Cash 4 Keys only option, not able to evict in CA

53 Replies

Originally posted by @Jennifer A. :

Hi BP,

I'm in the process of purchasing a duplex in LA.  The owner passed and left the house to her 95 year old sister, who is selling it.  The front unit is empty, but the back unit has been occupied by a couple and their mother for 10+ years.  They pay a ridiculous $650 in rent.  I opened conversations of what's to come - complete renovation of both units, including foundation repair on the front.  I asked them what they were thinking about a relocation fee and they came back to me with $50K.  I told them that was about of my budget and I was looking more at $15K.  They took a few days to think about it and said they could do $40K.  Needless to say, I think this amount is insane.  

Based on a conversation with LA County Consumer & Business Affairs, I was under the impression they qualified for relocation assistance amounts under the guidelines they set.  After speaking with LA County Housing & Community Investment Dept, they said that's not the case.  That only applies if I evict the tenant, which based on my reason (renovation), I cannot evict.  

Has anyone had a similar experience?  Is it true I can't evict (putting aside eviction moratorium)? It seems crazy that a tenant can just stay in the house if a landlord wants to renovate and will only leave if they're given a ridiculous amount of money.  Any insight would be helpful, even if it's to contact a lawyer.  With that being said, if we can't come to an agreement, I'm ready to cut my losses and walk - I won't be giving this tenant $50K.  Thanks!

Jennifer, I'm a local investor and attorney. A few questions:

1. Are all adults in the property on the lease? If not, that can be grounds to evict. 

2. If you have a relative (not like a random cousin, closer relation) who wants to occupy the property, or you want to occupy it, you can move them out for just relocation fees (which are likely lower than they're asking for).

3. Feel free to DM me if you want to consult with a landlord attorney on this. I know a few good ones.  

@Jennifer A.

You might want to talk to this BP member. They were commenting on a person looking to sell an occupied building and really seemed to know her stuff..

Amable John Aguiluz XIII Rental Property Investor from Long Beach, CA

replied 20 days ago

@Matt Huber CA Realtor and investor here. There's a CAR form called Notice of Termination of Tenancy (NTT-CTRA) that states that the lease can be terminated 30 days from service of this notice only if ALL of the following are met: 1. Landlord has entered into a contract to sell the premises to a natural person, AND 2. Purchaser intends to reside in the premises for at least one year following the termination of the tenancy in the premises, AND 3. Landlord has established an escrow with and escrow company licensed by DFPI, DI, or a licensed RE broker, AND 4. Escrow was opened 120 or fewer days prior to delivery of this notice, AND 5. Title to the premises is separately alienable from any other dwelling unit (SFR or condo), and 6. Tenant has not previously been given a notice of termination of tenancy.

Otherwise, it's 60 days if you or immediate family intends to occupy, and/or you intend to withdraw the premises from the rental market, and/or you intend to demo or substantially remodel, and/or you entered into a contract to sell premises to a natural person, AND purchaser intends to reside in the premises, AND title to the premises is an SFR or condo, AND owner has previously provided tenant with a rent control exemption form.

It’s a ton of verbiage to go through, so I summarized it, but basically it’s 30 or 60 days based on your situation without regards to the length of tenancy IF you are selling the property. Pre-covid was 30 days when you served a notice of termination and have opened escrow without regards to length of tenancy, but as you know, it’s become more complicated.

Hope this helps. This is not legal advice

 LA and San Francisco everything is different than the rest of the state. New York City is worse. Just had a friend leave SF for $65k (landlady passed away - executor offered $, he accepted, bought a house in Boise). Reality is the people who have been renting for $650 probably can't afford anything local, and will have to move. Is $40k "fair"? Probably not, but it's business. The property is either worth it or it isn't. Treat it the same as a $40k foundation repair, roof repair, or any other item on the property that would cost $. they won't be able to move anywhere without a lot of cash, & LA is extremely tenant friendly.  

@Jennifer A.

Any chance the seller is willing to share this cost with you?

But mostly, if this is the cost of doing business in CA, will your numbers still work?

In 10 years their lease should be month to month by now. Is it not possible to terminate the lease and have them vacate? 

If the situation above is possible, no tenant will ever move unless paid. What am I missing?  Is it because they are not market tenants? Apologies if the question is naive, I am new to RE and have investments in SF Bay area and this has got me worried.  For out of state, I agree with @Shiva Bhaskar .  Investing in TX and Chicago has worked out well but have different kind BS with the upside of cash flow with leverage 

This is why it is essential to only buy a place with vacant units, or with already decent rents. We have talked with several attorneys regarding this, and there is absolutely no way to get them out at the moment except cash for keys, and there probably won't be any other way for a long time as it is likely the moratorium is going to be extended. When the moratorium ends, you can start looking for valid reasons to evict, and pay around 20k for relocation fees. As far as I know, owner occupancy is a valid reason to evict, but renovating the unit is not. Considering it is the LA market, it is worth it for sure in the long term. 

I know it must be really rough to feel like you have a squatter in your property that you can't get rid of. Hopefully things find their way to work out for you. Good luck!

Not sure if this is allowed, but vote for Kevin Paffrath as governor to end this madness. 

 

Originally posted by @Rajesh Venkatachalam :

In 10 years their lease should be month to month by now. Is it not possible to terminate the lease and have them vacate? 

If the situation above is possible, no tenant will ever move unless paid. What am I missing?  Is it because they are not market tenants? Apologies if the question is naive, I am new to RE and have investments in SF Bay area and this has got me worried.  For out of state, I agree with @Shiva Bhaskar.  Investing in TX and Chicago has worked out well but have different kind BS with the upside of cash flow with leverage 

 Rajesh, city of LA requires you to renew leases on pre 1978 rent stabilized properties unless you have just cause for eviction (or are exiting rental business via Ellis Act). Just cause includes tenant violating lease terms, or moving a relative into a unit. 

@Jennifer A.

Hi Jennifer, your best bet is to move into the empty unit and move your closest family member into their unit. Your family member will have to live their for 1 year.

Don't pay these people crap outside of relocation fees. Who is on the lease doesnt matter in L.A. There are very few ways to get a tenant out in Los Angeles City and its heavily regulated.

good luck.

Originally posted by @David Lam :

@Gary L Wallman When your property has the potential to appreciate 200k - 500k plus in under five years in a hot market, you'll understand. That equity can be used for even more investing and snowball your portfolio even more. That $500/month cashflow for a couple of years out of state doesn't even touch that. I'm so glad I didn't invest out of state.  The appreciation factor is amazing. 

 David,

I understand the potential for profit perfectly. I've made millions in equity enhancement in my lowly little Midwest area renting to honest, honorable folks. Profit isn't everything though. The morality I spoke of is high on my list. Paying people a small fortune to coerce them to move out of a home I own seems ludicrous and highly immoral to me. Then to turn around and pay tax to the state that promulgates this behavior would be too much for me to bear, at any profit amount.

Respectfully,

Gary

@Jennifer A. @David Lam

Jennifer - I'd run like hell. But there are people like David et al who are only about the money....not the questionable morals and ethics involved in these blackmail schemes, which is exactly what they are. Supporting and condoning this kind of F'ed up behavior is exactly how societies start to crumble.

So if it is all money to you and nothing else, I guess do it....you gotta look yourself in the mirror every morning.

OTOH, if you have any backbone left, tell them to F off. Sell all your Cali RE go somewhere that is still sane.

Oh, this is all just IMHO, of course :-)

@Jennifer A.

In some cities if the property is in a bad shape you should be able to evict them on such grounds but once the unit is fixed you ought to offer it back to the same tenant as priority at a slightly increased rent.

If they don't want to rent it, you then have the choice to rent it to others.

Try to visit the property and the premises, many times the tenants abuse the property. If you find violations such as unclean premises, dumped junk, broken cars, illegal subleasing, etc. Click some pictures and send them a official violation notices via registered post.

That should bring them down to you for negotiations.

Also, if they don't correct the violations, it can be the grounds to evict them legally.

Hope this helps.

It's not coercing them @Gary L Wallman , they asked for that amount and they are willing to move for that amount. It may even be a head start for them to start making moves for a better future and getting a property elsewhere. No one is strong handling them, so I disagree with your assessment. I don't think that it is immoral. 

I managed to get 2 family tenants out during the pandemic Jan 2021 in Long Beach without cash for keys but it did take a 6 months long escrow of working with the seller and tenants to get them out. The tenants fought it for a long time. The sellers originally said not possible and I would need to keep the tenants. I told them our contract was at least one unit vacant which they agreed upon. We were almost going blow the whole thing up but it took a full on zoom meeting between tenants sellers and realtor to pleed the case. Luckily the long term tenants saw the plea of the sellers needing to sell the house because of financial troubles and agreed but wanted 3 months to of time to move out. As long as my EMD was protected with clause of vacant unit i didn't care how long it took to close. In a way got lucky because even though they were all month to month tenants at that point they were not professional tenants and had some sympathy for the sellers.

Originally posted by @David Lam :

It's not coercing them @Gary L Wallman, they asked for that amount and they are willing to move for that amount. It may even be a head start for them to start making moves for a better future and getting a property elsewhere. No one is strong handling them, so I disagree with your assessment. I don't think that it is immoral. 

David,

You totally read me wrong. I'm not blaming you one bit. Any system that requires you to hand over what amounts to blackmail I find totally repugnant.

The immorality stems from these renters thinking they are entitled to something other than the discounted shelter they've received for a decade. I don't think your immoral if you pay them. I think THEY are immoral for demanding anything at all other then their security deposit, should that be warranted. I personally couldn't do it as a matter of business practice.

As an example; I understand why Colonial Pipeline paid off the ransomware attack as a business decision. As a moral one, IMO, it sucked.

Respectfully,

Gary

@Gary L Wallman

I'm with you.  I live in California and all of my initial investments are in California.  However, my recent investment dollars went to Florida.  My near future investment dollars are going to Florida.  If it goes well, I'm considering slowly selling my California properties and reinvesting in Florida (or wherever).  Ultimately, I'd like to trick my kids into going to the same out of state college so my wife and I can follow!  haha.  

Do I think I'll make more money?  Honestly, no.  I believe I'll probably lose a bit in the end, but I feel like I've done enough in life that I can afford to conscientiously object to this ridiculous setup.  I'll care a lot less about how crazy this state has become when I'm no longer helping financially support it.

I will say this though, if you're a California landlord, I'd be aggressively raising rents as much as possible (even on SFRs).  Rent control hasn't impacted SFRs... yet.  There's going to be two prices for real estate.  One for investments at market rent and one for investments not at market rent.  I'm guessing the California cities that had rent control before it went statewide probably already have that.

Originally posted by @Mel Hayes :

@Jennifer A.

Hi Jennifer, your best bet is to move into the empty unit and move your closest family member into their unit. Your family member will have to live their for 1 year.

Don't pay these people crap outside of relocation fees. Who is on the lease doesnt matter in L.A. There are very few ways to get a tenant out in Los Angeles City and its heavily regulated.

good luck.

If you are unable to negotiate the cash for keys amount down, I would follow @Mel Hayes suggestion. However, keep in mind this could also ultimately cost you more in the long-run...but it truly is the only 'pathway' toward eviction should discussions with the tenants break down.

CA bashing is very fashionable, but it isn't really helpful to the discussion and does nothing to help the OP. It's also very old and unoriginal and does little more than expose one's lack of knowledge.

@Jennifer A.

I would investigate their lease agreement as quickly as possible and hopefully it is month to month or ends rather soon. You are not legally required to renew lease agreements. Just let them know their lease ends on X date and they will be required to find a new home before that date. You are bound to the previous lease agreement so be sure to read it closely and abide by the rules stated. Sounds like the previous owner was pretty loose so that shouldn’t be entirely difficult.

@Colton Sharp   Welcome to BP!, congratulations on your first post,   you will find while what you say is true California is a different story. You actually do have to pay renters to vacate in parts of California. In some states you must renew rental agreements so be careful where you invest. 

@Jennifer A. Its totally ridiculous that your government is giving renters a pay day like this! You talk about a transfer of wealth. What is next, the government taking over your rental properties?

@Gary L Wallman the words I am thinking. How can so many accept this form of control and dictatorship from our government? How can every landlord also not get paid, and giving tenants all time in the world and may NEVER pay back. Too many people getting conditioned into socialism which is what RE investing is NOT.

@Jennifer A. Hi Jennifer! Yes this is true. There are only a few reasons you can evict and the minimum relocation fee is $16,000 for mom and pop landlords. You can evict for a close family member to live at the property and they must live there for a minimum of 2 years. We own a multi unit here too. Glad to talk further about this with you too. Also, the housing authority is a great resource.