Is it a good idea to close escrow while there is a tenant in the property that is currently being evicted?

Assuming you are the buyer, the answer is yes and no. Eviction can cost you a bit for an attorney, but you could also use the presumably “bad” tenant in possession as a bargaining issue to get a better price, one which might more than offset the trouble and expense of bidding Mr. Malatenant a fond adieu.

It might pay to do some homework though. Is Mr. Malatenant a “professional tenant” (one who makes a habit of sponging all landlords and then moving on to the next)? Does he have a criminal record? What do the neighbors say about him? Police get called a lot? These are important because you’d want to know if he’s the type to trash the place on the day he gets booted. Or he might be a decent person who just lost his job.

If possible, request the seller to complete the eviction before the close of escrow. Also, consider requesting the seller to have the tenant sign and “estoppel certificate” clarifying the status and claims against the seller. Finally, ask the seller to “indemnity” you against any costs and damages claimed by the tenant in the course of the eviction lawsuit.

Case Studies: Considerations When Closing Escrow with a Tenant Under Eviction

Case Study 1: Negotiating a Better Price

As a buyer, you are in the process of closing escrow on a property that currently has a tenant under eviction. However, you discover that the tenant has a problematic history, potentially being a professional tenant or having a criminal record.

Despite the potential trouble and expenses associated with the eviction process, you realize that this situation presents an opportunity to negotiate a better price with the seller.

By leveraging the presence of the problematic tenant, you could potentially offset the costs of eviction and secure a more favorable deal. In this case, it’s important to carefully assess the tenant’s background and gather information from neighbors and local authorities to determine the potential risks and bargaining power.

Case Study 2: Requesting Completion of Eviction Before Closing

In another scenario, you are the buyer in a real estate transaction where the property has a tenant undergoing eviction. To mitigate risks and ensure a smooth transition, you request the seller to complete the eviction process before the close of escrow.

By doing so, you aim to avoid potential complications and delays that could arise if you were to take possession of the property with an ongoing eviction.

Additionally, you can request the seller to obtain an “estoppel certificate” from the tenant, which clarifies the tenant’s status and any claims against the seller. This helps establish a clear understanding of the situation and minimizes the chances of future disputes.

Case Study 3: Seeking Seller’s Indemnity

In a different case, you are closing escrow on a property with an evicted tenant. To safeguard yourself against any costs or damages claimed by the tenant during the eviction process, you negotiate with the seller to include an indemnity provision in the sale agreement.

This provision ensures that the seller takes responsibility for any expenses or liabilities arising from the eviction proceedings. By obtaining the seller’s indemnity, you provide yourself with financial protection and minimize the potential financial risks associated with the tenant’s eviction.