Previous Owner Keeping Money?

Question

Hi all,

Just closed on my first multifamily on Sept 6th. With rent already collected for the month of September, I was expecting 80% of that rent being sent to me (24/30 = 0.8). Having just received that check I come to find that all these extra fees have been deducted from the rent.

Total Sept rent: $1675

Fees from rent:

Eviction court fees: $480Management company fees: $120Terminix, beehive: $189Energy bill: $1536 days rent: $334.98

Total: $1276.98

Total rent due to new owner: $398.02

I did not keep on the management company at the time of closing. So correct me if I'm wrong, but aren't all bills that occurred prior to the 6th not my problem and they shouldn't be deducted?

Thanks,Nate

Patrick Liska · Answer

do they have receipts ? did the eviction happen in September, or did he just get around to paying it? if any of that happened in September, then it goes against the September rent roll that may have been collected on the 1st, the PM fee should be broken down into the 30 days as well and you only take out 6 days, that was terminated. demand receipts for the work and the paid energy bill.

Nathan Estochen · Answer

@Patrick Lisa Thomas S.

Ok thanks everyone!

Patrick Liska · Answer

Not your problem, in a sense. that was his business that started and did the eviction, not yours. as Thomas S.said, that should have all been prorated for the closing. but that said, as a business that is an expense that the business had to pay. your Lawyer ,as Greg said, should be able to straighten that out.

Ronald Perich · Answer

My title company takes care of all of this and it should be determined on the HUD-1. The only thing you are responsible for is the HUD-1. You should not be receiving anything directly from the previous owner after the closing.

It's critical that you review the HUD-1 for accuracy. If it wasn't spelled out in the closing statement, then you may not have any recourse but small claims. I agree with others that anything purchased before the closing date is not your responsibility.

I did have one issue with a property I closed on where an existing resident had moved out the day before closing. (Note to self: Never close on the end of the month if you can avoid it) So that lease, and the deposit, wasn't included on the HUD-1 settlement. But I had established enough of a relationship with the previous owner that they sent me the deposit separately and asked me to return the deposit. It worked out for everybody.

John Cohen · Answer

@Nathan Estochen it also depends on the contract you guys signed. Make sure what you are looking for is spelled out. For example I am closing on a deal in November and the closing date is suppose to be November 14th, but do to the obligation of their current mortgage what we negotiated is that we will close on the last business day due to certain payments etc. We have no penalty for not closing on the 14th and on top if they are not ready we actually benefit.  We have also negotiated certain security deposit and management fee deductions.

I would go back to the contract and reach out to your attorney.

Thomas S. · Answer

The seller has no right to deduct any expenses from the rent. The fact that he pays a PM is irrelevant. The tenant has paid his full rent and as the new owner you are entitled to every cent less the first 5 days of the month.

His PM fees of $120 for 5 days means he is paying $720/month for a PM, ridicules.

You are entitled to $1395.75 for September.

His expenses to operate his business are not your responsibility.

Wayne Brooks · Answer

September rents should have been prorated at the closing, on the closing statement. All the charges, except maybe the pm fee since they were still employed on the 1st, are all bogus.

Nathan Estochen · Answer

@Patrick Lisa eviction happened sometime back in July

Thomas S. · Answer

IT should be prorated with no deductions. If you did not have it spelled out in the purchase agreement you may still be able to have your lawyer straighten it out. What you expected is irrelevant, the only thing that matters is what your purchase contract states.

Normally you would demand a prorated rent, no deductions, as well as any and all deposits the tenants have paid.

Previous Owner Keeping Money?

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