If I was the buyer, I would not agree to send all past due rents to the seller when collected. It causes a huge mess. We have had sellers try to collect rents in the past post closing and it is confusing to tenants. They may pay a month rent to the seller, so they figure they don’t have the pay the current month rent to you. Then you start asking for money and they claim that they already paid the seller.
An alternative is to step down the receivables as follows:
- If a tenant is past due and they pay after settlement, all rent goes towards current rent & fees first.
- If there is anything left, it goes to back rent (to the seller) for up to 30 days.
- Beyond 30 days, the buyer keeps 100% of any collections, and everyone goes their separate ways.
This type of a scenario protects sellers who have tenants who consistently pay a week or two late, but it protects the buyer for the fact that anything 30 days past due takes extra effort and expense to collect. In fact, it may never be collected and may require expense to evict. Additionally, we typically include a clause in the contract that says the seller is forbidden from collecting rent, and any inadvertently collected rent must be forwarded to the buyer for processing. In my opinion a seller should never handle a penny after closing.
Imagine going to eviction court to say your tenant is past due and he shows proof to the judge that he paid the previous owner a few days ago. The case has a good chance of being dismissed or at least delayed.