What would a judge make of this? - Posted by Steve

Posted by Steve on June 28, 2002 at 17:53:10:

I appreciate your advice. Thanks a million.


What would a judge make of this? - Posted by Steve

Posted by Steve on June 28, 2002 at 10:58:59:

Bottom line in this scenario (no jokes please):

Property in pre-forclosure was purchased last year. An agreement was made to lease back to seller as a lease purchase. No written agreement was made with former owner, I repeat, no written agreement was made. (Please no comments on the wisdom of this, its already more than understood).

Tenant has been consistently late on payments - will only pay when severely threatened with eviction from his home; he knows the game. Property was deeded to another investor who wanted the property and said he would take over payments and refinance it into his name when title was seasoned for six months (again, no written agreement, rather a mistaken trust relationship with a now former friend). That investor has fallen through, and wants nothing more to do with the situation, agrees to deed the property back to me if I wish.

I am more than happy to take control of the property again from this deadbeat investor, as my credit is at stake on the loan. My first insctinct - an eviction ASAP, no if’s, and’s, or but’s. A brief description of the tenant is as follows:

He had owned the property free and clear at one point; house was in the family for some time. He racked up approximately $112K in debt by living on the equity. Was in preforeclosure last year once his financing options ran thin. Was appraised @ $191K, I purchased it for $165 in September. Remaining monies went to attorney fees, money to him for huge other debts, and up front profits for my self and other investors involoved. The same mentality of not making mortgage payments is still with this person, now only with rental payments. I know enough about the mortgage business to know that at this point there is no way he will qualify for financing to get the property back in his own name. He is uncooperative and has even threatened persons (including myself) coming to the property to inspect the interior.

Again, I want to lose this tenant ASAP, and even more would like to be rid of the property. My questions are:

  1. How will a judge see it that I have no formal written rental agreement?
  2. How do I provide proof that no payments are being made, or do I even need to?
  3. I understand the state attorney general has been frowning on such situations where investors take peoples homes / equity in similar lease back situations. So what legal recourse does the tenant have, if any, to come after me once I evict him and dump the property? Remember, he too, has nothing in writing.
  4. Numbers can still be attracitve to anybody interested in the property. I’m as flexible as rubber on terms with anybody interested, be it investor or retail buyer. Of course, no one will see the inside of the house until he’s out, no question about that.

Any ideas are welcome. I am moving out of the state and don’t consider foreclosure a serious issue if it came down to it, but would just assume avoid it.

Thanks in advance for your help.

Steve In Colorado

Did I miss something? - Posted by Tony-VA

Posted by Tony-VA on June 30, 2002 at 12:57:17:

Steve what is your current standing in this property? By this I mean, in what capacity are you going to evict? Your post states that the property is deeded in the name of someone else.

You have no written agreement obligating this tenant to pay you any money.

From what position are you arguing that he does owe you the money? Are you the management company? I am guessing that this is the case and perhaps it gives you the standing that you need.

I just wanted to be certain you did not walk into court and get hit with a tenants response of “Your Honor, this man does not own the property, I have never signed anything saying that I would pay him a cent. Why should I, he does not own the property?”

Just food for thought. Reality is that the chances of this guy actually showing up in court are probably pretty slim and you will not be faced with such in depth considerations.

Having spent many years testifying in criminal court, I found that I wanted all my ducks in a row so that no suprise questions surfaced (unlike Detective Mark Furman).

I also found that when I really put in the time to cover all my bases…they plead guilty without trial. It is my sincere hope that you have a similar no-contest experience.

Look at the bright side, this one deal should prove a HUGE learning exprience for you and if applied will save you years of screwing up since you managed to get most of it out in one shot (please laugh with me, I am not laughing at you). We all have bad days and bad deals. Fix it and move on.

Best Wishes,


Re: What would a judge make of this? - Posted by JohnBoy

Posted by JohnBoy on June 28, 2002 at 13:16:19:

You obviously have proof that you purchased the home, paid $165k for it, got a new loan in your name and title is in your name, so no problem with who the owner is.

As far as foreclosure you have nothing to foreclose on since there is nothing in writing.

Since you don’t have a lease then burden of proof can shift back and forth between you and the tenant depending on what everyone admits to or denies.

In my state a rental without a written lease is just a month to month tenancy. So I can just serve a written 30 day notice to vacate from the 1st of the month and if the tenant doesn’t leave then file for eviction. Or if the tenant is late and behind on rent I can serve proper notice to pay or quit and if the tenant doesn’t pay I can file for eviction.

Then it would go to court and I would have to testify to the amount of rent that was agreed on and the amount past due. At that point the Judge will probably turn to the tenant and ask if that is the amount of rent that was agreed upon. If he admits to the amount then the Judge would accept that amount as the rent that was suppose to be paid. If the tenant denies that was the amount of rent he agreed to pay then the burden of proof will shift back to you to prove the amount agreed on. Then you can show proof by showing that amount was the amount deposited into your account on the months he did pay rent. If the tenant denies that your deposits you are showing was from any amount he paid then the burden of proof will probably come down to credibility as to who the Judge thinks is more credible.

Then the burden of proof as to whether the tenant paid rent for the months you say he didn’t will shift to the tenant to show proof that he paid it by having to produce cancelled checks, and/or that amount was taken from his bank account that month, and/or by showing a receipt from you that he paid the rent. If he can’t prove he did pay it then the Judge would probably take your word for it that it wasn’t paid since the tenant can’t prove otherwise.

So the Judge will probably look at you as being foolish for not having the tenant sign a lease, but that doesn’t take away any of your rights to evict the tenant to get them out of your property. And since you don’t have a lease the only thing you may be able to get is any rent that wasn’t paid which you would probably never see anyway. But as to any damage to the property you have no lease that states the tenant is responsible for anything and the condition comes down to he said, she said as to what the condition was at the time the tenant started renting from you. But I assume your main concern is to just get the tenant out which you will have to serve proper notice and then file for eviction.

The fact the tenant was the prior owner of the property should have no bearing on this, especially since you paid a fair price and took out a new loan in your name and you have legal title to the property.

Just say only what you need to say pertaining to evicting the tenant for nonpayment of rent. Don’t get into all the details on how or why you purchased the property. Only say anything you have to say to defend against anything the tenant claims, which doesn’t sound like he will have much to go by since he has nothing in writing other than the fact he sold you the property for $165k.

As far as any verbal agreements about selling the property back to him, what verbal agreements? Did you say anything about selling him the property back? Or did you just agree to let him rent the property from you for a year or two after selling it to you?

Since anything pertaining to real estate must be in writing to be enforceable, just keep your mouth shut about any verbal agreements. You purchased the property, plain and simple. You verbally agreed to let him rent the property from you as part of the deal that HE wanted for selling the property to you. You agreed to rent to him and now he is not paying his rent and you are evicting him for nonpayment of rent! Period! End of story!

Keep it simple and don’t volunteer any information pertaining to any verbal agreements or verbal understandings other than you only agreed to rent to him and that’s all!

Where most of the deals like this that get into legal problems is where an investor buys the property way below market value and leases the property back to the buyer with an option to buy it back at full market value where the court could consider it just a glorified high interest loan that you made to the seller and is in violation of usury law. You don’t have a lease option agreement. You don’t have anything in writing that states you will sell the property back to the seller. You have a purchase agreement that shows you paid a fair price and the fact you verbally agreed to let the tenant rent the property from you on a month to month basis. Now he defaulted on paying his rent after spending all his money he got from the sale of his property and you are evicting for nonpayment of rent! That’s it! The less you say the better off you are.

Good lesson for investors… - Posted by JHyre in Ohio

Posted by JHyre in Ohio on June 28, 2002 at 12:48:02:

on how things can go wrong.


Bear in mind that my brief answer is that of an out of state tax specialist. With that said:

  1. Most states impute a month to month lease where no written lease exists. Tenant may argue that something else was agreed to, but month-to-month is the standard in this situation. In addition to evicting, I’d give 30 days notice of cancellation of the lease. That way, if the eviction for non-payment fails, you proceed on the termination of the contract.

  2. It’s hard to prove non-payment. If you’ve kept good records of payments made (I scan in checks and money orders received), the presumption is in your favor once you swear that payment has not been made.

  3. He can allege any number of things- that you agreed to share equity, etc. Legally, the burden of proof is on him, meaning that he should have little recourse…unless you get a bleeding heart judge that chucks the law and believes sob stories. His non-legal approach may include crying to the dummies in the media, getting you some bad PR.

Bottom line: You should be able to evict, subject to the usual risks of the trade- destrucion of property, bad judges, and media idiots, to name a few. As always, get local counsel that specializes in evictions and the like.

John Hyre

Re: Did I miss something? - Posted by JohnBoy

Posted by JohnBoy on July 04, 2002 at 10:04:37:


From what I read in his post it sounded like HE was the original buyer that purchased subject to. Then he deeded to another investor subject to. Then the other investor decided he no longer wants anything to do with the property and is willing to just deed it back to him. So he is the original buyer and he will be the owner again once the other investor deeds the property back, which I assume he will take care of before filing an eviction to get the tenant out.

Re: What would a judge make of this? - Posted by JHyre in Ohio

Posted by JHyre in Ohio on June 28, 2002 at 13:19:49:

Good points, especially re not volunteering anything except “he owed rent, has paid in the past (that establishes the fact that he was renting), and has not paid for x time.” Let him bring anything else up and refute as and if it comes up.

John Hyre