NEW YEAR RESOLUTION
Before purchasing a tenant-occupied property, or advising clients on purchasing a tenant-occupied property, I will ascertain the legal status of tenants and occupants.

When buyers are eyeing a tenant-occupied property, it startles us that the potential buyer does their due diligence in checking the foundation, the roof, etc., but overlooks whether or not they can use the property as they see fit. We’ll give a couple of examples.

A father purchases a duplex to move in his daughter who has just been admitted to college. Come to find out, the long-standing tenants are elderly, disabled, or catastrophically ill. They have protected tenants who cannot be displaced through a relative move-in eviction.

So the new owner attempting to house his daughter as she goes through school cannot transition her into the property he just purchased. He has some rental income but has not achieved the goal of giving his daughter a place to stay during her studies.

Another example is when a real estate agent promises a would-be buyer that a tenant-occupied property can be sold vacant by the time the deal closes, only to find out that the tenant enjoys “just cause” eviction protections and cannot be escorted out of the unit; a desire to sell the property vacant is not a just cause reason for eviction.

The buyer is furious that they are stuck with a tenant paying below market rate because there is no theory to evict them. The tenant has done nothing wrong, they are a saint and can stay on the premises absent a just cause.

We also find buyers who do not understand the rules surrounding unwarranted units. They will purchase a property that is not in good graces with a city and don’t fully understand their responsibilities and potential liability.

In still other instances, some occupants are licensees and are allowed to stay on the property but have no status of a tenant. Other times, there can be squatters in the property for sale and this presents additional challenges.

The quintessential point is that whenever a transfer of a tenant-occupied property is contemplated, let's find out who lives in the units, what the rental relationship is, if any, and what options are available to transition them out if the new owner has a desire to change the status quo.