I recently closed on a property that needs some extensive work to be brought up to minimum standards of habitation. The previous owner was a true slumlord and did some very shoddy work throughout. Specifically, he added an illegal fourth unit. The city eventually found out about it (when he attempted to add a fifth illegal unit, which is now a "laundry room"), and shut it down. His solution? To put two different groups of people on one lease, sort of.

My problem is this: I have tenant group A who is saying that tenant group B (in the former illegal unit) is not paying their half of the rent. However, only tenant group A is on the lease. I'd like to get rid of the folks who are not paying, because they have also been violating the lease in other ways such as removing the smoke detectors. Tenant group A was told by the previous owner that I would fix this situation, which I find hilarious.

Should I evict the entire group and then turn around and sign a new lease with the group who actually is paying? I am eventually going to get rid of all the tenants and then screen my own, but would like to keep most of them there for now as I rehab one unit as a time and keep their rents to cover the carrying costs. Open to ideas from other folks.

For what it's worth, I am working with city code to try and add back that fourth unit, which would be fairly simple so long as I get the thumbs up to do it.