Hypo Friday: The Short-Sale Surprise

     Larry Landlord gets a great deal on a short sale and buys a four-plex with an attached garage.  When Larry does his first walk-through of the property, he realizes that the garage is not just a garage, but a residence being occupied by Stanley Squatter.  He has a certificate of occupancy for four units but not for the converted garage.  Now aware that the unit is illegal, Larry refuses to accept rent from Stanley and instead, asks Stanley to vacate.

1) Does Stanley have a right to live on the property?

2)  How can Larry kick out Stanley?

3) Can Larry recover damages from the bank from which he purchased the short sale for non-disclosure?

A: This is an all to typical situation that I hear about daily.  Landlords get stuck with an illegal unit and even though they have no intention of renting it out, they have to invest the effort in evicting them.  Let's take each question individually: 

1) Yes. Stanley has a right to live on the property.  The unit is illegal because it is a converted garage and is not covered by the certificate of occupancy.  Even so, Stanley has a right to remain in the illegal unit as an occupant until a lawful eviction is instituted against him.

2) Yes.  Larry can kick out Stanley but he will have to pay a price.  The Los Angeles Rent Stabilization Ordinance requires that landlords pay tenants relocation fees to move out of illegal units.  The guidelines for this relocation are set out in Los Angeles Municipal Code section 151.09.A.11  This means that even though Larry doesn't have an intention of using the illegal unit as a rental, he will still have to pay to have Stanley move.

     Relocation fees start at $7,200.00 and top out at $19,000.00.  The amount a landlord is required to pay depends on how long the tenant has been in the unit, whether the tenant is a senior, whether the tenant lives with minor children, the median income of the household and more.  It is recommended you consult an attorney to determine just how much you can be liable to pay.

3) No.  Larry purchased the property in a short sale meaning he purchased it "as-is."  He cannot go after the bank from which he purchased the property to recover the relocation fees for evicting this tenant even if the existence of the unit was unknown to him.

     The attorneys at The Rad Firm, APC are adept at untangling relocation fees that a landlord may face in his or her career.  If you have a tenant in an illegal unit, it is recommended that you speak with an attorney to understand the process behind a lawful eviction for that tenant.  Failure to institute a lawful eviction can result in fines or more severe repercussions.  Call The Rad Firm, APC at (310) 461-3766 for tailored solutions to your situation.