Rental property lease - should I have re-written it?

[frances]

Hey y'all.
My mom died last November at 91 after a brief illness.
I inherited a rental property from her that she has leased out.
I am the executor of her estate and the only heir.
I am in the lease as the "property manager" for the rental.
The current lease expires 7/31/2024.
Current tenant has been in the property since end of July 2019.
Mom initially set the rent about $200 below market and NEVER raised the rent. She always said she would rather get a little less rent and have a long-term tenant than have to find a new tenant every year or so.
Expenses on the rental have gone up about 16% since the current tenant moved in.
He was always very good about paying on time and in full while mom was alive, but now, well, he's not. Since January he has shown up with less that full amount due 5 out of the past 9 months.
There is allowance in the lease for late fee ($100) and also raising the rent during the term to meet expenses (60 days' notice required).
The tenant wants to buy the unit. I have gotten an appraisal and we have agreed on a price. The appraisal I got was far below the "zillow" price but it's whatever at this point.
Original cloing date was supposed to be 8/20, he asked to postpone to 10/20 and offered to raise the price $5k, which I agreed to.

A couple of more things about this guy - the lease specifically says that everyone residing in the unit must be added to the lease. He's had roommates, admitted to that, yet won't give me their information to add them to the lease. Also he continues to do things inside the unit (paint, replace the dishwasher, remove the carpet from the stairs, and I honestly don't know what else) in violation of the lease. I've told him IN WRITING and VERBALLY to stop. I continue to get ignored on this as well.

Here are my questions:
-Should I have re-written the lease when mom died or is it OK that I've let the current lease stand since I'm the executor of mom's estate and now the legal owner of the property?
-He's already missed the closing deadline once. I honestly don't think he's going to meet the upcoming date. (I"ve asked several times for the closing attorney's name and the contact information for the mortgage company he's supposedly going through and am being ignored.) What would you do? Evict and sell on the open market? Raise his rent? (He already is showing me he's having problems making the low rent now so I'm very concerned.)

 

[Aerides]

Do you have a RE attorney? get one. Get him out and sell the place for the "zillow" price or better. In my market, the zillow number is 200k less than I know I can easily sell for.

ETA: if you don't want to evict him now, or can't legally, then assuming he doesn't show up and close on the place in October (spoiler he won't) then get an actual property manager to handle things until next July. Expect damages.

You will also want to immediately start legally enforcing lease violations particular roommates, to ensure you have less of an issue if eviction has to happen. But you really need a lawyer here.

 

[LateToFIRE]

Been a Landlord and r.e. investor for +20 years. My advice is that once you've established you're dealing with someone who is dishonest - get an attorney - terminate their lease - cut your losses. It is not worth the time and higher blood pressure to play games with a slickster - and this tenant is clearly trying to play you for the fool. Next move will be to stop paying rent altogether, while still claiming to want to buy the place. You will likely have to evict, you will need an attorney depending on laws in your jurisdiction. Expect the place to be in bad shape by the time you reclaim it.

EDIT:
FYI, sounds like the tenant is in violation of the lease by not meeting the required rent amount. If I were in your shoes, I would [have my attorney] sending notice to demand catch-up payment and late fees, increase rent (if allowed under the lease), etc., and start ramping up the eviction process (even if they swear they'll make the payments soon). You need the attorney because the slightest misstep on your part could work in tenant's favor. If the tenant is trying to be as sleazy as sounds, they will play a game of delay and under-pay. Know I sound harsh - just going on the facts you provided - lots of red flags.

 

[frances]

Do you have a RE attorney? get one. Get him out and sell the place for the "zillow" price or better. In my market, the zillow number is 200k less than I know I can easily sell for.

ETA: if you don't want to evict him now, or can't legally, then assuming he doesn't show up and close on the place in October (spoiler he won't) then get an actual property manager to handle things until next July. Expect damages.

You will also want to immediately start legally enforcing lease violations particular roommates, to ensure you have less of an issue if eviction has to happen. But you really need a lawyer here.

Thanks. I've notified him in writing and verbally he's in violation but he keeps ignoring me. I think, based on his history (he's a convicted felon and mom and I were trying to give him a hand up when we rented to him) I won't have any problems with eviction.

I've not been able to definitively prove the roommate violation as he never gives me names and always brings rent to me. Unless I stake the place out I don't absolutely know someone else is living there, although he admitted to having one guy there in the past that he was trying to get rid of and asked for my help. I wrote him a letter telling him he had to get rid of that roommate. I think he has another one now based on little things that are said.

He knows I'm a bit teed-off with what he's been doing, but he keeps on.
Husband thinks the guy's an idiot; I think he's just pushing me because mom is gone. He was never late on the rent or did much in the way of messing with the unit when mom was around.

I do have a RE lawyer so I'll be in touch with her shortly.

 

[OldShooter]

20+ years landlord here, too. @LateToFire is right. just follow those instructions.

 

[frances]

Been a Landlord and r.e. investor for +20 years. My advice is that once you've established you're dealing with someone who is dishonest - get an attorney - terminate their lease - cut your losses. It is not worth the time and higher blood pressure to play games with a slickster - and this tenant is clearly trying to play you for the fool. Next move will be to stop paying rent altogether, while still claiming to want to buy the place. You will likely have to evict, you will need an attorney depending on laws in your jurisdiction. Expect the place to be in bad shape by the time you reclaim it.

EDIT:
FYI, sounds like the tenant is in violation of the lease by not meeting the required rent amount. If I were in your shoes, I would [have my attorney] sending notice to demand catch-up payment and late fees, increase rent (if allowed under the lease), etc., and start ramping up the eviction process (even if they swear they'll make the payments soon). You need the attorney because the slightest misstep on your part could work in tenant's favor. If the tenant is trying to be as sleazy as sounds, they will play a game of delay and under-pay. Know I sound harsh - just going on the facts you provided - lots of red flags.

Thank you. There is a provision in the lease that allows for rent increase with a 60 day notice.
Since we're now supposed to close on 10/20 if that happens it's a moot point.
If we don't close I will probalby go the eviction route; the lease allows for early termination with 60 days' notice with no reason having to be given.

 

[OldShooter]

... I do have a RE lawyer so I'll be in touch with her shortly.

Today, please. Any delay, things will only get worse.

 

[freedomatlast]

I'd go ahead with the 10/20 close date as scheduled. Since he thinks he's buying it, he'll keep it in good shape till then. If you give this dishonest tenant a notice of eviction. I'm suspecting all sorts of bad things will start happening to the property that will cost many thousands of dollars to repair at a later time.

 

[MarieIG]

20+ years landlord here, too. @LateToFire is right. just follow those instructions.

This.

Red flags all over the place.

 

[Aerides]

Thank you. There is a provision in the lease that allows for rent increase with a 60 day notice.
Since we're now supposed to close on 10/20 if that happens it's a moot point.
If we don't close I will probalby go the eviction route; the lease allows for early termination with 60 days' notice with no reason having to be given.

At this point I'd assume the already-delayed closing, and the request to buy the property, are both just stalling techniques. You have to assume you have a bad actor who has played this game before and knows you are new to it.

 

[MarieIG]

At this point I'd assume the already-delayed closing, and the request to buy the property, are both just stalling techniques. You have to assume you have a bad actor who has played this game before and knows you are new to it.

I agree. I don't see this ending well . . .

 

[captain3d]

Tenant thinks you are an idiot. Evict asap

 

[OldShooter]

I'd go ahead with the 10/20 close date as scheduled. Since he thinks he's buying it, he'll keep it in good shape till then. If you give this dishonest tenant a notice of eviction. I'm suspecting all sorts of bad things will start happening to the property that will cost many thousands of dollars to repair at a later time.

I'd bet real money that the tenant has no intent to close because he doesn't have the money to close. It's just stalling. Giving him another month and a half to make trouble is just asking for more trouble.

Tenant thinks you are an idiot. Evict asap

Tenant has tested his limits violating the lease and has found that landlord has no real limits. Landlords attempting to be nice to tenants are frequently thought to be weaklings, ripe for further exploit. BTDT.

When tenant is gone and place is trashed, OP will also find that winning a court case is a waste of time because tenant has no assets from which to pay a judgment. Tenant will almost certainly be a no-show in court, too.

 

[Kings over Queens]

He knows I'm a bit teed-off with what he's been doing, but he keeps on.
Husband thinks the guy's an idiot; I think he's just pushing me because mom is gone.

i dont know if the guy is an idiot but he clearly is a jerk and no doubt trying to get over on you.

My opinion is to draw a very hard line in the sand and if it were me, I'd have the eviction started so that he know you're serious. I get the sense he will push as far as he can until told "nope, no more."

 

[calmloki]

At this point I'd assume the already-delayed closing, and the request to buy the property, are both just stalling techniques. You have to assume you have a bad actor who has played this game before and knows you are new to it.

30+ year marshmallow landlord here, and I agree. Start the eviction or increase in rent/penalty as allowed by contract process now, letting the tenant know that buying as agreed gets him out of all that evil landlord onus. Lawyer is most likely worth it at this point.

Example: we sold a property with a ten year balloon, due last November. Lots of late/missed payments prior to that time, several penalties waived. Balloon time drew nigh, a few days before buyer asked for an extension as the property was for sale (we couldn't find it on MLS) and needed till 12/31 to close. I gave him six months, not two. At that point he was four months in arrears. Our buyer caught up payments to Nov. 1, and made the next two payments, then went dark. I tried to contact him to no avail, then paid a $3000 retainer and had an attorney jump in. Low and behold, several months later we were paid off including serious performance penalties and interest. Worth doing.

While tempting, try to avoid thinking the tenant is evil and trying to screw you or thinks you are a dupe and an idiot. They are just doing what circumstances allow and taking the easiest and most advantageous path for them. I've told people that I try and do what I say, and if I say I'm going to fix a toilet or file eviction on a certain date that's what I'll do, even though I'd rather not screw up their ease of getting another rental.

 

[LateToFIRE]

"Tenant has tested his limits...."

THIS is precisely what has happened - and very typical of criminal behavior (you did mention your tenant is an ex-con). OP, I'm afraid you've shown yourself to be a soft target. Which is why some hard lines need to be drawn. Don't feel bad - even after 20 years of r.e. experience, I have a soft spot and tend to wait too long to act. That is why DW handles the people side of the business - she has no patience for BS or late rent and will not hesitate to rip your head off your neck and... well ok, you get the picture. In terms of r.e. attorneys I've found there are two kinds I've encountered:

1) Ones who prefer the documentation/negotiating side of the business, representing buyers/sellers across the table.

2) Ones who live for a good fashioned no holds barred cage fight, often double as divorce attorneys.

So, now balance has to be restored.
For this situation, you want #2

 

[LateToFIRE]

OP, I had one more thought. How much is this property worth to you? [rhetorical question]

I say this because I had a similar situation years ago - details I cannot go into, but a lot like the situation you are describing, maybe worse. I was an executor, and I let the bank foreclose, handle the problem and sell it off in a fire sale. There was maybe $20K of equity in it, maybe less. Saved me a lot of trouble, hassle, legal bills, even my own personal safety. Just saying, I made a call that $10K-$20K simply not worth it. Fortunately my name was not on the deed, no way I could be held personally liable - might not be the case for you.

 

[frances]

OP, I had one more thought. How much is this property worth to you? [rhetorical question]

I say this because I had a similar situation years ago - details I cannot go into, but a lot like the situation you are describing, maybe worse. I was an executor, and I let the bank foreclose, handle the problem and sell it off in a fire sale. There was maybe $20K of equity in it, maybe less. Saved me a lot of trouble, hassle, legal bills, even my own personal safety. Just saying, I made a call that $10K-$20K simply not worth it. Fortunately my name was not on the deed, no way I could be held personally liable - might not be the case for you.

The property was appraised at $254k. I agreed to sell it to the tenant for 3% less because we weren't going to have any RE agents involved.
So I guess to answer your question, it's worth $254k less 3% (don't remember the number exactly right now) to me. And in the sales agreement I wrote up I specified that the $254k is what I want to walk away from closing with, all expenses of the closing belong to the tenant. I did that because he's getting the property for somewhere between $30k-$50k than I could probably get if I put it on the market with a RE agent and took the highest offer.
And I've had numerous calls over the past year: "do you want to sell?" To date my answer has been "no, thank you", but soon it might change to "yes, what's your offer?"

 

[frances]

Thanks everyone for your thoughts.

I was thinking I was being taken advantage of but wanted a sanity check.

 

[LateToFIRE]

The property was appraised at $254k. I agreed to sell it to the tenant for 3% less because we weren't going to have any RE agents involved.
So I guess to answer your question, it's worth $254k less 3% (don't remember the number exactly right now) to me. And in the sales agreement I wrote up I specified that the $254k is what I want to walk away from closing with, all expenses of the closing belong to the tenant. I did that because he's getting the property for somewhere between $30k-$50k than I could probably get if I put it on the market with a RE agent and took the highest offer.
And I've had numerous calls over the past year: "do you want to sell?" To date my answer has been "no, thank you", but soon it might change to "yes, what's your offer?"

Yeh, $254K I absolutely would not walk away from even if it was "found money". Any potential buyers who might take it off your hands as-is leased to current tenant? Some investors might see it being occupied as a positive - IF the rent were current and near market rate. That scenario, I would be willing to take a steep discount (like up to 10%) to be rid of a nasty problem. There are vultures out there who look for these kinds of situations as they have the "resources" to deal with it in a way you likely would not. That's just my thinking, YMMV.

 

[LateToFIRE]

Ok, last thought and then I'm gonna go jump in the pool. Just want to emphasize that EVERYTHING, every communication, every action you make towards the tenant needs to be reviewed by an attorney. Do not expect a housing court to be sympathetic to your word against his. There is sometimes a presumption that LL's are greedy, rich and evil.

If your tenant has a few brain cells they may know all the ins and outs and how to play the system and get delay after delay. Verbal agreement is useless at this point - do not discuss further with tenant. All communication around lease, sale, timing, rent, etc. should be in writing from here on out. You should consider having the attorney act as conduit for communication - your life will be easier, your head will ache less, and you will be far less vulnerable to manipulation. Additionally, making it clear your attorney is active may have an effect - kind of like "you're dealing with the law now, this ain't no polite conversation no more."

Escalation is not usually my first card - but seems you've already tried the polite, understanding approach and its working against you.

 

[frances]

Ok, last thought and then I'm gonna go jump in the pool. Just want to emphasize that EVERYTHING, every communication, every action you make towards the tenant needs to be reviewed by an attorney. Do not expect a housing court to be sympathetic to your word against his. There is sometimes a presumption that LL's are greedy, rich and evil.

If your tenant has a few brain cells they may know all the ins and outs and how to play the system and get delay after delay. Verbal agreement is useless at this point - do not discuss further with tenant. All communication around lease, sale, timing, rent, etc. should be in writing from here on out. You should consider having the attorney act as conduit for communication - your life will be easier, your head will ache less, and you will be far less vulnerable to manipulation. Additionally, making it clear your attorney is active may have an effect - kind of like "you're dealing with the law now, this ain't no polite conversation no more."

Escalation is not usually my first card - but seems you've already tried the polite, understanding approach and its working against you.

Thanks. I agree with you - I've been more that polite and understanding with this fellow. DH keeps telling me to wait - 10/20 isn't that far off. Since I have to live with DH I'll do that, but if closing doesn't happen on schedule, well, lets just say all bets are off.

 

[frances]

Yeh, $254K I absolutely would not walk away from even if it was "found money". Any potential buyers who might take it off your hands as-is leased to current tenant? Some investors might see it being occupied as a positive - IF the rent were current and near market rate. That scenario, I would be willing to take a steep discount (like up to 10%) to be rid of a nasty problem. There are vultures out there who look for these kinds of situations as they have the "resources" to deal with it in a way you likely would not. That's just my thinking, YMMV.

I've considered that as well - selling with the tenant in place. And it may go that way. We'll see what happens in another few weeks.