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What You Need to Know Before Buying a Tenant-Occupied Home

Posted On October 21st, 2011 by Karstin Axe | No Comments

You have found your dream home—a single-family home (SFH) or a condo—a home that has all the features that you have been looking for, BUT the home is tenant occupied and you have learned that the tenant will not voluntarily vacate the unit. Prior to moving ahead with the purchase it is essential that you are aware of what lies ahead before you can occupy your newly acquired home.

What are your options?

Answer: A buy-out or eviction under the Owner Move-In provision (OMI).

Note that you cannot proceed with either one of these options until escrow has closed and you are the de facto owner of the property.

The purpose of this review is not to give legal advice, but rather to alert you to general issues and problems. Before moving ahead with a tenant buy-out or an OMI it is advisable that you consult an experienced real estate attorney who can guide you, assure compliance and prevent any unnecessary delays.

Buy-Out: Typically, the process begins with oral requests for the tenants to vacate and offers of payment.  It is in your interest to pay to move the tenants out. If you can get the tenants to waive their rights and move-out quickly and without a legal battle, it not only saves you on attorney’s fees but on debts service on your mortgage as well. The legal process to evict a tenant can take anywhere from three to six months depending on whether the tenants fight the lawsuit or not.

OMI Eviction: If you cannot reach a settlement with the tenants, the tenants may receive a 60-day notice to evict. This notice has many technical requirements and must be drafted by an attorney familiar with San Francisco rental laws. 

It is important to understand that a sixty 60-day notice does not change negotiation strategy.  In fact, the notice can be withdrawn up until the expiration of the sixty (60) days or until the tenants vacate. 

If the tenants have not vacated within 60 days of service of the notice, you may file an eviction lawsuit called an unlawful detainer (UD). 

If the home you have purchased was built before 1979 the tenants are entitled to Relocation Payment. As specified by the San Francisco Rent Board Ordinance, you must pay each tenant approximately $5K with a maximum of $15K.

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