Tenant Neighbor problems - Need some advice

Rehabbing, Fix and Flip, Rental Properties
1

We have a reasonable number of rental properties in Arizona. One such property we have owned for the past 3 years has represented the vast majority of evictions with tenants that we have had to do. We call this our ‘cursed property’. :banghead

Joking aside, I had to evict a tenant from there on Monday for non-payment of rent. I had no problem getting the judgment for this from the judge, however in the process the tenant stated their reasons for not paying rent due to harrassment from a downstairs neighbor.

It would seem that this issue has repeated three times over three years with our tenants to the point where this downstairs neighbor is literally driving my tenants out of their unit. I have a paper trail of events now dating back to 2005 showing a clear pattern of harrassment from this downstairs neighbor.

The property is in a condominium complex that has HOA, is by no means ‘low income rental’ property. I called the management company for the HOA today expecting to get a flat “we don’t deal with resident to resident disputes”. However what I got was a very different response. It would seem that the person I was talking to actually understood and empathized with my plight. He stated that it would appear that the resident of the unit in question was living there rent free, that their parents owned the unit and he stated that it was his opinion that she has mental problems, wasn’t taking her medication properly and was likely to be “hearing voices” and consequently had targetted our unit as the cause of her paranoia. He also stated that it would appear that her parents bought the condo 10 yrs ago because they couldn’t stand her living in their house and needed to move her out.

Great. So where does this leave me? We he said submit a formal complaint in writing and they would see what they could do. The problem for me though is that if I rent the unit again, I’m going to encounter this same problem with the next set of tenants as has been the case for the past 3 yrs with the past 3 sets of tenants. This downstairs neighbor will start banging on her ceiling with a broom at 2AM, call the cops and wake up my tenants routinely. The cops are forced to respond even though my tenants are fast asleep and causing no noise issues. Its pure fantasy stuff, paranoia and insanity.

Now with all of this stated, what does an honest landlord do in this situation? I’ve called my attorney to get his advice and am waiting a call back on this. The problem I see is that if I sue the owner of the unit (her parents) for loss of income due to the harrassment, all that’s going to do is make an attorney rich as some judge takes pity on her mental state. I can see more expert witnesses being called, all at my expense and tens of thousands later, who knows what the verdict would be. I don’t need the hassles, to be honest.

But if I try and sell the property, its unclear based on Arizona law whether this should or should not be disclosed during the sale process.

So I’m running short of ideas on this one. If anyone out there has an experience with this sort of thing, I’m all ears. If anyone is a real estate attorney who feels that there is a clear direction that should be taken, please let me know. This is one of the weirdest situations I’ve seen in over 10 years of REI, and I normally have all the answers for this sort of thing, but I’m coming up blank on this one.

Thanks in advance for any suggestions.

V

2

Couple things.

First - I would contact the owners of the other property directly. Let them know strongly that:

  1. Their daughter was harrasing tenants - in fact had forced three seperate tenants to move due to her abuse - that your reports from different sources was that she is not taking her medicine and was specifically targetting people in your unit.

  2. That as owner of the unit - especially due to the fact that the tenant was a non-paying relative - they are completely responsible for the lost revenue - the lowering or property values to do the harrasment of their daughter - and are directly responsible for any harm done to any tenants due to her condition.

  3. Inform them, that due to the repeated and documented harrasment, you are filing for a restraining order that will prevent their daughter from further harrasment of your tenants. If she violates any such restraining order, then she will be subject to arrest.

  4. You strongly urge the owners to do something to cure their daughter’s problem of harrasing the tenants before something tragic happens which they will be responsible for.

Then take the information and see if you can file a restraining order against the woman to stay away and not communicate with the tenants in your condo. You actually have a good chance of doing that, if your documentation is good enough.

As far as Arizona law, I am a former licensed real estate agent in Arizona. if you have documented evidence that a woman suffering mental defect is targetting the people living in your condo unit- you have to disclose that. It is like someone died in the house, or it is located on a toxic waste dump. It would be one thing if you knew something, but it wasn’t something heavily documented and well known by the HOA and others. :argue

Because what will happen is the woman will kick or slap or spit on someone, or heaven hope not - something much worse- and someone will want to sue someone. They can’t sue the woman (medical defect, etc)- but they can sue the owners of the condo (the parents) and the HOA and when someone at the HOA mentions they discussed the problem with you and you had several months or years of documentation of the abuse :deal … well -they will own everything you do now. It is not just that it will become someone else’s problem, which has a lot of ethical problems, but it is almost guaranteed to come back to haunt you.

Good luck

3

Thanks for the input. The problem, however, is that due to the past behavior of this tenant and possibility of continuation of future behavior, and (as I actually do agree that it needs to be disclosed), the fact is my real estate property value has now significantly dropped on this condo. At this point, I have no alternative other than to sue the owner of the property for financial loss.

Do you see any other alternative here?

V

4

Wow Salverston, you have to disclose that someone died in a property in AZ? Not so in CT. Its funny what is considered a material fact in one state vs another.

5
Do you see any other alternative here?

Yes, I see an alternative. Follow the advice that Salverston gave you. It was very good advice. If the parents can take care of the issue, then your problem is solved and the property value is back to normal.

I would certainly do that before I filed a lawsuit and lost thousands of dollars paying lawyers.

Mike

6

A couple of points of clarification. AZ real estate law (according to advice received from an attorney and my realtor) doesn’t specifically state that disclosure of this sort of thing is required in the seller property disclosure statements. However if it is material, then ethically it should be disclosed.

This is where it gets a bit iffy for me. The fact is that the issues have been personal issues between people - not facts about physical property. What I mean is that all complaints that have been made from the downstairs neighbor are against the behavior (ie. noise) from people residing in the unit. Not anything complaining about the physical property itself. To me, that means that it is not a material fact affecting the property, but a material fact affecting the relationship between two parties - one of which resided in the property.

The problem is that this conflict has re-occurred for each occupant of the real estate. This is where it gets complex.

Also in relation to the suggestion about a restraining order… I might be wrong but isn’t a restraining order between two PEOPLE and not relating to a piece of property? Ie. Restraining prohibits person A from being within 100 feet of person B? If she is a neighbor to real estate, how is it possible to get and enforce a restraining order against her if she lives adjacent to the property itself? And since I am the landlord and have not had this problem with her (because I don’t live there), then how could I successfully file such an order?

V

7

V,

I would start by calling the parents. Try to work it out with them. If that fails, then start thinking about legal action.

Mike

8

I should clarify about the difference about “Required to” by law and you “must”.

In Arizona - you are right - you are in a legal grey area. There are a lot of differences between what must be disclosed from State to State. For instance - the question of if you have to declare that someone died in a house - especially under egregious circumstances - varies widely. in Arizona - there is no particular law that requires that someone died to be declared, however there are a number of civil lawsuits that have been made - with the buyers almost always winning, that the court declares that a death in a house is a significant fact, therefore finding damages for the Buyer. It is not a specific law, per se, but because of legal precedent in Arizona it might as well be. As far as your specific situation, though, it is even more of a grey area.

But that doesn’t matter. My point wasn’t that there was a particular point of law requiring you to do so. If that was what people thought I said then I was unclear. This is not real estate law. The law of disclosure is not what you want to worry about here. this is Business Law and Asset Protection.

The problem is basic Tort Law in which if you knew of a dangerous situation and did not take appropriate action to warn or keep safe people you had a responsibility for, then your are in part culpable. This is law of torts. if something happens and someone sues - you have a history with it and if you don’t document and cover yourself you will be named as a person who SHOULD have done something.

It is like you own a building and know the fire system has a flaw. You sell it and don’t disclose the flaw to the buyer. This ends in tragedy when the fire system fails. Well, there could be a problem in Real Estate Law in that the buyer could come back and sue you for not disclosing. But the real problem is all the people who were injured or disposessed by the fire and failure of the fire system can come back at you because you were an owner, knew about the problem, and did not do everything you could have to take care of the problem - by fixing it or making sure the buyer was aware of the problem so they could deal with it.

As a real estate investor you are not only dealing with buildings, but you are also a business dealing with people. You have to legally protect yourself and your assets with the appropriate legalities and insurance, but also appropriate behavior that will protect you from getting crushed by an army of lawyers.

A lot of people are always talking about what the law says about something. That is important, to know the law. But you also must realize that there is what the law says, and what you CAN DO and then there is what you SHOULDN’T DO.

Many times you can do things that the says is wrong, but because everybody agrees to it it is fine. For instance, if I want to evict a tenant the law says I have to go thrugh the eviction process -spending several hundred dollars and lots of time and paperwork, and often take 14 days - 3 months to get the tenant out of there. However, if I offer the tenant $500 plus their deposit back if they leave by Monday with the unit clean and in good shape - the tenant agrees to it - that is fine. tenant is happy - they got extra cash. I’m happy - I have a clean unit I can rent out quickly and don’t have to put in the time and expense of evicting, cleaning and repairing the normal damage done in an eviction. I can do this, although the law agrees that this is not the procedure I should use.

And perhaps by law I don’t need to disclose your problem, but I better if I don’t want many more problems down the road.

Anyway, enough of the lecture (God, the way one can rant when you get old) talk to the parents and see if there is anyway to work something else. I’d even offer to pay for the move and first month’s rent at a different place! If it doesn’t work, check with your lawyer on legal options.

Good luck.

9

Thanks again for the advice, Salverston. I did consult with many people in regards to this. So far there is concensus about it. Here’s what they are saying:

  1. There isn’t any specific legal requirement or statute to disclose this.
  2. The advice of the realtor agent to not disclose should be gained in writing in case something comes back later.
  3. Here’s the big one… If the resident who is harrassing my tenants is actually mentally disabled, then there are strict laws upon what CAN be disclosed regarding this based on Disability laws that have to be adhered to. My attorney feels that this overrides anything else. In other words, if they are disabled you can’t state this in a real estate contract as it negates their rights as a disabled person.

Therefore 3 out of 3 so called ‘experts’ are telling me I cannot disclose this in the Seller Property Disclosure Statement.

Bottomline: I’m selling this property because its taking too much of my time and energy to manage. With the proceeds I will buy a 4-Plex and be the HOA for myself (as I have done successfully in the past). I agree with you regarding finding resolutions based on what is a ‘win win’ situation for people. I’ve certainly done that over the past 10 or so years I’ve been a REI. But this is one situation that is the strangest and most challenging I’ve ever faced in this business, and I’m grateful for anyone who has shared their insight on this situation with me.

V

10

In CT we have laws specifically stating you can’t disclose if the previous occupant had HIV/AIDS. You might be right in saying that on the same token due to the rights of THAT person you can’t disclose it. I’d say personally don’t say anything and get rid of that unit asap!

11

it seems like you have the more general situation of a “private nuisance” which a common type of situation between neighbors.

I agree that talking to the owner (parents) about their resident/tenant and the disturbance of the “enjoyment” of your property (unit). I would not let on that your know the possible root clause of the problem.

as for disclosure, I would be very caution about not disclosing something that the Purchaser later deems to be “material” in nature. The fact that the cops have been out means there is now public record of this problem. I have a friend that end up settling for five figures on a suit over failure to disclosure the continous barking of the neighbor’s dogs. What got him in real trouble was he forgot to disclose he had called the cops 17 years before sold the house over this situation. If nothing else, make sure you have good liability insurance.

12

I’d probably sell it. Condos don’t make good rentals, one reason being that you have no control over the neighbors.

Another possiblity, if she is not too far gone to actually realize her address has changed, would be to exchange units with the owners of her unit.

If you are on the top floor and her obsession is with imagined noise over her head, that should solve everybody’s problems.

Just to be sure, you could plant a speaker in the attic space and play her some space ship noises to draw her attention upward until she was trained.

It sounds a lot to me like she is not capable of living on her own, and her parents really should get her taken care of properly. I’d notify them on the very small chance that they don’t know that their daughter is not functioning well enough to be unattended.

13

Thanks for all the input. Yes, we are going to sell it. But I found out today that there were numerous police calls between neighbors over the past 4 weeks or so, which definitely puts the matter in the public record.

The tenants that are there are leaving, but I have had them document a journal of events and are faxing it to me today so I can take it to the HOA. I have a history of these events dating back 3 yrs so its pretty solid evidence of what is going on. The reality is that I need to sell the unit because its draining too much time from me. I do much better with 4-Plexes.

The question is one of disclosure. I suspect, despite my wife being adament that we shouldn’t disclose this, that we will. I personally don’t think its fair to the new owner. However if this forces us into a situation of financial loss, then I will hold the owner of her unit directly responsible and take the matter to court with them. I have a feeling that attack is the best form of handling this, rather than to try to escape from it.

V

14

One way to disclose would be to tell the buyers to do their own due diligence. You could tell them that they may wish to contact the management office to get a feel for the neighborhood. I always tell my clients to check with the police department if they’re worried about crime in the area and they may also want to talk to the neighbors, they’re free to say whatever they want.

As for disclosures, I did go through the same thing in my broker class. Basically what you’re selling is a piece of property and you have to disclose facts pertaining to the property. As you’re not a doctor, the possibility that a neighbor may be mentally ill is an opinion. In the case of the class, it was people moving because they couldn’t stand their neighbors. What it boiled down was that just because the neighbor hates the current owner, that doesn’t mean the neighbor will hate the new owner.

Also laws do vary from state to state. Here we’re not required to disclose that someone died in the house unless asked. As with HIV/AIDS, we’re actually allowed to say no because it has nothing to with the house and is discriminatory. I think mentally ill may also fall under a protected class as mentioned by your attorney so I think all you can do is hint around with providing disclosures.

Also you should have the condo association look into what rules the neighbor is violating and have them fined. To me it sounds like she’s breaking a basic rule that says that they’re not suppose to be a nuisance. Lots of things fall under that category. Her parents need to move her to a townhouse condo or a single family.