Could a Buyout Be Your Way Out of a Problematic Tenancy?
By Aser G. Tolentino Esq.
There is a scene in the third Star Wars movie in which a character explains to another that he did not lie to him, because what he said was true, from a certain point of view. The importance of viewing things from different perspectives can help explain people’s approaches to difficult situations and can also help find solutions to issues that might otherwise seem impossible to resolve. This month we will discuss the concept of a buyout, and how it might help tenants who are having a difficult experience with a landlord: we’ll cover what a buyout is, pros and cons, and how the process might look.
What is a Buyout?
A buyout is an agreement in which a landlord pays their tenant to give up rent control protections and usually move out by a set time. As we have discussed previously when explaining damages in a constructive eviction case, tenants in rent-controlled units have an economic benefit from remaining in the same home long enough that the rent they pay is lower than the market rate. We have explained how that value is calculated through rent differential. Rather than a landlord forcing a tenant to move out then and having a damages award forced on them, a buyout is a process where the landlord offers to trade money to the tenant to voluntarily give up their rights and move somewhere else. Some might wonder why a tenant would ever agree to such a thing.
Why Should Someone Pursue a Buyout?
As valuable as a rent-controlled tenancy might be to a tenant, it might not be worth as much to someone whose needs are not met by the space they are currently renting. A married couple whose children have all moved away might not need a three-bedroom apartment and find maintaining it too much of a chore and the neighborhood too active for what they want in their later years; a single professional with a studio downtown might get married and want to start a family; or a group of college friends might all be parting ways with none of them wanting to continue residence in a drafty loft for instance. That difference in value can grow more noticeable when landlords fall into the habit of treating properties with a sort of benign neglect where things may not be seen to as quickly if tenants choose not to actively complain, which is often the case when tenants make allowances for the state of repair because of how cheap rent has remained.
Tenants may therefore find themselves with a valuable benefit they do not want, while landlords are stuck with a unit so unprofitable that repairs and maintenance can easily lead to a loss. Tenants might also then find themselves in a situation where the allowances made earlier then reduce the leverage they might otherwise have had, since the landlord can honestly claim they had no idea what state the unit was in after all these years. This sort of situation can quickly deteriorate, as both sides go from having gotten along at a distance to an adversarial relationship. Acknowledging that things are not going to work out and trading resources to find a better fit for the tenant in exchange for a fresh start for the landlord might be the best path forward.
Why Might a Buyout Be a Bad Idea?
A buyout might be a bad idea when the landlord and tenant are already on less than pleasant terms or habitability issues have been a long-running concern. Situations where the landlord and tenant have already had challenges working together generally will not create the best conditions for a successful negotiation. Landlords may attempt to use buyouts in these circumstances to avoid tenants moving out and filing a constructive eviction claim or staying in the unit and reporting their landlord to code enforcement. A tenant who expresses an interest in a buyout also by extension undermines future constructive eviction claims, if a landlord can use them to show that the tenant was not truly intending to stay in their unit as long as they might claim. More cynically, raising your hand and expressing an interest in a buyout may put you on a landlord’s radar as someone who could be encouraged to leave a rent-controlled tenancy by legal means or otherwise.
How Does a Buyout Work?
Buyouts are negotiated agreements. Either a landlord or a tenant may start the conversation about whether a buyout might be a promising idea. In many communities with local rent control laws, additional restrictions on buyouts have been created to protect tenants from landlords who might try to take advantage of this process. Such laws often require landlords to provide notices explaining a tenant’s rights, including the right to walk away from negotiations or refuse to negotiate entirely, provide a time limit before which a buyout cannot be signed after the notice is given to make sure they are not pressured into signing, and an opportunity to change their minds before they move out. These laws have sometimes been challenged successfully by landlords for limiting their rights to free speech, so speaking with an attorney to determine what is and is not permitted might be the best option.
Conclusion
Ultimately, the decision on whether to look into or accept a buyout is a personal one. It will depend on what your priorities are at that moment. Some people find it easier to have a third party like an attorney handle the negotiations, after which they can decide yes or no on the final offer. Tenant Law Group’s Customized Legal Services for Tenants can make a great fit for people looking for extra help in navigating the buyout process. Whether working on buyouts or any other tenant rights issue, Tenant Law Group’s attorneys are always standing by to give you the tools to feel comfortable in your home.
