requesting them to have the place vacant. A good realtor should have asked you that question before. I always like to tell them to have my vacant before buying cause then I can make sure the tenants are good.

    Also as a new landlord and ownership you have to get new lease, so you can choice to not have them stay there any longer. 

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  • Micki M.
    Flipper/Rehabber · York, UK · Member since 2013 · 895 posts · 453 votes
    11y

    This is all good advice.  Whenever I write purchase offers on tenanted properties we specify that "accrued rents" are due to the buyer at closing which requires the sellers to pay the amount of rent due regardless of whether tenants are delinquent.  I personally don't like inheriting tenants, but if you're going to make sure to request the documentation needed to show how well they pay rent etc.  Even that won't guarantee things will go well.  @Luke Miller might have some words of wisdom for a day one tenant eviction, he went through a similar issue.

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  • Luke Miller
    Investor · Front Royal, VA · Member since 2013 · 586 posts · 418 votes
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    Hey @Jeremiah H. I was in a similar spot as you a few months back. I inherited some terrible tenants who had all kinds of excuses why they weren't paying. The biggest mistake we made was giving them time and flexibility. 

    If I were to do it all over again, I would still buy the property, but my first stop after closing would be delivering a 3-day notice to quit and aggressively demanding past rent. With our tenants, they had been evicted twice before, so they knew the process and scaring them into paying did't work and we ended up going through with the eviction. In Colorado, it is a simple process, i'm not sure how it is in Fl.

    @Micki M. is right, before you buy make sure the current landlord gets you a rent roll. If they are 24 days late, chances are they have been late before and that should make your decision easier. If they have been loyal paying tenants for years, perhaps it is worth keeping them and giving them a break. 

    Ultimately, I'd prepare and budget for an eviction and the costs of repair that go along with a tenant being forced out, and move on. If it is a good property and good location, an eviction shouldn't change your mind. 

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