Scenario: House purchase - tenant won't move out (clause, mortgage, mortgage)

[Marathon01]

Scenario: 2 unit house purchase. The purchase contract clearly states that 2nd floor apt (larger) needs to be vacant by the closing time, 1st floor apt (smaller) stays occupied. For buyer the larger unit is to be a primary residence.
1. Seller sends a note to tenant about termination within 30 days, to meet the contract conditions.
2. Tenant states that by the law, he has 60 days to move out.
3. Seller sends revised note about termination within 60 days (30 days after agreed closing date).
4. Buyer states that the contract terms were not met by the seller, as the apt. is not vacant at the closing time. Closing date needs to be rescheduled after the tenant moves out.
5. Seller states that he meets the terms of contract as he did his part and terminated the tenant (regardless if he moves on not). He wants the closing to be done on original date.
6. Buyer states that he cannot accept the closing date as he will not be able to move into the house after closing, since there is a tenant. He also states that he cannot afford paying the mortgage for newly purchased property and the rent for his current place of living.

Additionally, the tenant is really tough guy and there is a chance that even after 60 days he will not move out and the case may end up in court, as he lives thare for last 20 years.

What are the options for the buyer?? (inspection done, mortgage done, all conditions met on the buyer part). Buyer was informed he will be gone after if the closing will not be finalized. WTF?

[Rabrrita]

If the contract sates "VACANT" that means "EMPTY with no tenant in possessions". No court will accept a notice of rental termination as satisfying the "Vacant" clause in the contract. Have your attorney send a formal letter to the seller explaining the legal requirements to deliver that unit vacant as defined by law.

[Lacerta]

Buyer is correct to not close without having the unit vacant.

One option if you had to close without the unit vacated would be to estimate eviction costs and have that amount held by the title company from the seller's proceeds. If the tenant moves as expected, the seller gets that money released 30 days after closing. If not, and the buyer has to evict, the money has already been set aside for that and is released to the buyer, or even directly to the attorney.

Living expenses for the month the unit will not be available would have to be negotiated.

It would also have to be worked out what to do with the tenant's security deposit, and what will need to be done if the tenant trashes the place at move out and major cleanup/repairs are needed. Whose expense will that be if you are unable to collect from the tenant.

Far easier all around to refuse to close until the unit is vacant. The seller is the one breaching the contract if he refuses to extend the closing date.

[manderly6]

Seller is an idiot and has no clue what a contract is. Buyer would be an idiot to close without the apartment being vacant.

[oregonwoodsmoke]

If you really want to have that property, just agree to extend the closing date for another 30 days.

Do not close on a tenant occupied property if the agreement was that the property will be vacant as close of escrow.

If you are the seller, and you can not deliver the house vacant, your buyer has the option of walking away, scott-free. Next time, get the tenant out, clean up the house, before putting it on the market.

[NilaJones]

Additionally, the tenant is really tough guy and there is a chance that even after 60 days he will not move out and the case may end up in court, as he lives thare for last 20 years.

If seller was an ethical person he would have told tenant far in advance that he was going to put the house on the market, and that buyer might need it to be vacant.

Then when he accepted the offer he would have told the tenant that the move is for sure.

Beware of doing deals with unethical people. Get very, very sound legal advice if you need to deal with them.

What are the options for the buyer?? (inspection done, mortgage done, all conditions met on the buyer part). Buyer was informed he will be gone after if the closing will not be finalized.

That was complete BS and an attempt to intimidate the buyer. Seller is a real a$$haberdasher.

Buyer needs to do a walk through before closing, to verify that tenant is out, place is clean and in good repair, etc. There should be a clause in the contract that allows for new inspections at that time if buyer feels the desire for them.

Personally, given the BS so far, I would also ask to speak with the now-ex tenant myself before closing, to verify that they are not holding this all against me, planning to burn the place down, etc. I mean, I would not ask that directly but would assess their attitude and listen carefully to how they talk.

Also make sure the closing docs include a copy of ex-tenant's rental agreement showing deposits paid, and proof they were refunded. You don't want ex-tenant expecting you to refund some huge deposit.

[2bindenver]

You need an amendment to the contract protecting your interests to close after tenant vacates.

You should have read the leases for both units. Your contract should include what security deposit is currently being held, and that should be a credit to you at closing.

[crescent22]

Buyer needs to play tough with Seller if Seller is already threatening him with some sort of contract nullification. Buyer needs to get an attorney to send Seller's attorney a letter stating a breach of contract will result in an immediate lawsuit.

[davecj]

It is most likely a condition to close the loan out as well. If it isn't vacant, you can't secure the loan, ergo, the transaction dies.

[jeoff]

Seller and buyer could consider working together to "pay" tenant to move.