Buying a house inhabited by a long-term tenant: process and ethics
April 15, 2021 7:55 PM   Subscribe

My family is on the way to buy a home, something we never thought would be within our reach. Yay! The home is inhabited by a tenant, who has lived there for several years. They’d like to stay. We plan to live in the home. Can you help me think how to work through this process legally and as compassionately and ethically as possible?

They are paying about 70% of market rate for the area. We are aware that moving will be both inconvenient and financially taxing for the tenant, who has been strongly hoping that someone would buy the house as an investment property and keep them as tenants. We are living in temporary housing which is safe and stable but will drive my beloved in-laws crazy over time (kids on parent’s couch and we’re staying in their office/workout room/guest room.

You are all, of course, not my realtor, not my lawyer, and definitely not my in-laws (I hope!), but I would appreciate your help thinking through this. I have a realtor (who keeps telling me we’ll talk about this side of things “in a week or two, let’s focus on the inspection for now”).

Ethical/compassionate side: We want to be as flexible and caring as we’re able to be, but I’m not sure I have it in me to talk terms in person with someone who is losing the place they’ve lived for the last 3-4 years. I was thinking about writing a letter offering them a reasonable amount of time to find housing (60 days? 90 days?) and offering them a modest financial compensation for their unplanned move (I was thinking of offering them about two months rent - we can afford it, though it is non-ideal for us budget wise, and it seems like a caring thing to do). Are there other ways we should approach this to be as compassionately and ethically as we can?

Legal/process side: We have just gone on contract for the house. I assume we cannot send the letter to the tenants or give them any idea of what our intention is until we close on our house. Further, I assume that means the notice that we give them (60/90/whatever days) cannot start until we close. Is that accurate? (I’m in California, they’re on a month-to-month lease that stipulates 30 days notice)

Is there a chance that with the eviction ban presently in place we could actually be precluded from getting them to move out if they elect to stay? This is in Siskiyou County in Nor Cal to the degree it matters).

When we close on the house will the previous owners transfer the damage deposit for the renters to us? If not, will they transfer it to them?

What else am I not thinking about that I should be thinking through? Right now we’re over the moon about buying our first house; I also want to be sure we are behaving in a compassionate and ethical way to our renters, too.
posted by anonymous to Human Relations (41 answers total) 1 user marked this as a favorite
As a tenant in a house, I think as much notice as you can (90-120 days) and waiving the last month’s rent would be beyond helpful. Mostly it’s the time I’d need—time to adjust to the news, find a good place that’s actually available when I need it, apply, sign a lease etc. With sufficient notice I wouldn’t expect compensation but waiving the last month would be incredible because it’s hard to save for moving expenses, increased rent, and any deposits or fees.

IANAL but I would not set any agreement, or anything that could be construed as an agreement, in writing until you’ve closed. Currently you’re a third party; you’re not the owner or landlord. The current owner may expect something in writing, though.
posted by kapers at 8:08 PM on April 15 [3 favorites]

Unless there are some kind of extenuating circumstances that you failed to mention, I would not make any extra concessions to a stranger who has only lived there for a few years and is currently month to month with well below market rent. Find out what the law is and follow it.
posted by Kwine at 8:10 PM on April 15 [70 favorites]

You really need to consult with a lawyer. There is a complex web of local laws, patched up multiple times by COVID relief bills. E.g., I think that right now "just cause" eviction/termination rules apply to all homes in California, but I'm not sure. You really want to make sure you comply with all legal requirements for both practical and ethical reasons.

Ethically, I'd probably give them 90 days (so, one month more than I think is required), and just not charge them rent for that time. (Note that if the law requires any relocation assistance, I would adjust accordingly.) It's important to speak with them as early as possible so they're not just waiting for the hammer to fall; also, they may be able to identify needs that you might be able to easily help them with and thus bolster good will.
posted by praemunire at 8:12 PM on April 15 [4 favorites]

If your purchase is going to make someone homeless, it is ethical to help them, thank you for considering this. Do they have a deposit? Previous owner should transfer any deposit at time of sale. If they have a deposit it can be used for most/all of the last month's rent. Find out what tenant laws are in your area and follow the law. I can't say it strongly enough, it can get really difficult if you screw up. Also find out what kind of subsidized housing is available, and provide the information to the tenant. I'd ask the current owners to give them 1 month free, possibly built into the contract, and you give them key money, a payment to help tenants adjust, and encourage them to leave, of 1 month, as well as helping with moving costs.
posted by theora55 at 8:23 PM on April 15 [6 favorites]

Definitely talk to a lawyer, but I'm pretty sure that state law requires at least 60 days' notice for a month-to-month tenant who's been there at least a year.
posted by pinochiette at 8:24 PM on April 15 [1 favorite]

Offering them a reasonable amount of time to find housing (60 days? 90 days?) and offering them a modest financial compensation for their unplanned move (I was thinking of offering them about two months rent)

While it is nice that you are working hard to behave ethically, keep in mind no matter what you do, people get a bit bent out of shape over losing their home. Treat this like any other negotiation, for example if giving up two months rent is going to stretch your budget, then don't start the negotiation there unless you are mandated to by local or state laws.
posted by jamaro at 8:27 PM on April 15 [25 favorites]

You need to speak with a lawyer. Setting aside COVID, California has some complex eviction-control laws that took effect in Jan 2020 that may or may not apply in your situation. "Cash for Keys" is incredibly common in parts of California to avoid a lengthy dispute over tenancy.
posted by muddgirl at 8:33 PM on April 15 [3 favorites]

Speak to a lawyer, but the biggest ethical debt (if there is one, it's been below market and laws is laws) is on the person profiting, the seller. Any kind thing you do is wonderful.
posted by cyndigo at 8:38 PM on April 15 [7 favorites]

To be clear, I mean I think you should talk to a lawyer ideally before the end of any contingency period on your contract, and certainly before you have any kind of formal contact with the tenant.
posted by muddgirl at 8:39 PM on April 15 [4 favorites]

Oh no, heaven forbid somebody not pay the "market" rate! Anything but worry the edges of the "market"!

Your suggestion of ample notice plus (essentially) financial compensation is a good instinct and will be appreciated. But, yeah, might be worth seeking some official advice.
posted by turbid dahlia at 9:02 PM on April 15 [14 favorites]

I would not buy any house in the US right now unless the seller would agree to deliver it vacant. Please consult a lawyer. The cost of evicting this tenant may dramatically increase the price of this house for you. It may be months or years, and tens of thousands of dollars before you can move in to this house. The current owner should pay off this tenant to move out. If the tenant cannot be paid off to leave before closing, he surely is not going to vacate easily after closing.

This is not the time to buy a tenant-occupied house in California. Focus on the inspection, but not for the reason your realtor wants (to distract you from the tenant elephant in your proposed house). Find a legitimate inspection reason to reject this house and get out of the contract. Ask your realtor to indemnify you for the cost litigation to evict the tenant, and for you to pay rent elsewhere while you evict the tenant. Watch the realtor's face go white.

I am not your lawyer, and this is not legal advice, but I am a lawyer, and this is common sense advice: Don't buy litigation. I repeat: Don't buy litigation. Unless you have been extensively involved in litigation and are inured to the emotional damage it causes: Don't buy litigation. If you buy this house with the tenant in it, you are buying yourself an expensive, painful and time-consuming lawsuit. Buy the house empty or not at all.

It is sweet of you to worry about a 3 or 4 year tenant with 70% market rent who should have known he would have rent raised to market or have to leave when the house is sold. Sweet, and foolish. Your realtor is avoiding the topic because the tenant eviction issue is a deal killer, no commission for realtor. If you must buy this house, use the inspection contingency, which will inevitably find that some repairs need to be made, to renegotiate. Forgo the cost of those repairs, on the condition that the closing be moved out to 90 days, and the tenant be required to move out during that time, all notices to and negotiations with the tenant to be done by the current owner, all payments to the tenant the responsibility of the current owner, and the house to be delivered vacant, or no closing. Cash from the current owner will compensate the tenant for losing his rental home. The amount of cash is between the current owner and the tenant.
posted by KayQuestions at 9:24 PM on April 15 [222 favorites]

Let me just put this out there as a very likely scenario that can happen if you ignore KayQuestions' correct advice.
posted by saeculorum at 9:35 PM on April 15 [13 favorites]

This is not and should not be your issue. As part of the final agreement/contract, the house should be free and clear including tenant out. The current owner should give them the 30 days notice.

I don't see you having any moral or ethical obligation to someone else's tenants. Anything you do is a plus.

I think even communicating with the renter is a mistake. Talk to your lawyer asap and make sure they put the burden back on the seller. Your RE agent pushing this off is doing a disservice.

Congratulations on the new house. Good luck. I bet you can't wait to give the in laws a big hug and kiss on the way out of the door!
posted by AugustWest at 9:39 PM on April 15 [22 favorites]

I think offering the tenants financial compensation to get them to move should be on the seller as they’re the ones profiting from selling an empty house, not you. They’re his tenants, not yours and if they prove to be difficult to move because they’ve enjoyed cheaper rent for years and understandably would like that to continue, you don’t want to inherit that mess.

Put it back on the seller to make good with the tenants and get them out as a condition of sale. You’re not the one making them homeless, he is. I would be careful about offering the tenants anything that could be construed as you accepting responsibility for continuing the current situation on.
posted by Jubey at 9:51 PM on April 15 [29 favorites]

Please contact a lawyer and all that.

As far as I know, Siskiyou County has no rent control. If they are month-to-month, then you simply give them 30-day notice, and wait a bit longer. If they refuse, you'll have to apply for legal eviction through the local courts and enforced by sheriff's office.

To ease the transition, you can offer them money. What's a fair amount would be an interesting question, but basically, you're bribing them to leave quietly without a fuss.

During peak COVID this was not handled properly, resulting in a couple, who closed on a house before shutdown in Riverside, but the seller refused to vacate and sheriff's claimed that COVID moratorium prevented them from acting (it shouldn't as this is not an eviction, but cleaning out squatters) but it seems when the buyers plead their case in public and the news went viral, the sellers finally left after spending over a year in a house that wasn't theirs.
posted by kschang at 10:11 PM on April 15

It's nice that a lot of strangers on the internet are saying that the nice thing to do is to give the tenant time and some kind of financial compensation. But they aren't the ones that will find themselves with potential legal issues regarding their home. You are. Do not listen to them. Do not offer any kind of money to the tenant without talking to a lawyer. Do not do anything without talking to a lawyer. Preferably tomorrow.
posted by bowmaniac at 10:58 PM on April 15 [34 favorites]

I’m a renter, single mom, etc., and I would never expect more consideration than what is legally due. I am also a landlord, same applies. Being generous is a delightful quality that improves lives. Act accordingly./
posted by tristeza at 11:02 PM on April 15

Yeah, my first reaction was, "move on". This isn't ... great. Maybe try (with legal advice) assessing whether the tenant _does_ have options and/or help that tenant get options, but, if they're paying below market rate, you're essentially asking them to move somewhere a lot worse for no benefit -- and it's not their fault, any of it.

There _is_ a chance that they'd actually be happier in a less central location, which would potentially have lower rent for the same quality of housing; if that's the case, then your helping pay moving expenses could be a boon.

Or, hey, maybe your in-laws could put _them_ up :)
posted by amtho at 11:28 PM on April 15

“I would not buy any house in the US right now unless the seller would agree to deliver it vacant”

This. This is the current owner’s problem, not your family’s - the house should be vacant before you take over the keys. For goodness sake, do not buy a house with a sitting tenant, especially one who is already saying they don’t want to move out. If they decide not to pay rent, you’ll be stuck with them for years while you go through the courts trying to get them out. If you choose to become a landlord, you know you are running that risk. Why on earth would you risk it to become a normal homeowner?

What on earth is your lawyer doing advising you to buy it with a tenant in situ? Can you even get a mortgage if it isn’t vacant? You wouldn’t be approved in the UK unless you’d applied for a specific landlord (Buy to Let) mortgage (which comes at a higher interest rate, precisely because of the risks involved).
posted by tinkletown at 11:47 PM on April 15 [19 favorites]

I have been given notice twice because of landlords who wanted to sell the place I was living. In neither case did I get any consideration other than the required notice, nor did I expect it because... Well, that's renting? They haven't been there long, 3-4 years, and you want to live there not flip the place into an AirB&B.

That said, I was given notice and moved out way before any buyers saw the place, because buying a house with a tenant in is buying a big potential headache. If they refuse to leave, trash the place, make you life difficult.... It can be a long and expensive process to get a formal eviction and then fix any damage. I would not take possession of a house with a current tenant.
posted by stillnocturnal at 12:08 AM on April 16 [13 favorites]

I'd say no especially if it is to be your primary living space.

I bought a building (it's a two flat) in Chicago which had a finished basement that is designated as related living where the owner/owner sister was living in in Aug of 2020 . We agreed to buy and were expecting complications due to COVID. They agreed to vacate and the rent was minimal. We weren't planning on renting it anyway as we want a basement, but didn't need the space and took the risk. Anyway, they didn't pay any rent and didn't move out until Oct 2020 when the utilities were cut off. But we didn't have access to the unit until Janurary 2021. They showed up a few times to collect things so we couldn't declare it abandoned. We had to enter into our own house when the pipes froze in Dec, give notice for emergency maitenance and all that stuff. We were fearful if we turned on the power prior to the legal stuff that they'd just move back in. In that time it ended up infested with rats, which destroyed the cabents. If the utilities hadn't been shut off, I'm pretty sure they would still be there. Honestly them staying for free would have likely been preferable, simply because of all the damage them leaving caused.

So anyway, it was mess. We're out money, time and damage expenses but overall it was okay and I know that the tenant is housed and not homeless so theres that. So we feel we did the ethical thing on our end, but it was an expensive ethical thing.

Unless the seller can get the property vacated, or you are prepared for someone to live there for a long while you should probobly pass.
posted by AlexiaSky at 12:13 AM on April 16 [16 favorites]

Speak to a lawyer and all that, but perhaps your real estate agent put in a vacancy contingency in your offer without mentioning it? Alternatively, there could be a clause with some costs of renting/eviction/etc being on the seller. If not, I’m amazed that they would advise you to put an offer on this place given the current climate.
posted by sincerely yours at 1:08 AM on April 16 [1 favorite]

FWIW, "cash for keys" is a valid tactic
Cash for keys is a method of getting a tenant to vacate a unit willingly by offering a cash incentive. For tenants who are struggling financially, cash for keys is an effective method for motivating them to leave, and will save you the time, money, stress, and effort that it takes to evict a tenant. Unfortunately, if the tenant is occupying a property without permission or has stayed in the unit past their end-of-lease date, the only legal way to force them out is to go through the formal eviction process. However, paying them to leave, especially if they agree to do so quickly and peacefully, will allow you to avoid the lengthy and expensive eviction process.
However, it is usually only done to a troublesome tenant, NOT for charity.
posted by kschang at 4:26 AM on April 16 [2 favorites]

You do not know the history of this tenant. They could be 'the tenant from hell' whose shenanegans have forced the sale of the house for all you know. Naturally this isn't something the sellers would want you to have an inkling of before the sale. Please be more cautious than generous and talk to a lawyer before you talk to the tenant.
posted by glasseyes at 5:31 AM on April 16 [9 favorites]

The real estate lawyer is not on your side. The real estate lawyer wants you to buy the house so they get their commission. Anything after that is not their problem, so they will not give you good advice about the tenant. They just want the sale to go through, full stop.

Find another lawyer to give you advice about this situation, and help you get out of the agreement if needed.

If you buy the house you should assume the tenant will refuse to leave and that it will take months or longer to evict them. Given the dynamics, they could stop paying rent during that time.

Be careful, and good luck to you.
posted by Winnie the Proust at 6:08 AM on April 16 [3 favorites]

Just to let you know how difficult it can be. Some people can be very difficult to move on. My husband is a kind hearted man and was renting a house to a group of guys. One by one they left and my husband let the last guy stay on (I think it’s called a split tenency?) for only his fraction of full rent... on condition he get new roommates. He didn’t. Later he let his girlfriend move in, my husband kindly gave her a tendency agreement of her own for a fraction of full rent (which was very stupid) she ended up having a baby and eventually the original guy left and she was there on her own with the baby- the house was a tip- it was a nightmare. About 2 years later he decided to sell and getting her to move on was a nightmare. She didn’t want to go. My husband actually found her a new apartment for her AND paid her deposit... at the last she still wasn’t sure she wanted to go and we had to hire someone to literally go to the house and pack for her and drive all of it over to the new place. It was crazy. But if we hadn’t done it the sale would have been lost... and she could have decided not to play ball at the last moment. And not all sellers are making a fortune- this house sold at a big loss.
posted by pairofshades at 6:11 AM on April 16 [4 favorites]

Oh, my. I would make any offer conditional on the fact you obtain a vacant residence. I mean, you will long-run own the home whether it comes vacant or with a tenant. But the amount of time, expense, trouble, and aggravation it might be to get the tenant out and the house into your hands is... near infinite. This definitely needs to be the seller’s problem to solve.

(I know someone dealing with getting tenants out right now... nice enough tenants! everyone wanted to do the right thing! And, yet, here we are with cops and lawyers and property management companies and emails flying and certified letters and no real end in sight...)
posted by whitewall at 7:08 AM on April 16 [4 favorites]

I’d make your purchase contingent on the seller having the tenant gone before you move in.
posted by slateyness at 7:09 AM on April 16 [3 favorites]

Piling on: where I am, yes the eviction moratorium applies to newly purchased homes with tenants and I didn’t look at any inhabited properties for this reason. If your realtor didn’t catch this, what else aren’t they catching?
posted by momus_window at 7:50 AM on April 16 [10 favorites]

In addition to what KayQuestions said--which is as close to a perfect answer as AskMe can provide--I'd never buy an occupied house that I wanted to live in because you have no way of knowing what the tenant will do to the house before you're able to move in. 30 minutes with a crowbar and a pipe wrench could ruin the place. Unlikely, yes, but why take the risk?
posted by Pater Aletheias at 8:02 AM on April 16 [5 favorites]

I'll just add - your compassion is a good thing. I've been there - we rented a legal basement apartment in my first house to a couple with a child.

We wanted to be kind people and good landlords. What followed was a two-year nightmare ending with them having trashed every wall in the basement, kicked in the doors, dumped used cat litter in a place we couldn't get to without removing part of an already-damaged wall, pulled the plug out of the toilet tank so we had an $800 water bill one month, and by the grace of god did not damage the furnace or the electrical. They also let our dog out of our yard deliberately (they had their own, separate yard and entrance) over and over.

Some landlords are really shitty people, the system is not good...but as an individual landlord, some tenants are equally awful. We've never rented since.

It took us two more years to dig out of the financial and home repair mess...and we learned we couldn't afford to be landlords.

So...yeah, if you don't want to be landlords, don't start with tenants in your new building.
posted by warriorqueen at 8:12 AM on April 16 [9 favorites]

I add my voice to those saying “don’t buy this house”. Use the inspection to back out of the contract. Do not buy this house; it will be bad for you and bad for the tenant. I don’t think the pipe wrench scenario is as unlikely as you think and there’s a lot of ways to mess up a house you think you’re being unfairly thrown out of during Covid. Sure you could take them to court, but you’re on the hook for expensive repairs that they probably couldn’t afford the cost of anyway.
posted by corb at 8:36 AM on April 16 [3 favorites]

I agree with others that you should make this into the problem of the only person in this situation who is making money.
posted by Ragged Richard at 9:16 AM on April 16 [2 favorites]

KayQuestions' advice is spot on. Please heed, OP. My ex-in-laws bought two adjacent apartments, one for themselves to live in and one for my ex-FIL's brother to live in when he returned from an overseas assignment six months after the purchase. That second apartment was still occupied by tenants who promised to move out in three months, which my ex-inlaws thought might be a nice little sum of money for the brother so they agreed. But they literally never moved out. They're still there 25 years later. They bribed the first and only judge who heard the evictions case, and have managed to keep the appeals off the dockets for decades through their connections with local law enforcement. They pay the same amount of rent that they did when they first moved into that apartment 30 years ago, to have some cover of legality in their tenancy. This is not a common scenario, I know, but it has happened, and it could happen to you.
posted by MiraK at 9:23 AM on April 16 [3 favorites]

I dunno about the rest of it, but the nicest a landlord ever was to me was to say 'Welp, I'm breaking the lease, there's not much you can do about it, but I'm doubling your deposit, and giving you this last month free.' He also stored my stuff in a garage until I found another suitable place for it. He sounds like an ass (he was), but I didn't have any complaints at the time. I'd been treated much worse by landlords.
posted by pseudophile at 9:44 AM on April 16

Fire your current lawyer advising this sale.
posted by spitbull at 9:52 AM on April 16 [12 favorites]

Lots of good advice above, but I want to point out that you say in your first sentence that you never thought home ownership would be within reach for your family. You are also crashing at your in-laws, who don't have enough beds for everyone, until you secure housing for your family. I know you are far more "privileged" than most, but honestly you can't afford to be a landlord for any length of time at all, and the way tenancy works is that you probably will be the landlord for some unknown amount of time and expense if you buy this house now.
posted by stowaway at 11:03 AM on April 16 [11 favorites]

When you buy a property, you buy the lease. The tenant has a right to complete their lease. If that means they has 1 month, 6 months, or 11 months left in their lease, there is really nothing you can do about it, and buying them out may be a good option. If they have converted to month to month, the terms of the previous lease as still in force. The most important next step is finding out what the tenant's current lease states. There is most likely a clear statement about how and why the landlord can terminate the lease, as well as the amount and type of notice that must be given. Follow those guidelines exactly.
posted by hworth at 11:15 AM on April 16

Be compassionate to yourself first.
posted by hypnogogue at 1:22 PM on April 16 [1 favorite]

I hate to say this to you, but in California in 2021, there are very few circumstances where there is ANY ethical way to evict a tenant, given the low power of renters in the market. Unless you live in Truckee or something, think of it this way: best case scenario, you're taking hundreds of dollars per month in increased rent out of the tenant's pocket, so that you can live in what is currently their home, instead of them continuing to do so. If you want to be an ethical buyer, you'll look for an owner occupied house.
posted by kensington314 at 11:22 AM on April 17 [2 favorites]

Would it be possible for us to get an update on how this concludes?
posted by Jubey at 4:33 PM on April 23 [4 favorites]

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