Should I forgive delinquency during takeover


I just closed on a park and I’m trying to figure out what to do with delinquency. The lot rents are paid up but some of the tenants are behind on paying their utility bills. The park bills back water and sewer and a third of the tenants are behind with most of them in the $150 to $400 range. What should I do with these? Try to collect them or wipe the balances and start fresh?

Thank you,

If it were coming out of my pocket to pay, I’d collect.

If it was past due rent, and was something the last owner missed out on I’d consider it good will and wipe it out. I’d also make it clear this is a one time thing for the tenants and everyone is starting out with a clean slate.

Be prepared to follow through if you collect. Are you prepared to evict people over it, and also haggle / go to court with them saying that “the prior owner never recorded their payment correctly,” and that type of nonsense? I hope the prior owner’s records are amazing to support this.

These tenants have not been trained properly, and if you hold their past mistakes to a new standard you’re likely going to create more pain for yourself than necessary. I would wipe it clean and say that as part of the new ownership there is a no pay no stay policy and none of this payment plan stuff. As soon as someone gets behind then take action and make an example out of them - worst case you’ll only have to evict one person instead of four or five, and save a bunch of time in the process.

If the economics of this Park hinge on collecting this then you probably shouldn’t buy the Park. :wink:

1 Like

Good feedback, guys - Thank you. My thought was just to forgive it because of the reasons Jhutson gave. I haven’t see the sellers invoice so I’m not sure how much detail actually went into it. Regardless, I didn’t have to pay for any of this debt and I factored none of it into my valuation. I think it makes sense to wipe and that way I can control how much tenants are allowed to get behind. Clean slate, my rules, don’t let it get out of hand.

Much appreciated.


I would not “forgive it” upon takeover. If they could not afford the rent under the previous owner, they will not be able to afford it for you, except you are throwing away the evidence you need to evict (seriously behind on rent).

You are stepping into the shoes of the leaseholder and inheriting the leases at least until you give proper notice of the new leases and wait the appropriate amount of time.

You had better know who is ahead and who is behind when you get done with DD, because you certainly cannot just “zero out” someone who prepaid (1% of tenants? But which?)

Seller should give allowance for prepaid rent (you are buying a liability) but a good buyer should not count on collecting any of the receivables, and if the seller wants to collect on those, the time to do so is before closing.

If you’re going to “control” how much you let them get behind why not start out with current?

I agree with Brandon on this one. Of course as the new owner you can decide. I caution is that you will set a very bad precedent if you come in and start forgiving owed debt as your general policy.

  1. You are engendering bad behavior for the late payers. Yes, you may say that this is one-time thing, yada yada, but all they will hear and take away is that they can ‘work’ with the new owner on payments.
  2. For those who pay on time and early, they will be pissed. Why should they be good tenants but the other ‘late’ payers get this great break. Last thing you want to do is alienate your good tenants. This cannot be stressed enough.

It sounds like the prior owner may not have had the best operations. Now is not the time for you to come in as the ‘good guy’. You need to come in as the ‘fair but firm’ operator. No pay, no stay is both fair and firm. You may think I’m overly tough but I can tell you we are extremely respectful of everyone in our park. But rules are rules.

Regardless of your decision you are going to be facing payment issues.
It would be nice to know who is owing as the likely hood is you will ultimately evict most of them.
If they did not pay in the past they will not pay in the future.
It is probably a waste of time trying to collect past debts but you will need to inforce a no pay no stay policy going forward.
Bottom line is they will continue to not pay, you will evict and you will lose money. It’s inevitable.

Howard and Brandon,

Thank you for your responses and you make really good points. If I carry forward the balance on the invoices and they do not pay up first month (which most of them will not), would you hit them with late fees until they clear the balances? If I do bill them their balances and I accept some sort of payment plan, I feel like I’m asking for trouble. If I continue to add late fees, they’ll never catch up.

Regardless, the old owners were very lenient and I can’t let myself be perceived in the same way…


Just as a little aside, I always go to the seller after the earnest money goes hard and try to have them file the evictions that need filing. This simply speeds the process up. Something we have had success with when it comes to non-payers and rules violations is sending the demand letters out on the day we close. This is in the form of a new owner letter and an “oh by the way” here is your demand letter. Looking across the portfolio, it usually gets about 60-70% of the dead beats to pay and about 20% to just move out (with a small number of people who need a court date and maybe physical removal). Do not delay the process for the sake of propping up your books the first few months.

Your books and distributions are going to suck the first 2-3 months of ownership on a turnaround anyway. That’s to be expected. You need to decide whether or not they are going to still suck in month 4, 5, 6, … or are you going to right the ship as fast as you can.

You situation is not that bad with most people being behind $150 - $400. This is chump change compared to some of the balances I’ve had to go after on day 1 on some of my aquisitions. My bet is that you’ll collect most of this if you stick to your guns. Type up demand letters tomorrow and get them in the tenants hands as soon as possible. That’s the only way to really know who is going to stick and who isn’t. Lastly, no payment plans… you are not their bookkeeper or their babysitter. They dug this hole themselves and there is a very simple solution to digging themselves out of it.

Just out of curiosity, has anyone ever sold this type debt off to a collection company instead of collecting it themselves? How did that go and can you speak to the valuation / discount agreed as part of the deal?

Also @jo13nathan while probably not an issues for you, there are some regulations on the statute of limitation for time barred debt. Some states personal debt over 3 to 6 years old cannot be collected.

That’s a great idea Charles. Always better to get the eviction process going sooner than later.

1 Like

@jo13nathan , as per your post:

  • “Should I forgive delinquency during takeover”

When we closed on our Turn-Around MHP, we started the process “fresh”.

Whatever was owed to the Previous Owner was between that Tenant and the Previous Owner.

However, the Tenants were “required” to pay what was owed us as of the day we closed on the MHP.

If the Tenants did not pay us the Rent, Utilities and Fees that were owed us as of the day of the Real Estate Closing, we filed Evictions on them and held them to it.

@jo13nathan , I totally agree with your statements:

  • “I think it makes sense to wipe and that way I can control how much tenants are allowed to get behind. Clean slate, my rules, don’t let it get out of hand.”

@jo13nathan , I also totally agree with your statements:

  • “If I do bill them their balances and I accept some sort of payment plan, I feel like I’m asking for trouble. If I continue to add late fees, they’ll never catch up.”

You need to start fresh…with your rules…no pay no stay.

New Owner…New Rules.

We wish you the very best!

1 Like

Thank you, Kristin. I pretty much take whatever you say on this forum as the gospel truth. Just to put some closure on this thread, I’ve just decided it’s not worth chasing the tenants for a grand total of $1,500. My introduction letter went out this week and I made no mention of erasing anyone’s debt. I clearly stated our pay or no stay policy, informed them of the new rules and leases they would be signing and sent them the invoices. I’ll find out what I’ve got come August 5th…

Thanks everyone.

1 Like

@jo13nathan , thank you for your kind compliment!

My Husband and I wish you the very best!

Congratulations on your new Mobile Home Park and for getting your introduction letter out! That is awesome!

We hope that you are able to get all your new Leases signed with no issues.

However, when we took over our Turn-Around MHP, there were some Tenants who just selected not to sign the new Leases.

Thankfully, in South Carolina if you present a Tenant a written Lease that has been signed and delivered by the Landlord and they select not to sign it, the Lease is still in force if the Tenant pays the rent without reservation.

We wish you the very best on your MHP Journey!

As per South Carolina Law:
SECTION 27-40-320. Effect of unsigned or undelivered rental agreement.

…(b) If the tenant does not sign and deliver a written rental agreement which has been signed and delivered to the tenant by the landlord, acceptance of possession and payment of rent without reservation gives the rental agreement the same effect as if it had been signed and delivered by the tenant.

1 Like