Inherited a long term lease with a new purchase

8 Replies

In December we closed on a 6-plex that is in an area close to downtown that is currently being revitalized and is showing a lot of promise in becoming a really nice area for young families and young professionals.   When we bought the building it was in rough shape with a lot of neglected maintenance and questionable tenants.   We have been working at moving the questionable tenants out and are completely remodeling each unit.   It all seems like it has great potential, but we are struggling with one issue-- A lease that goes until July of 2020......  

We reviewed this lease with our lawyer during due diligence, and he said that it would be tough to get out of it through legal methods, but that we should try other methods.  

A couple of other notes on this lease:

1.  It is handwritten on a piece of notebook paper

2.   The rent is at $300 per month, of which the rest of the units are renting for $650 before even being redone

3.  The person on the lease does not live there.  She is subletting it to someone else and charging them the $650 per month

We thought we could live with this situation, but the people that are currently residing in there are deterring people from their interest in the property.   They smoke heavily in their unit, enough to the point that when they open the door the smoke comes rushing out to the hallway, they have odd people coming and going at odd times, and they scream at their kids and each other all the time to the point that people down the hall can hear it.   

We have tried to buy the person on the lease out, throwing a couple thousand at it, but she insists on getting $300 per month for the remainder of the lease.   We implemented a no smoking rule for the whole building, yet they continue to smoke, even with letters and notices.    

Any one have any creative ideas on how to deal with a situation like this?   Just curious if anyone else has run in to it.

Thanks for the help

Talk to an attorney and find a way to remove them legally. It doesn't sound like the contract has much on it so I would push the sub-lease angle. The tenant that rented it no longer resides there so you should be able to declare the current residents illegal tenants and remove them. You can also push the noise violations or that the smoking is disturbing the health of other occupants.

My real question: did you see this "contract" before closing and accept it?  If you saw it during your inspection phase, which you should have, that would have been the time to deal with it. Force the Seller to get rid of the problem before closing rather than inheriting the problem.

Originally posted by @Tyler Ebnet :

In December we closed on a 6-plex that is in an area close to downtown....   It all seems like it has great potential, but we are struggling with one issue-- A lease that goes until July of 2020......  

We reviewed this lease with our lawyer during due diligence, and he said that it would be tough to get out of it through legal methods, but that we should try other methods.  

A couple of other notes on this lease:

1.  It is handwritten on a piece of notebook paper

2.   The rent is at $300 per month, of which the rest of the units are renting for $650 before even being redone

3.  The person on the lease does not live there.  She is subletting it to someone else and charging them the $650 per month

We have tried to buy the person on the lease out, throwing a couple thousand at it, but she insists on getting $300 per month for the remainder of the lease.   We implemented a no smoking rule for the whole building, yet they continue to smoke, even with letters and notices.    


Did you have an estoppel agreement signed prior to closing? If yes, anything there that can help you?

Does the original lease (the one through 7/2020) allow sub-letting? If it doesn't  address that at all, what does your state/local laws say about sub-letting? 

Does the original lease address smoking?

Begin the eviction process immediately based on the sub lease tenants refusing to comply with no smoking and noise. Not aware of your regulations but in my jurisdiction the tenant is responsible for the sub let tenants complying with lease and rules. The eviction would be issued to the tenant not the  sublet tenants.

Do you have a sublet contract agreement signed with the original tenant. IF not then the sub let is not authorised and you can evict your tenant for having a unauthorised sub let.

Does your lease clearly state that rent can not be raised during the term of the lease. If not then raise the rent. Most state codes allow annual rent increases. You should be able to raise the rent to the maximum allowed under your state codes assuming your lease does not state otherwise. Maybe you can raise it to 650 on the anniversary date.

If you can not evict you will need to make their lives as miserable as possible, legally of course ;) 

First review your landlord tenant laws for your state.

I'd go over in depth the language, even if it's only on  notebook paper of thier rental lease / agreement... it has some terms that you should be able to really enforce,, if it's not stated on that paper that a sublease is permitted then "GOLDEN TICKET" .. you have cause (in my view) to file proper notice of lease violation and get them out.

To have a attorney to review this is SMART money spent.. I'd have no further dealings with them in person. and get an attorney that is familiar with landlord tenant law.. 

@Tyler Ebnet This is a really tricky question to have much advice on, unless someone licensed in your state comes in to talk about state laws. Even then we'd really need to see the lease too -- terms are specific and it's hard to say what flies without those terms being at hand. The subletting is a questionable step, but I'm not licensed in Iowa so I can't say what's allowed there. 

Anyway you can provide more information about the lease? Maybe a photo of it with redacted names?

Maybe try to encourage the sub tenants to move out.  Even paying them to leave. Then make it very difficult for your leasee to rerent. If they can’t get it rented, they’re out $300/mo and will be more incentivized to work with you. 

Obviously this is a messy situation with a number of issues. I would zero in on the noise and smoking. I would start the eviction process based on a violation of the rules specifically smoking and noise. I’d speak nothing about any of the other issues i.e. low rent, crappy lease, shady sublet, weird people at weird hours, etc.

Eviction based on noise or smoking would be considered a termination of the lease due to material noncompliance. Iowa code 562A.27(1).

Landlord must give written notice specifying the exact nature of violation including date/time and specific event. The notice must include a statement that if the violation isn’t remedied in 7 days that the tenancy will terminate.

If, after giving this notice, substantially the same violation recurs within 6 months, the landlord may terminate the tenancy with no cure period.

Then to begin the eviction process, you would issue a 3 day quit notice based on the second violation. This gives the occupants 3 days to move out. If they don’t you will need to filed for a FED (forced entry detainer) and the sheriff will forcibly remove them if needed.

Make sure your notices are directed to the original tenant, the sub letters, and a blanket statement of “all other parties of possession”.

You may wish to have a lawyer do this process for you as it can get hairy with what to say, not say, service required, and appropriate lapse of time.

- Kyle

@Tyler Ebnet

You can call the Iowa Legal Aid office located in Des Moines (or one of the other locations) and get a landlord-tenant law booklet. They should be able to mail it to you. It basically summarizes all of the state laws in this area and puts them in layman's terms. It outlines the entire eviction process. I would not recommend asking them for any advice because they are biased toward helping low income tenants. We need to see the documents if you're comfortable providing them. Remove any landlord/tenant personal information and post a copy of the original lease and the handwritten lease.

Best,

Bennett

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