Sellers Tenant refusing to move, rent control, Los Angeles

41 Replies

I would like to start by saying that this is my first post to the Bigger Pockets community and I am very excited to be a part of it. With that being said, I am reaching out to you guys for guidance regarding my situation. Thank you for your time. So here it is......We are currently in escrow and I was just informed that the Sellers tenants are refusing to relocate and even threatening the seller that they will sue him. We are in a rent control area in Los Angeles and we are abiding by the relocation rules. The agreement is that the seller is going to provide the funds to pay the tenants the relocation dues and I as the new owner will occupy the unit that they are moving out of after the proper amount of time is given to the tenants to relocate. The seller's agent informed my agent that the seller wants to cancel the sale due to the hardship that the tenant is causing. Would it be wise for me to back out of this purchase? By continuing with this purchase, does the tenant become my problem? Does the tenant have any grounds to pursue a lawsuit? How long can they drag this out for if the sale and relocation assistance is being properly executed? Any help or information would be greatly appreciated. Thank you. 

@Antonio Scerra

Without knowing about the property and the tenants it's really hard to give advice. 

If the tenant has lived there for 10 years and is over 62 years of age you will not be able to evict to owner occupy. If the tenant is terminally ill you will not be able to evict. 

If those are not applicable to this tenant you should be able to do it fairly easy. 

thank you. It is my understanding that none of those circumstances exist in my case. We are completely within our legal rights to occupy the unit according to the LAMC. The tenants were being extremely cooperative at first and as of yesterday they decided they were not going to move and that they were going to sue the seller for whatever reason. If none of the exceptions apply (10yrs, 62+ yrs old, disabled, etc.) does the tenant have any grounds to pursue legal action? And if not, what will it take to "make" them cooperate? 

Every person has the right, even without grounds, to pursue any legal case as far as the courts will allow it to go.  How long it will take before the courts determine he has no case and allow you to engage a sheriff to evict is dependant on your area and only a experienced lawyer will be able to answer.

You can not make some one cooperate if they do not want to do so. I would expect their end goal is to extort money out of the owner. I can not advise on paying it as I consider extortion to be illegal and would not for any reason ever pay it myself. They may leave for $1000 or may want $10,000- $20,000.  

Once you own the property they become your problem. You should probably reconsider buying ths property.

With the little knowledge I know about tenants. They could drag 6 months. They can sue, anyone can, but it is the validity of the suit that counts.

Yes you don't want to mess with that. Back out!

Was it a condition of your contract that this unit be delivered vacant at COE? If so, then do NOT close until the unit is vacant, as agreed to in the contract. If not, then it should have been ... yes, if you close on the property it becomes your problem and they can drag it out for a very long time if they or their lawyer know how to work the system. Or you may get lucky and be able to move them out quickly and amicably, but I would not count on luck ...

http://www.caltenantlaw.com/LARSO.htm
This is one of the hot bed issues in California and there is tremendous political pressure on landlords to follow the law exactly,judges love to side with tenants.even though you have a legitimate reason to relocate tenant,if all the paperwork is not perfect it can take forever,but if you are getting a great deal patience can go a long way I would try to get an update from the eviction attorney

Originally posted by @David Faulkner :

Was it a condition of your contract that this unit be delivered vacant at COE? If so, then do NOT close until the unit is vacant, as agreed to in the contract. If not, then it should have been ... yes, if you close on the property it becomes your problem and they can drag it out for a very long time if they or their lawyer know how to work the system. Or you may get lucky and be able to move them out quickly and amicably, but I would not count on luck ...

This.

Once you close, it's your problem. And the tenant's sound like extortionists. They may try to drag it out, and yes- it would then be your problem after closing so long as the courts would be willing to let them drag it out. The tenant sounds like scumbag extortionists, and I would reconsider purchase until it's vacant-- and never buy anything unless the contract says delivered vacant at COE.

Thanks for all of the great responses. You are all VERY helpful. A few things....it is in the contract that this unit will be delivered vacant and that the seller will pay relocation fees. There are 2 other units on the property which are not being vacated. Those tenants have not caused any issues, but they also have no motive to either. Also, I will get clarification from an eviction attorney about the entire process and timeframe in order to remove these tenants. I have been informed that at the very most it will take 6 months in order for the tenants to be forced out by law, and approximately 1000-2000$ for the services of an eviction attorney. I am still interested in the property even with the issue regarding these particular tenants. The property appears to be worth the current issues and as hopeful as I am that we won't have any other major issues it does not feel like it would be a mistake to continue with this purchase. It is a triplex that is supposedly "turnkey" (the inspection is tomorrow), in a good neighborhood, and even with 0 down (VA loan), and if I were to rent all three units, they would pay for the mortgage and still have room for some slight cash flow. And, though I will be occupying one of the units, I will be paying less than I would if I were renting. Another question though, what is a safe margin for cash flow? The numbers seem to make sense to me since I will not be in the red after the mortgage payments, but is there a safe zone that one should strive for? And how likely is it to reach that safe zone given the area I'm in (San Pedro, CA).

Originally posted by @Antonio Scerra :

it is in the contract that this unit will be delivered vacant and that the seller will pay relocation fees. 

Sounds like this is a seller problem.  You should not pay anything for an eviction, it should be done for you by the seller before closing per the terms of the contract.  You can always work with him on extending the time for escrow to close, especially if you are coming in with no money down as you won't tie up any of your funds.  The seller can always choose to back out, but would likely need to pay you liquidated damages if it is a standard CAR (California Association of Realtors) contract.  You can always use that as leverage to work out a deal that will help the sale go through, despite the delay.

You likely need a lawyer with expertise specific to rent control relocation  rather then a generalist in real estate. I would not agree to cancel until I reviewed the options. basically canceling means the owner can move forward with a non- owner  occupied sale because you agreed to void your contract. That would be easier for the owner and tenant but not you. People are not always genuine in real estate transactions so see what happens if you stick to your position.  It is one day they may just be seeing if you will bend or walk away without making a problem. I assume you have some  time to make this happen and you are performing to all the terms on your side of the contract. They are obliged to deliver vacant so if you must can you postpone at all to assure they do deliver vacant?  

Honestly it seems like a headache to purchase this property for you. Is there something huge to gain by purchasing and putting up with all this,  if not then walk away. It's not worth your time and efforts. There are other places for sale. Good luck! 

update....they allowed us to complete a partial inspection of the property today. We were unable to view all of the units since the seller told the tenants that the inspection was canceled (which it wasn't, but since the tenants in the main unit are not cooperating, the seller is being lenient with their requests). Supposedly there is a law that states the unit can only be shown Monday-Friday from 9-5....the seller says he was given this document from a lawyer that the tenants went to. it is becoming more and more challenging to acquire this property but it seems to be worth it. 

@David Tipton we do have time to extend escrow as long as necessary. And from my knowledge we will only acquire the property after the tenants vacate. 

@Varinder Kumar after the inspection, we were informed that the property was in great condition from what they were able to see today. So, i feel that it is worth sticking with it and completing this purchase.  All major systems were replaced within the past 5-10 years, no foundational issues, no major termite issues. And since it makes sense financially and it is in a location we desire, we feel that it will be worth the fight. 

And thank you all for the responses. I'm already learning a lot from this community. There have been a few responses about not closing until the unit is vacant. We will make sure that it is vacant before we close. Thank you!!!

Well it seems you guys really like the property.  With everything fine and dandy and the fact that your going to make sure the property is vacant before y'all move in it slaves the biggest issue. Good luck and enjoy your new place! Feel free to reach out to me should you need more assistance. 👍

is it a single family residence or a multi unit?

in los angeles that matters...rent control doesnt apply the same way to a single family home as it does to a multi unit.  there is a city of la number you can call to discuss rent control 

http://hcidla.lacity.org/contact-us

The property has 3 units. One single family home in the front, and 2-1 bed units in the back.

I would walk away from this problem. The sellers already indicated they wanted to cancel the sale, which should return all of your escrow funds.

Take this for whatever it's worth, but I don't close on units with tenants in them. I walk through the property on my way to the closing, and if the property is not empty we don't close, period. This is a little different with multi-family, since you probably don't want 3 vacancies at once, but if you are supposed to occupy one of the three, and that tenant won't leave, I wouldn't close. 

Two of the most important issues you have with any rental, once you have decided the building/house is basically suitable (right price, right location, etc), is controlling the quality & cost of repairs/rehab and controlling the placement of tenants. Occupied units allow for neither, and you look through the "What do I do?" posts on BP you will see a common thread of "turnkey" purchases with crappy tenants and units that need repairs with people in them, often at crappy rental rates, that won't allow the repairs or want to be compensated while repairs are being made. 

Do some research on the Los Angeles Rent Stabilization Ordinance (RSO) and owner move in relocations/evictions.  Owners in LA have the right to occupy one of the units in rent controlled apartment buildings but there are restrictions on which of the units you can roccupy.  

The previous owner has no grounds to evict/relocate the tenant if they are not moving in or do not have one of the legal reasons to evict in LA.  In that case it has to be a voluntary, cash for keys relocation and it sounds like the tenant is not going to leave voluntarily.  

I would consult with an eviction attorney in Los Angeles and/or relocation specialist, yes they do exist, like shoberconsulting.com.  At that point if you are comfortable handling the relocation yourself, ask the seller for a reduced price so you are compensated for handling it yourself.  If you are not comfortable then cancel the contract and look for another deal.  

Good Luck!  

A lot of right information in the above responses responding tenant/landlord law. Definitely study LA Rent Stabilization Ordinances. The entire document is on line in a PDF. Also, they have a hotline to answer questions. Office located on Sepulveda in Palms area.  hcidla.lacity.org and  http://hcidla.lacity.org/RSO-Overview. Definitely talk to a lawyer. If tenant accepts money make sure they sign that they areaway of their legal rights as tenants if the settlement is not within the law. Could come back and bite you.  Find the tenant motive & the Seller motive -  it's usually about money. The rent may be under market and tenant wants to stay.. 

This is a great topic. Please keep us updated!

Update.....got some good and bad news today regarding the property. Supposedly We can only start the eviction process once the "analyst" signs off on the Declaration of Intent to Evict for Landlord Occupancy (2-4 weeks), and after we have closed escrow. So, the tenants will be our issue. That's the bad. The good is, as soon as the city approves our declaration of landlord occupancy we will issue the eviction notice and the tenant will have 60 days to vacate. With that being said, the relocation funds will be transferred into an escrow account no later than 15 days after the eviction notice and if the tenants fail to vacate by the given date, they will lose their right to the relocation assistance funds. So, since  they will be in breach of the eviction terms, I (the new owner) have the right to pursue legal action against them as well as retain the relocation funds. This will then lead to (worst case scenario) up to 6 months until the tenants are removed from the property by law enforcement. There has been some very good advise and suggestions posted here, and I am taking it all into account. So far this has been a great learning experience. I am actually grateful that I am able to learn so much with my first purchase. And given the issues that we are dealing with, this property still makes sense. It seems like it will satisfy my financial needs, professional growth in this business, and housing for my family. Please keep posting. I love the feedback and I sincerely appreciate your time and efforts.

I have very minimal experience, so take this with a grain of salt.

Everyone has had fantastic advice, but for me, it boils down to one simple fact.  Your contract states that the seller delivers the property with the unit vacant.  I'd hold the seller to that.  How does he/she get the tenant to vacate?  Not your problem.  It's the seller's responsibility to perform their part in the contract.  If he/she doesn't perform, I would think there are legal remedies you could pursue towards the seller.

I don't think that waiting six months is worst-case scenario.  There are many stories on here about situations that took much much longer to evict.  Sure, you may eventually be entitled to the relocation escrow.  But, what if the current tenants cause six figure damages to the property?  What if all the nice mechanical systems that were replaced in the last five years are destroyed?  What if their behavior makes life miserable for the other tenants, so that they move out too, and nobody is willing to move in?  

I understanf that the process should eventually allow you to take up residency in the main unit, but I'd be very hesitant to assume that the property will be in the same condition as you see it now.  So, the simple solution, in my mind, is to stick to the clause that states the seller will deliver it vacant.  Let the seller handle it.

I think @Jason Krick is spot on. When you close you can normally do one last walk through to make sure the house is in the shape you had agreed to when you purchased it. If you're having to evict someone who will clearly be very pissed off, months after closing, what are the chances you think you will get it in good shape?

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