We are in a due diligence phase on a a park and have come across some issues in the sewer lines ie. belly in the line, cavern in the ground where pipe collapsed, tie ins on vacant sites that are clogged. Can anyone share examples of how they handled these issues with the seller? Do you escrow money for repairs, have them repair it, negotiate a new price on the park and accept it as, any other ideas? Have you had more success with one method or another?Thanks in advance.
First of all, you have to have a functioning sewer system, so don’t let the seller claim it’s not necessary (although many will try, saying “it’s never been a problem in the past”). A fully operational and legal sewer system is a necessity, not a luxury. You cannot accept it “as is”. Otherwise, the fines are substantial, and they can even shut your park down.So how do you make it right? You need that sewer to be fixed ASAP after closing (most sellers will not allow you to do so before closing, and it’s a narrow window of risk if you start on it immediately after closing). So we would get three bids to fix the system, and then have that taken off the purchase price. That way WE control the repair process. If you let the seller control it, by having an arrangement in which he makes the repairs, they will take years and still not be done right, while he tries to do it using a hillbilly named Bob, a hound dog and a shovel with a broken handle on it (Bob, of course bid $78, while the real plumber bid $32,000). We had one park in which the seller was adamant that he would fix the clubhouse after a fire burned it during due diligence. Because it was not a life-threatening item, we let him do it (even though we thought it was a bad idea) and then had to take it back away from him after he failed to even touch the project after almost a year had gone by. Lesson learned. The seller is the worst guy to fix things because the reason you bought the park cheap was that it was in bad disrepair, right?
Frank is right, the sewer needs to be done properly. The ‘bellies’ are spots where the line is level or even retrograde. This causes the flow to slow down and drop heavier matter. It also causes the line to go septic and produce gas. The correct ‘fall’ is 1/4 inch per foot, this provides what is called the ‘scouring’ velocity which keeps all solid material moving to the tank or the street. The gases produced are carbon dioxide (CO2), methane (CH4), and an insidious gas called hydrogen sulphide (H2S). Methane and carbon dioxide are odorless but hydrogen sulphide has that rotten egg odor. Both methane and hydrogen sulphide are flammable. You do not want your systems to produce any of these gases in the lines, only the tank or city sewer. Also, you may want to advise tenants that there are only 3 things, the Three P’s, that go in the sewer system. They are, from the Orange County Sanitation District website, pee, poop, and (toilet) paper. Hope this helps.
As a SC Real Estate Broker I would suggest that at Closing the cost to fix the Sewer System be taken out of the Seller’s Column and given to you in the form of a check. This will allow you to have the most freedom to resolve the Sewer System issues.However, the Bank might not agree to this. The Bank might require that the amount taken from the Seller be placed in an Escrow Account with the Bank /or/ Attorney overseeing the Money. This puts more restrictions and limitations on you, but gives the Bank a ‘warm and fuzzy’.Since your goal is to run a successful MHP and not be involved in lawsuits, you will inherently desire to fix the Sewer System immediately.We wish you the very best!