Beware of Tricky Tenant Issues when Buying Rental Property

This is a story about rental property tenant issues and a mistake that we only made once. It is a perfect example of “no good deed goes unpunished”. Hopefully you will learn from our mistake and never make it yourself!

When ‘Vacant’ Doesn’t Mean Unoccupied
In this rental property tenant issues case, we bought a single-family home in a suburb of Minneapolis, MN. We agreed to allow a prior resident (ex-husband of the seller) to stay in the property for a couple of extra days after closing. Our thinking was that we could do this guy a favor because we didn’t need access right away and he seemed like a “nice guy”. We did this based on a handshake and had nothing in writing. What a mistake! Our “nice guy” turned out to be an armchair lawyer with nothing better to do than comb through Minnesota’s tenant laws to find ways to use the system to his advantage. He refused to leave after a couple of days AND, because we didn’t have a written lease in place, Minnesota law treated him as a squatter rather than as a standard tenant. This meant that we had to give him 90 (!) days’ notice to vacate the premises before we could start eviction proceedings. The eviction proceedings took another 30 days beyond that. The result, we didn’t have access to our property for 4 months after closing. We finally regained access to our property via a physical eviction (thank you to the local Sheriff’s Department). But the trouble didn’t end there. Our former “tenant” continued to file nuisance law suits against us claiming numerous procedural violations during the evictions process. When it comes to rental property tenant issues, this is a mistake that you only make once!

The Lesson Learned
The moral of the story is that whether you are buying a residential property as a long-term hold or as a fix and flip, make sure you know what you are getting in terms of existing occupants. If your intention is to acquire a vacant property, make sure that it is indeed vacant on the day of closing. When that is not possible, get an agreement/lease in writing before closing with any occupants so that expectations are clear. We should have had a written agreement in place prior to closing stating that the occupant of our property agreed to move out within a certain number of days. Then we would have been able to follow the standard eviction route and get him out within a month. Instead we wasted an additional 3 months and excess legal fees.

This tip is just one of many items on our pre-closing checklist. Click here to download the full checklist

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