Protecting Your Real Estate Sale From Eviction Lawsuits

A couple from Idaho is faced with the difficult task of evicting a squatter that rented their home from someone posing as the landlord.

Brian and Renae Prindle moved out of their Canyon County home at the end of 2015 in order to expedite its renovation and sale. Little did they know that a woman named Debbra Smith signed a lease and paid a man who had keys to their home. Smith pays $1,550 to rent the home, although it is unclear whether she is current on her rent. The Prindles contacted local authorities who consider the case a civil matter. They have now filed a civil lawsuit to evict her. The Prindles are concerned the eviction will derail their chances of selling their home.

Is the Tenant’s Lease Valid?

Smith claims she signed a valid lease with a man who claimed to be the landlord of the Prindles’ home. It’s unclear whether she can provide a copy of the lease. Regardless, whether she can prove she signed a lease with the fake landlord is immaterial. A residential lease is a legally binding contract between a landlord and a tenant which affords the tenant the right to exclusive use and enjoyment of the residential property in exchange for money paid to the landlord. If a lease is signed between a tenant and a man posing as a landlord that has no legal right to the property itself, he does not have the right to rent the residential property. In that regard, the lease between Smith and the purported landlord is completely invalid.

What If the Tenant Pays Rent?

If Smith pays rent to the Prindles directly, does that change the relationship between Smith and the Prindles?

In most states, the answer is yes, but only if the Prindles accept payment. By accepting rent from a tenant, even one who is not in the lease, the transaction creates a landlord-tenant relationship. The tenant has the right to exclusive use and enjoyment of the residential property, and the landlord is entitled to monthly rent. The transaction creates a month-to-month lease. It also becomes more difficult to evict the tenant.

Does the Tenant Have a Legal Right to Remain in the House?

A bona fide purchaser, or BFP for short, is a legal term used primarily when referencing real and personal property. It refers to the innocent party who purchases property for fair value without notice of any other party’s claim to the property. Because the bona fide purchaser is innocent and had no notice of another party’s superior rights, he has the right to retain the property or enforce obligations against the person who may have superior rights.

For example, let’s say Derek steals your bike then sells it to Joe. You later find out Joe is in possession of your stolen bike. If Joe paid fair value for the bike and can demonstrate he thought Derek was the owner of the bike prior to purchase, Joe would be considered a bona fide purchaser and have the legal right to the bike. Your only legal recourse would be against Derek, but you would have no legal right to your bike.

In this case, the tenant could not claim she was a bona fide purchaser. The tenant did not purchase the home, only rented it. Even if she did buy the home for fair value, she still could not claim she was a bona fide purchaser because a title report would show that the true owners of the property were the Prindles. Therefore, she would be “on notice” that someone else was the legal owner of the property.

While Smith continues to reside in the home, she’s considered a squatter. A squatter is a term for a person who occupies a place that legally belongs to someone else when the owner hasn’t given permission for the occupation.

Will A Sales Contract Prevail?

Various disclosures are required in any home purchase contract. Most states require sellers to disclose whether any pending litigation exists on the property.

While the sellers understandably wouldn’t have known of the squatter until visiting the house, they would have to disclose to any potential buyer that there is litigation pending which could stall any potential sales contract. A savvy buyer’s agent would put a clause in a sales contract which states that the home purchase contract is subject to a successful eviction of the squatter, and would also include a definitive timeline.