Should I Carry Rent Arrearage Forward Upon Purchase?

mobile home university
1

Hi All,

Do you think it is advisable to start each tenant with a fresh slate after I purchase the park and forgive all of their arrearages? The arrearages for this particular park are substantial. If you think I should forgive the arrearages, should I inform the tenants of this in our first letter to the tenants?

Thank you!
Shelly

2

No. Once you own it and start collecting rents and enforcing rules, you may find you want some tenants evicted because they won’t comply with the rules by being courteous good neighbors who keep the noise down, pay on time and keep their home and homesite looking great. You can them evict for non-payment.

If you have a toothache, you must pull it or treat it properly. Bad tenants are toothaches and they affect all the other residents.

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3

Unless you are buying the legal entity that owns the park (which seems unlikely), I don’t believe they legally owe you anything.

4

The past due balances are found money for you if:

  1. You negotiated in the Purchase Agreement that past due rent is yours to collect and keep;
  2. The Purchase Agreement or an Assumption of Lease Agreement states that your company assumes the seller’s leases.

Assuming the leases and agreeing with the seller in the PSA that you keep back rent will give you the legal right to collect it.

I wouldn’t offer a blank slate because you will be able to collect most of the back rent through payment plans or lump sum settlement agreements.

5

We recently acquired a new community that had the same situation. It is not so much the problem of the tenants as it is the community owner not enforcing the Rules. It’s the old owners responsibility to collect their old debts. When you take over the community and send out your new owner letter along with your new leases, rules & regulations etc., just start enforcing and after an eviction or two people will either get on board or they will be gone. Easy fix…:wink:

6

Do not “waive” any back rents.

Collect it all.

Being tough on the rent will set a precedent with the residents that you want to be paid in full and on time.
Rent is due on the 1st and late on the (whatever day) and then late fees kick in.

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7

Thank you for the response. I was thinking the same unless I purchased the business, regardless of which form it was in, in addition to purchasing the assets (land and homes). However, the Seller could assign the leases/contracts to my company without a transfer of the business and it made me wonder if that was sufficient to make the leases enforceable. Sounds like a good legal question.

8

The seller can assign the rents to you in either the purchase contract or during escrow.

If you buy the park with a back rent, then the seller will usually want you to collect it and send it to them.
I am happy to do that for anything less then 60 days delinquent. I do require that the tenant bring all their rent current before I send the seller any money.

If they are more than 60 days past due then I’d rather just evict them.

AW

9

That seems pretty generous to the seller, I have to say. If the back rent is collectable, the seller should have collected it. I would write the contract so that the leases and obligations (back rent) transfer to the buyer and the buyer keeps what can be collected and makes all the deals about what who is current how much etc.

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