Friday, February 16, 2007

TIC, Tenant Included

Here is the latest example in a trend I am noticing - owners who are selling their multi-unit properties as TICs, even though there are tenants still living in the building. I can fully understand why landlords want to get out of the business in a town where lease holders have more rights than property owners, and rent control is leaving them with a cash flow that is not enough to maintain their older buildings. In previous posts I have outlined the many benefits of selling off a building instead of holding onto it. If you could cash out for a few million and pass on the expense and worries about broken pipes and repainting and crumbling foundations to eager new owners, wouldn't you do it?

But in my view owners who also want to pass on their tenant hassles are crossing a threshold. In cases like these not only does the seller want to unload the property, they also want to unload the hassle of evicting their tenants. I realize it can be a huge drama dumping tenants, especially those who are "protected" or otherwise dug in and ready to fight. But honestly, I think that clearing out a building is the owner's responsibility, and not the buyer's. The seller should bear the burden of that risk. If I were in the market for a TIC, I would not contract into a building where one of the residents was a legacy tenant, especially if I was expected to finance my own owner-move-in eviction in order to take possession. I might perhaps maybe consider such a scenario if it was a magnificent property at a ridiculously low price and the seller was willing to compensate me for all my legal fees and the cost of an alternate residence for as long as it took my lawyer to get the tenants out - which, depending on the situation, could be a long, long time. These type of sellers are either hoping for a legal eagle buyer, or preying on the gullible.


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