Buying a property with tenants in situ

dendof

I have gone sale agreed on a property but as it is a receiver sale, one of the conditions are that the tenants remain on. They are there since October 2011. I am unsure whether a lease has been signed or not.
As I understand, as they are there > 2 years they will require 8 weeks notice. Basically it's seems I am purchasing a property, becoming a landlord, and then having to 'evict' the tenants. I'd be getting a mortgage so I'd wonder if the bank would insist on vacant possesion. Has anyone any experience of this and whether it was fairly straight-forward or a complete nightmare?

The_Conductor

You won't be allowed draw down the mortgage (providing you are getting a mortgage)- unless you are guaranteed vacant possession of the property.

If the tenants decide to act the maggot- it may take a year or even longer, to evict them from the property- during which time they could cause all manner of damage.

You have no business buying a property with tenants in situ- and your solicitor is remiss if he/she has not explained this to you- you need to demand vacant possession as a condition of sale.

dendof

As it's a receiver sale, I think they are just trying to wash their hands of it. I have a meeting with my solicitor to discuss further although I doubt I will get it with vacant possession. Even if I demand it I doubt the receiver will entertain the idea.

The_Conductor

dendof wrote: »

As it's a receiver sale, I think they are just trying to wash their hands of it. I have a meeting with my solicitor to discuss further although I doubt I will get it with vacant possession. Even if I demand it I doubt the receiver will entertain the idea.

Insist on it being a condition of sale.
In any event- no responsible lender will allow you draw down the mortgage- without you being guaranteed vacant possession on signature of contract.

You cannot allow yourself be put in the position where you're buying the property with sitting tenants- and you have to serve them an eviction notice- if they dispute it (or indeed, if they ignore it)- it could very well be a year or even longer, before you have vacant possession.

Tenancy law favours the tenant- and you need to protect yourself in these circumstances- by demanding vacant possession- it is not worth the risk of agreeing to anything else.

dendof

Having looked at the contract provided by the receiver, it's clear that tenant is there X long paying Y rent etc and that this is part of the sale.
I will try to demand vancant possession, but I'm afraid I'll probably have to walk away from this unfortunately.

godtabh

Surely you have the power in this? Receiver wants to sell and doesnt want a drawn out process. Get them to evict and you sign on the dotted line when done. Doesnt put the sale in doubt just might take longer.

dendof

Solicitor is writing back saying that I will sign contracts subject to vacant possession. She didn't seem too confident in auld NAMA though, but agreed it really is the only sensible option. Could not be spending that amount of capital on something unknown and inheriting a disaster. Could be fine, but I don't want to take the chance.

homerno

dendof wrote: »

Having looked at the contract provided by the receiver, it's clear that tenant is there X long paying Y rent etc and that this is part of the sale.
I will try to demand vancant possession, but I'm afraid I'll probably have to walk away from this unfortunately.

more like run away.

Marcusm

dendof wrote: »

Solicitor is writing back saying that I will sign contracts subject to vacant possession. She didn't seem too confident in auld NAMA though, but agreed it really is the only sensible option. Could not be spending that amount of capital on something unknown and inheriting a disaster. Could be fine, but I don't want to take the chance.

If you are depending on bank finance on the basis of being an owner occupier, your solicitor should have taken this up with you right at the beginning; vacant possession will be an absolute requirement of the lending institution (for whom your solicitor also acts). If you have to walk away on this point, I would make it clear to your solicitor that they have not served you well and that you would not entertain any fee from them.

The_Conductor

homerno wrote: »

more like run away.

Yes OP- you NEED vacant possession.
Its not optional.
You could have hell on earth evicting the tenants- if you plan to live there yourself- you just don't know.
If you cannot be given vacant possession- drop the whole idea to buy the property- its too dangerous.

Can you afford to have the tenant in situ for 1-2 years not paying rent, while you jump through the various hoops to finally get rid of them- doing god only knows what damage to the property- with no recourse for compensation for lost rent, somewhere for you live, or damage to the property.........

Drop the whole idea- its nuts.

womandriver

godtabh wrote: »

Surely you have the power in this? Receiver wants to sell and doesnt want a drawn out process. Get them to evict and you sign on the dotted line when done. Doesnt put the sale in doubt just might take longer.

The receiver can't legally just evict them if they're in a fixed term lease.

The_Conductor

womandriver wrote: »

The receiver can't legally just evict them if they're in a fixed term lease.

Not entirely true- their lease may be invalidated by the bankruptcy/liquidation of the landlord- its not very well provided for in Irish law- and needs clarification- however, the original lease, between the original owner and the tenant- may no longer be valid.

It badly needs legislative clarification- because it is an issue that is popping up again and again.

Normally, in a situation like this with a commercial lease- the receiver would have two choices- sell the property with the tenants in situ (which is what normally happens- and what the receiver is trying to do in this case- or the alternate- is the tenant is offered a consideration to vacate the tenancy- which the receiver is doing their utmost to avoid doing here.

If the tenancy is allowed continue- the terms of the tenancy- including its fixed term nature- also continue- and the new owner would have no means to try to get the tenants to vacate the property until the fixed term lease had elapsed, and thereafter- they would have to follow the process for asking the tenant to vacate the property, under Part IV rules.

There really is no upside in this for a purchaser- unless, they want to buy a tenanted property- which might actually suit someone with a retirement lumpsum or something similar. It 100% does not suit someone who actually wants to live in the property- unless they are willing to kick the 'living in the property' bit down the road- 1-2 years, and even then, they'd have to be a cash buyer, as a mortgage provider would insist on vacant possession.

womandriver

The_Conductor wrote: »

Not entirely true- their lease may be invalidated by the bankruptcy/liquidation of the landlord- its not very well provided for in Irish law- and needs clarification- however, the original lease, between the original owner and the tenant- may no longer be valid.

It badly needs legislative clarification- because it is an issue that is popping up again and again.

Normally, in a situation like this with a commercial lease- the receiver would have two choices- sell the property with the tenants in situ (which is what normally happens- and what the receiver is trying to do in this case- or the alternate- is the tenant is offered a consideration to vacate the tenancy- which the receiver is doing their utmost to avoid doing here.

If the tenancy is allowed continue- the terms of the tenancy- including its fixed term nature- also continue- and the new owner would have no means to try to get the tenants to vacate the property until the fixed term lease had elapsed, and thereafter- they would have to follow the process for asking the tenant to vacate the property, under Part IV rules.

There really is no upside in this for a purchaser- unless, they want to buy a tenanted property- which might actually suit someone with a retirement lumpsum or something similar. It 100% does not suit someone who actually wants to live in the property- unless they are willing to kick the 'living in the property' bit down the road- 1-2 years, and even then, they'd have to be a cash buyer, as a mortgage provider would insist on vacant possession.

We are in this position, renting a property in receivership which is now for sale. We have been assured by the letting agent appointed by the receiver that our fixed term lease still stands and we retain all rights conferred by a fixed term lease which includes the process for any eviction.

dendof

Just to update this. The recievers have come back and said they will issue an eviction notice. Contracts will be changed to reflect that I will be getting vacant possesion. Contracts also need to approved by NAMA but that should be fine.
The main thing is that if there is any hassle getting existing tenants out - it's not my problem. So now waiting game begins and hopefully will go OK.

ninjabe86

Hi Dendof,

How did this pan out in the end? Did you get the property or did you have to move on?

I am in the exact same position you started this thread in

dendof

Hi,

I was really wary of purchasing with tenants there and as others have said I probably wouldn't have gotten a mortgage for the property. My solicitor requested vacant possession. The tenants were given their due notice and actually moved out earlier than the planned date. Purchase proceeded albeit slowly but no real other problems. I stuck with it as I felt the house was worth it.

Hope your own purchasse goes well.