I am in contract to purchase an MHP in Ohio that is on city water/sewer (master meter with sub meters). The park pays the master meter, and gets reimbursed by its residents who get billed by a third party metering company. Recently the city changed its water/sewer billing structure to a “tiered structure” that essentially bills a high rate for the first several gallons used, then lesser rates for each subsequent bunch of gallons used. Previously, it was more of a “flat rate”. Each resident’s rates increased by 30% as a result, and in addition, the MHP is now paying a fee for 60 vacant lots, equivalent to $2,000/mo1.) Can I file a lawsuit against the municipality for assessing water fees on vacant lots, and increasing water rates for occupied lots too excessively?2.) The total monthly rates for water/sewer are approx $100 - $150/mo - that seems extraordinarily high, no?3.) Any ideas on how to minimize the impacts of water/sewer fees given the situation? e.g. is there a way to reverse this mess?Any responses are appreciated. Thanks, as always!
Jkmhp2, my Husband and I have a MHP that is Master Metered.The Water Company has a meter at the street for which we as the MHP Owners pay for all water (and sewer is calculated off that) that goes through that meter.Our Lots then have meters (that the MHP owns) on them in which we read the gallons used and bill each Tenant for the amount of water used.The MHP owns everything after the master meter (piping and Lot meters).How can your Water Company even know how many Lots are in your MHP and how many actually use the Water (besides physically counting them)?This should be of no concern to the Water Company.The Water Company should be concerned about their piping from the street to the Master Meter and how much water goes through the Master Meter (they probably use this amount to calculate the sewer also).Have you seen a copy of the Water Bill?Have you investigated the Water Company’s website as they should post all their fees in connection to creating Water / Sewer Bills?Have you also spoken directly to the Water Company concerning the Water Bill?Are there excessive water leaks in the MHP that the Third Party Company is trying to cover?How much is the Third Party Company charging for their services?I would NOT recommend filing a lawsuit against the municipality. A lawsuit would take years (and lots of money) to come to a decision and it might not be a decision in your favor.If all the above information is correct concerning the excessive Water Bills, I would RUN AWAY from this deal.Water is a huge expense for a MHP and will cut into your profits.We wish you the very best!
Great topic. First off, the city’s water department’s rates and actions are probably overseen by the state utility department, and probably directed by the city counsel. SO know what every you try to do to fight what has been done will probably be a HUGE uphill slog. I have parks in several states, and interestingly one of my parks in Texas does something pretty similar to what your stating. The city requires we submit a rent roll of sorts every month, and we are billed an added fee based on our total lots, and what we have occupied. So, it happens, it is legal and ya just get to deal with it… Knowing this, you only need to adjust the NOI, which in turn adjusts your purchase price when you calculate your purchase price. The only thing that makes this a bad deal is if you can not factor it into the way you purchase the property. If the water rates have gone up for one segment they will go up for all, so the playing field will be leveled. 30% of a water bill increase is probably $10 - $15 per resident, so factor that into less money you can get from your overall lot rent increase. It changes forecasting a bit. The bottom line is your return is based on your purchase price and terms. Go back to the table and negotiate based on the changes. Now- why is this happening? I do not know where you are, but I can tell you why this happened at my Texas park. Here is a short version. EPA has changed some rules. So this might seem like a small thing, but the EPA has made some ‘executive’ orders regarding drinking water and waste water. These changed both hardware (required capital improvements) on the physical side and plant oversight and manpower on the operations side. So the net effect here is you need more funds to buy equipment and more funds to operate per person. So- in the part of Texas I am speaking of there are a huge number of RV parks. Most fill up in the winter, and empty out somewhat int he summer. The challenge is, the water department must operate like they are there 24/7. As must the Police departments, fire departments etc… The population in the valley of texas probably doubles in the winter, but the expenses do not. So in the town we are located in, and we are a mobile home park not a RV park- but we are all lumped together for the purpose of this billing- we pay per occupied and unoccupied lot. The city looks at each ‘possible connection’ as a tap, and then divides some of the fixed operating expenses per connection to the system. With increased regulations, and also water systems needing to be looked at more closely and secured against some outside source tampering with it- if flat out cost more to operate water and waste water systems. Here are some real numbers for you- mine. I own a park that has a well, we treat the water, distribute it, then it runs to my packing plant (sewer plant) and I treat it again and pump it to a stream when finished. The new regulations in the past 5 years required $30,000 in new equipment. They also adjusted my classification of water / waste-water system so I need a certified operator in my well house / filtering center to be onsite at least 5 days, and they must be onsite for 3 hours each of the days. The onsite testing takes less than 10 minutes. So he sits in my office with nothing to do for over 2 and a half hours each day. The law states how many days, and a minimum number of hours for each visit. So the net effect- I bill w/s/t in one bill and we used to charge $23.xx monthly for w/s/t. That is what it costs per lot not per tenant. The water cost is the same if I had 2 lots filled or 76. There would be a slight adjustment in the treating chemicals, but I do not want to split hairs. The new cost is $33.xx per lot for w/s/t. The overall trash charge has not changed and is about $9 per lot. bottom line- adjust your purchase price based on the info. Adjust your forecasting based on the new info. Put a fair offer on the table after you have made your adjustments, argue the facts- they do not lie. good luck to ya…
Kristin and Jim, thank you for your valuable insights on this matter. I am knee deep reviewing city water bills vs metering company bills (both $ and gallons), and trying to put together an analysis to bolster my re-negotiation. Fingers crossed that seller will step down on pricing! Josh