Hey MHP people,
I’m purchasing a 60 lot park soon, and inheriting a bunch of residents (they own their homes). The seller has told me that she never collected any deposits from any of them (or signed leases with them). I will get her to put that in writing and sign it, but if that’s the case - when I take over, should I require that everyone pays a security deposit when signing my new lease? Lot rent is 325, what should the security deposit be?
Thanks!
Aaron
I’m a park manager and when the owners bought this park we did request everyone to have deposits. We had some tenants prove they paid deposits and the previous owner said they did not. I think it is wise to have deposits on all homes in the community. You can have an addendum in the purchase contract that any resident who can provide a receipt for deposit needs to be covered by the owner within x number of days post closing. Also before closing you can send out estoppel letters to minimize this problem. At the end of the day though it is wise to get security deposits
1 Like
Might I ask why a security deposit is needed when the mobile home is privately owned? I always thought that security deposits, in apartments etc, were for protection against damages to the rental unit. Things like walls, doors, etc.
That’s a good point. What is the standard for deposits on privately owned mobile homes? no deposit? 1 months rent?
You will probably get a lot of pushback and negative sentiment if you charge a deposit for someone who is a prior tenant. They’ve paid the rent so far, probably they’ll keep paying it. You’re not really getting much benefit from that.
Agree with getting estoppel letters and getting tenants to verify their security deposit amount even if zero.
2 Likes
So far we have had a few homes move out. While this doesn’t happen often, when it does there is a possibility to damage the pole where the electric is connected and other utility connections. If a tenant is upset upon departure there will be a lot to clean up of debris. Sometimes a little, sometimes a lot. It is a new owner’s discretion for inherited tenants. We gave options to make the security in payments it worked for us with minimum upset tenants. If they proved they paid we gave them credit.
1 Like
We purchased our first park in June and obtained estoppel statements from the tenants. These were signed by the tenants, manager, and owners. This document saved us. When evicting our first problem tenants they came back and stated they needed their deposit back, luckily we had an estoppel by him stating that he has not paid rent in 6 months, therefore previous owner did not transfer deposit, therefore we do not owe him back his deposit.
2 Likes
First off, I require leases from each and every tenant in my MHP’s. It makes sense and in my state it is required by law. In a park I recently purchased, I had everyone sign an updated lease for me. This was also a good way to get acknowledgement, in writing, for the new Park Rules and Regulations I implemented.
Secondly, I don’t require a deposit for lot leases. When talking with other owners, park managers and my attorney I am finding that most are trending away from deposits for lots. A tenant moving into a mobile home park will very likely be there for years. Collecting a $200 or $300 deposit is not worth the maintenance problems it can cause as may be required by state law (e.g., separate account, interest, etc).
In the end, the deposit amount is not going to cover much if there is some kind of damage or debris left when a tenant moves a home out. I’ll take that hit if and when the time comes. I am much more concerned about spending $3500 to have a home demolished than worrying about a $200 deposit should a tenant/owner move a home out.
To be clear, I am not talking about a park owned home, those will always require a deposit. My no deposit approach applies only to lot leases. I am wide open to other views on this, but this is my current approach.
2 Likes
I would not require existing tenants to pay a security deposit. However, if any new tenant moves into the community, I would require a security deposit from them. There was a posting wondering why you would request a deposit from a tenant who owns the home, and the reason is that there can be damages, and they can be extreme. What if the tenant moves the home out and leaves a bunch of trash behind, forgets to cap the sewer, destroys the concrete pad, and runs over your $5000 mailbox? Damages could easily exceed $1,000. Not that a $300 deposit will cover this, but it helps.
1 Like
During a due diligence trip I would just ask multiple residents if they ever paid a security deposit when they moved in, and see if this confirms what the seller is saying.
If there are no security deposits on site I would be very reluctant to try and collect new security deposits from existing residents. It may be possible to do so, but you’ll likely get a ton of pushback and the process will be brain damage. Some residents will grumble and pay, and some will grumble and not pay. What will your game plan be for those who don’t pay: evict them? Will you even win in court? Reward the ones who push back the most by not requiring them to pay, thereby punishing those who were easy to work with?
Have tenants fill out a Tenant Estoppel Certificates. If they can verify security deposit then ensure that gets transferred during closing.
If there aren’t any, ensure you add an addendum in your lease that has them acknowledging there is no security deposit on file.
Don’t push getting a security deposit for those that are there paying lot rent on their TOHs. Not worth the hassle and may lead to resentment.
1 Like
Yes on the rental agreements.
Deposits? You’re going to create a lot of bad sentiment without much upside. I wouldn’t do it. But if you do decide you want deposits, I’d ask half of what you’d ask a new tenant, and make sure tge present tenants know you’re giving them a “break” based on their good payment history/your goodwill.
Also read Ydhw’s remarks on finding out tenants HAD paid deposits, and gracecreekproperties remarks about estoppels. This is a good issue to take to your lawyer.
1 Like
I have never collected deposits from any tenant renting a lot. Not worth the aggravation of having to manage it and pay interest annually to the tenants on their deposits. If a tenant were to cause damage I would take them to small claims court to collect however we have never had a home removed from our community by a home owner and do not anticipate it ever happening. Our residents sell their homes they do not move them.
2 Likes
Where my parents are, there is no $5000 mail box …it’s in the laundry building several streets over. Also, no concrete pads for many homes…just gravel. I get your point, but some old parks just aren’t that fancy.
As for mover’s insurance, aren’t the damages caused by moving what the movers insurance takes care of? Or, is that only for the damages to a mobile home during the course of the location move?
Yes, if they did that much damage, insurance would cover it. The more likely scenario is they are going to leave trash including old skirting, rickety and rotten steps, pieces of PVC. Also, they are unlikely to remove the tie downs. It will cost you a few hundred dollars to dispose of the junk, remove the tie downs, and cap the utilities, and insurance won’t cover that.
1 Like
Good luck filing a claim with the movers. They’re not going to come back.
I will tell you what is normal with 100s of transactions. The average buyer does not go after deposits and many smaller parks do not have deposits. Typical deposit is always equal to rent. If you are looking to get some reserve, try to find it in other places (such as pet deposits, extra vehicle payments, etc) but not deposit. That will just give tenants a negative impression of the new owner. ~ Steve www.DueDiligencePartners.com
2 Likes
Because if they break the rules of the park, and they won’t leave, it can help cover court costs and rent they didn’t pay. Also, some tenants who own their own homes have thrown trash and furniture behind the homes and cost us by having to pay someone to remove it.