Legally Speaking by Cassandra Savoy, Esq. OP/ED
This serves as a postscript to my column entitled “Do I need a Lawyer to buy a house.” The answer remains a resounding YES!!! The story from these two poor, unsuspecting Buyers should be written in Ripley’s Believe It or Not!
If you are buying an investment property, you don’t just need any lawyer, you really need a lawyer, and one who regularly handles real estate transactions.
Being a lawyer is a lot like being a doctor. While all doctors have the “MD” after their name, and all lawyers have “ESQ” after their name, all MDs, like all ESQs, are not alike. The best heart surgeon in the world may not be able to help you with a tickle in your throat. The best worker compensation lawyer in the world may not be able to help you transfer title in a real estate transaction where the real estate purchase is an investment property. Ask before you hire! Get the lawyer you need. Here’s an example of why this is important.
Two guys came to my office with a problem! They had purchased a three-family in East Orange in March 2019. The owner moved out when title transferred, leaving tenants on two floors. The realtor encouraged them to make a fast sale since they were pre-approved and could close quickly. He told them “Don’t worry. You can always get the tenants out!” “You can get them out after you close.”
The poor unsuspecting Buyers decided that it would be a good use of their funds to use a title company to be the settlement agent rather than retain an attorney, a cost of about $2,000. Consequently, there was no one looking out for their interests. No one to ask for copies of the leases. No one to ask for monthly costs for the past two years. No one to ask for payment history of the tenants for the life of the leases.
The title company’s sole and exclusive function is to make sure that there is nothing in the history of the property that will prevent the lender from foreclosing if it comes to that. The title company is only worried about “clouds on the title.” The title company dotted every “i” and crossed every “t” when it came to properly transferring the title. No dead people still in title; no liens or judgements against the property; and the new lender secured in first-lien position.
No one told the poor unsuspecting Buyers that New Jersey is probably the most tenant friendly state in the country. The law relating to tenants in New Jersey is titled, “the Anti-Eviction Statute.” And so…eighteen months later, the poor unsuspecting Buyers who thought it was a bargain to save $2,000 by not hiring an attorney, have not collected a single dime in rent, and they have no earthly idea whether security deposits were collected, and if they were, where they are being held! Most importantly, they can’t locate the Seller who has taken his profit, changed his mobile number, and moved on with life in the fast lane!
An attorney would have insisted that the Buyers inspect the leases in advance for closing. An attorney would have insisted that the security deposits be turned over to Buyers before the closing, and an attorney would have insisted that rent payment history for each tenant was made available as a contingency. In other words, if the tenants don’t have leases or if they are not regularly paying the rent, I can decide by a given date not to go through with the purchase.
The Buyers told me that the realtor told them, “not to worry about the tenants. You can get them out after the closing,” causing to think that removal of the tenants would not be too difficult. The Buyers tried “reasoning” with the tenants. When that failed, they offered money to get them to voluntarily vacate the premises. And, by the time that was not working, the pandemic hit, and the Governor signed Executive Order #106 baring the removal of tenants for sixty days. Of course, the courts were closed so eviction was not possible anyway.
About a year after they purchased the property with the non-rent paying occupants, they seek legal counsel from an attorney who regularly practices workers compensation law. This attorney files an “ejectment” action in the Chancery Division of the court. An ejectment action asks the court to remove someone from your property when they do not have a lease. For example, if the bank forecloses on your house and you fail to get out, the bank might file an ejectment action. You were never a tenant, and you have lost ownership of the property. Consequently, you get ejected.
But, if the occupant has a lease, or if the occupant ever had a lease, in order to evict the occupant pursuant to the NJ anti-eviction statute, there is a strict process to be followed. The poor unsuspecting Buyers were stunned when they arrived in court to find the tenants with copies of their leases. The judge threw the matter out of his court and told them to file in Landlord Tenant. The buyers were dejected. It is almost two years since they purchased the three family, and they still have not collected a dime in rent.
The question relevant question now is “how exactly does the anti-eviction statute work?” What can our Buyers do now? We’ll explore that information in next week’s Legal News.
