Just Cause Eviction – Part Deux: Buying Tenant Occupied Rental Property In Seattle

By Doug Owens

In last month’s newsletter I wrote about the Seattle Just Cause Eviction ordinance in connection with a Supreme Court case about the procedure at a show cause hearing in which a landlord seeks an order restoring possession of the property and the tenant challenges the veracity of the landlord’s certification of just cause. This month I discuss a Court of Appeals case which considered the question of when the notice of termination must be given to tenants of property that is to be sold, in order to constitute just cause for eviction.

The context of this question involves the situation where a landlord has tenant occupied property which is a single family residence and wants to sell it One class of potential buyers could be those who would continue the tenancy and another class could be those who would develop the property by evicting the tenants and remodeling or tearing down the structure and rebuilding. The latter class of owners has a separate process under the Seattle Just Cause Eviction Ordinance in which in order to be authorized to evict they must obtain a Tenant Relocation Assistance License, which requires the landlord to assist low income tenants financially to obtain replacement housing.

In the case that went to the Court of Appeals, the sellers entered a purchase and sale agreement with a buyer, and in me course of negotiating that agreement they committed to delivering a notice of termination to the tenants of the property. The notice was duly delivered shortly before the sale of the property closed. Thus, the buyers negotiated what they hoped would be a way around the Tenant Relocation Assistance License requirement by purchasing property as to which the sellers were contractually obligated to deliver the notice of termination of the tenancy. The pertinent language of the Seattle Just Cause Eviction Ordinance allows such an eviction when an owner “elects to sell” the property. The dispute in the court was whether a seller could “elect to sell” the property after it had a signed purchase and sale contract, and thereby confer on the buyer the ability to provide “just cause” for eviction without having to go through the Tenant Relocation Assistance License procedure. The ordinance defines “elects to sell” as making reasonable attempts to sell the property such as listing it with a broker within 30 days after the tenant has vacated the property.

The court analyzed the language in the ordinance and concluded that the interpretation that made the most sense was the one that the City of Seattle supported, namely that one cannot “elect to sell” property that has already been sold. Therefore the court decided that the eviction was improper and awarded attorney’s fees to the tenant as well as possession of the property.

This case has important implications in today’s market for those who will buy single family rental properties with the objective of remodeling or replacing them. Instead of having a vacant property and a clear field for construction, the buyers in this case faced a lawsuit in which the City supported the tenant’s position and ultimately the court held that the attempt to avoid the requirements of the Tenant Relocation Assistance License procedure were ineffective. Not only was there delay due to the litigation, but the buyer-developer was also required to pay the tenant’s attorney fees and, presumably, had to go through the Just Cause Eviction Ordinance Tenant Relocation Assistance License process after all. The key fact in this case was that the sellers negotiated with the buyers for the provision by the sellers of the notice of termination to the tenants as part of the purchase and sale agreement. Therefore the sellers did not “elect to sell” and then after that election deliver the notice of termination. A prudent buyer or tenant occupied single family property who does not want to go through the Tenant Relocation Assistance License process will shop only for property as to which the notice of termination has already been given by the seller. The preceding is intended to be educational and should not be considered legal advice.

About the Author…

Doug Owens practices real estate law and general business law from his office in Seattle. He offers a 20% discount for REAPS members and he can be reached at 206-985-6679 or dougowens@seattlelawyer.com.

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi.” We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free.”

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