The Property Management Shop

by Marc Wilson

Q. I know one property owner who has successfully paid some low-rent tenants to vacate their property. Once vacant, the owner has remodeled the unit and re-rented it for almost twice the former rent. Is this legal? How much does one usually pay a tenant to vacate? Is there some kind of agreement I can have drawn up with the tenant?

A. Most attorneys will advise you against attempting to obtain possession of an occupied apartment unless you are doing so “in good faith” or in “conformance with one of the just causes for eviction,” blah, blah, blah. The practical reality is that any owner involved in an eviction proceeding almost invariably ends up paying the tenant to vacate. We all know what usually happens at a pre-trial mediation, arbitration, shake down or whatever else they are calling them now —the owner ends up forgiving some rent and usually pays some money to say “good-bye” to the tenant. This is all perfectly legal because it is done in the context of settling the lawsuit.

Soliciting tenants to vacate for money can be very risky business. The entire transaction is probably not legal and just bringing up the subject could lead, and has led, to numerous wrongful eviction lawsuits. Unless the circumstance is extremely unusual, I personally will not involve myself in financial negotiations for the displacement of a tenant. Why? I have two reasons. First, if a tenant approaches me and inquires whether or not I would pay him to vacate, I know that he is thinking about vacating anyway and I am willing to be patient and wait. I have plenty of vacancies anyway and I don’t need to be looking for more trouble. Second, if I approach a tenant and ask him/her to vacate for money, the tenant will usually get greedy and ask for too much money. Even if I can “break bread” with the tenant, I will have trouble documenting the transaction in such a way as to minimize the probability of getting sued later. No matter what the contract with the tenant stipulates, you will always run some risk of being sued by the tenant during or after the transaction.

Having said that, if I were to attempt such a procedure, the first thing I always tell the tenant before we negotiate departure terms is that all the paperwork will clearly stipulate that it was the tenant’s idea to be paid to vacate. I make sure the tenant understands he/she will sign an agreement with terms that indicate the tenant had every opportunity to hire legal representation, that the tenant obtained the advice of the Rent Board and that this entire deal was the tenant’s idea. If the tenant starts acting funny or inconsistent in any way, I immediately terminate negotiations. All negotiations are verbal until a deal is struck. Then I tell the tenant to have his attorney call my attorney so that we can both create the paperwork. This kind of agreement can be drafted by any of the attorneys who frequently speak at the SFAA meetings. How much do you need to pay a tenant to vacate? It depends on the circumstances, for it can be as little as $3,000 or as much as $75,000.

On occasion, I have paid tenants with behavior problems to vacate. If I have a drunk and disorderly tenant who is clearly out of control, I will often attempt to negotiate an orderly departure from the property. After I serve the tenant with a Three-Day Notice to perform covenant or quit, I schedule a meeting with the tenant. At the meeting, I show the tenant all of the evidence including letters from other tenants, promises from other tenants to testify, police reports, etc. I simply tell the tenant that if we don’t agree to a figure, I will instruct my attorney to file a lawsuit for possession that will ultimately lead to several consequences for the tenant. First the tenant will lose the case. Then the tenant’s credit report will be destroyed, the tenant will not get any money, and finally the tenant will find it impossible to rent another apartment. I don’t tell the tenant these things in a threatening manner. I am calm and matter of fact about the whole thing. The fact is, I will pay a problem tenant $5,000 or more to avoid the cost, hassle and uncertainty of an eviction. The tenant usually understands that I can give the money to the attorney or I can simply give the money to the tenant. I never make an offer to a tenant unless I am totally committed to pursuing their eviction should negotiations fail. I never put anything in writing. I simply tell the tenant that one of us is going to have to trust the other and, given the circumstances, the tenant is much better off in trusting me than visa versa. When we have a deal, I instruct the tenant to give me a 30-Day Notice to vacate. Once I finally have possession, I simply pay the tenant. The tenant usually trusts me because I am very consistent in my dealings with tenants. In short, I always do exactly what I say I am going to do.

The opinions expressed in this article are those of the author and do not necessarily reßect the viewpoint of the SFAA or the SF Apartment Magazine. Marc Wilson has been managing and selling San Francisco apartment buildings for 15 years. Please send your questions concerning property management and/or apartment building sales to Marc Wilson at 1699 Van Ness Avenue, SF, CA 94109. He can be reached at 415-229-1275. © Copyright 2002.