Meth Disclosure to Buyer


#1

I closed on my 2nd park today and about an hour after closing I found out that one house is abandoned after occupants were manufacturing meth.
According to the police the previous owner was notified of the issue before we signed purchase agreement…
This was not disclosed in a purchase agreement or at closing.
Hose has to be demolished.
Anyone else with a similar story or any good advice on how to approach this as far as going after seller.


#2

Commercial real estate is always going to be “buyer beware.” You can’t really ever expect the seller to disclose everything and you can’t ever expect to catch everything either. I don’t think you can go after the seller in this case and I also don’t think it’s a good use of time. What I would do is add “google search park and talk to police department” to your due diligence checklist and move on. I had a similar situation blow up a loan at the 11th hour and I lost a few thousand dollars as a result. It happens.


#3

Did the seller represent that unit as occupied and income producing?

Charles is much more experienced than me, but personally I disagree a bit, I think that’s pretty bad on the seller’s end. Can you get a police report or police records proving that the seller was notified of the issue?

If you can, I would approach the seller very nicely about the subject, assuming it was an oversight and not nefarious, and discuss potential compensation for his misrepresentation. If he balks, I’d then lay it out in black and white: sending him the sales contract that (I’m assuming) said he would be honest, the rent roll he sent you, and then the police report proving that his rent roll was wrong, and that he knew it was wrong. I’d then send this to him, and follow it up with a letter from an attorney. If he still balks, it may or may not be worth pursuing further.


#4

Shouldn’t a Phase I identified this issue? If it was known and reported, I would have guessed that should have raised a flag


#5

I’m not a phase 1 expert, but I believe the engineer would have sent the seller a questionnaire, and the engineer would often only know about this if the seller was truthful on the questionnaire. If the seller lied to both you and the environmental engineer that’s yet more ammunition that you have.


#6

The Phase I would have definitely discovered the meth lab.

I had a park under contract several years ago and the Phase I not only found that a mobile home was a meth lab but the park owner moved the home to a different location in the park. So instead of one contaminated area the park had multiple contaminated areas.


#7

You have a contract, P/A. You have that for a reason. In there, it should state that the owner would tell you things such as this . There are usually “catch-all” statements in these agreements if they are worth their salt.

I would sue him for all costs associated with the meth . He was deceptive.

But again, read the contract.