Hi All,
So i’m purchasing a park from a bank and would like to include all Accounts Receivables/Past Due Rents for the one year the bank has owned and run the park. I don’t necessarily expect to be able to collect on these past due rents, but feel it gives me leverage in certain specific instances with some tenants. The question is has anyone negotiated this into the deal with a bank? What language was used/included in the contract? If anyone can share that, I would appreciate it.
The operating statement and tax return will tell the story. If the receivables don’t match the number of tenants and rent rate they told you then you can estimate how many are behind and how many you will need to evict once you take over - that takes time and money and the bank has been mismanaging the Park.
Yes that conversation is commonly raised to justify a purchase price.
Our contract requires cooperation and information sharing from the Seller. For large Parks it’s quite common to make a formal list of financial items you want from Seller, and a fine example is included with the MHU Due Diligence Manual.
The Assignment of Leases and Rents should cover this. The one we did references an exhibit which I believe had the latest delinquency report and rent roll for the park. If the Seller did not collect the money, and you do, it is your effort that obtained it and it should belong to you, I don’t think Seller can really dispute that. You get the leases and all delinquencies and all prepaid rent liability as well (if any) which should be clearly documented, tenant by tenant, what their account balance is.
You can choose to waive the past due balances, but you wouldn’t expect to collect in full and then turn some more money over to seller, that’s not right. You pay what you pay and after that whatever comes in is yours. You should be purchasing the leases (via ALR) so you should get the rights to collect the past due rent under the leases.
Brandon@Sandell