Dealing with property occupied by owner or tenants after purchase at auction

Hello from Los Angeles, California,

  1. Once you buy at auction and the property is occupied, are you allowed to schedule an inspection of the property with 24 hours notice to occupants so you can get an idea of the rehab and the condition of the property before the occupants move out? What if the occupant is being hostile to that?
  2. If you file a 3 day notice or if a tenant 90 days and then the 3 days, and then a UD, is it possible to collect rent during the time you are waiting for the UD to be done and the sheriff to evict them, or would accepting rent change the timeline for the eviction and a judgement is really the only chance of collecting any rent?
  3. What if the occupants say they have a lease but are not showing it to you or you may think they are not telling the truth regarding it, or that the owner occupies the place too? If they don’t furnish it and/or proof it is them within a specified time, can you proceed with a 3 day notice instead of a 90 day?

I am in the process of finding an attorney if I need to evict, but I hope to handle the notice part and I was thinking posters here probably have as much accurate knowledge/experience, if not more, about these questions than an attorney might.

Hi Alan,
Once you are the owner you can give a 24 hour notice to inspect the property but the homeowner may refuse to give you access and you will not be able to force the entry. If it does appear that you will have to evict them then you may want to back off from gaining entry. I have heard of auction investors that have seen evidence that the occupant is damaging the property and they have called the police and gained entry with the police present to that they could take photos of the damage. If you are in an area where there is rent control you will want to tread very lightly.
If you file a 3 day notice to pay rent or quit you will not want to accept rent because that would re-establish their tenancy and you would not be able to evict them. If you have given them the 90 day notice then you could accept rent since you would not be pursuing an eviction until after the 90 days has expired and they have failed to vacate the property. Once you have evicted the occupants you could take them to small claims court to seek a judgement for the unpaid rent that accrued during the eviction. The judge may award you a judgement for the unpaid rent if you go to court and then you would just need to report that judgement to the credit reporting agencies.
If it is the owner living in the property then you would have to give the 3 day notice. If there is a renter then you must give the 90 day notice. They would have to produce a copy of the lease executed prior to the filing of the Notice of Default.
As you can see this can turn into a very ugly and lengthy process. This is why many auction investors will do all that they can to negotiate a cash for keys. It is always in the best interest of everyone involved to come to some agreement. You may end up paying more than you wanted but get the property back faster and in better condition. If you are not great with people you may want to hire someone (maybe even a local realtor) to contact the homeowner. If you have a spouse or a business partner that has great personal skills you may want to have them talk to the occupant.
Many agents have told be that it is easier to find a rental with a foreclosure on your record than an eviction. That may be helpful information to share with them as you negotiate their exit.

my understanding was that if you buy a foreclosure with a tenant in it and that tenant has a lease, you are required to respect the lease. Have the laws changed? Are you only required to give 90 day notice now?

Hi David, If the tenant has a lease dated prior to the Notice of Default then the new owner would need to honor the terms of the lease. They would need to produce a copy of that lease in order to assert the terms of the lease. Otherwise the new owner would be required to give a tenant a 90 day notice. I believe that Amir said they were not producing a copy of the lease and he was wondering what he should do in that case.

Hi Michelle,
Thanks so much for a great, complete answer! Yes, I definitely hope to be able to do the cash for keys route, but just had these questions in case the occupant won’t agree to that path. It seems like it wouldn’t be too difficult for tenants to change the date of their lease or occupants to use someone they know as a “tenant” but I guess that’s part of the risk when you buy a property that is occupied.

Hi Alan, We could probably sit for hours and tell stories about what tenants and owners try to do. I have heard of auction investors that watch the property and have called the police when the current occupant tries to sell off fixtures. I have also recently heard from many realtors and investors that have had a difficult time with occupants that have read about the robo signing scandal and other cases and do not want to move because they think they will somehow get the sale overturned. Oftentimes it is all about keeping your cool, trying to explain what is happening and hopefully get them to work with you.

Yes, very true, thanks Michelle. I guess it’s officially called a 3 day notice to pay rent or quit, so do investors who want to flip cross out the pay rent part or make a notice that say 3 day notice to quit? Or for some reason, is it required to give them the option of paying rent?

Hi Amir,
You would use a 3 day notice to vacate not a 3 day notice to pay rent or quit.

Okay, great, thank you.

I bought a forclosure that was still occupied by the owner who had been allowed to live there for 2 years after the forclosure without paying rent. This is what I understand happened: they sold the house to a “friend” on a short sale, he was to hold title for them and they would live in and physically retain the property, and pay the bills… Their father took a loan on his retirement and put the funds into the short sale escrow on behalf of the buyer. The sellers were to pay the monthly note to their father. Besides circumventing the lender, violating the terms of the arms length affadavit and committing fraud she still occupys the house. I just bought it from their friend . The original terms that he was to be of no expense changed because the sellers got a divorce and the husband moved out but the wife is still there , so the friend in title had to pay property tax , some attorney fees, water sewer and garbage etc., so he warned them that he wanted to take his name off of title but they did not respond soafter a period of time , he sold it . The seller’s never paid their father back, so part of my deal was a note to the father, which I will pay. I served her a 60 days notice which is not up yet but I understand that i can serve the wife with a 3 day notice to vacate, Is that right? May I just forget about the 60 day notice and serve her instead with a 3 day notice to vacate? Do include all of these details in my unlawful detainer? I am confused she is seriously in arrears regarding her rent ut ts to the old landlord she is not past due with me . I just want to get her out quickly and lawfully…?

I am sorry correction to the above, not foreclosure but just a cash sale, I purchased the property from the guy that bought it in the above described short sale as a favor to the sellers