Former Landlord kept rents mailed post closing. What would you do

Former Landlord kept rents mailed post closing. What would you do

Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes

My partner and I purchased a duplex in Phoenix, Arizona about a month ago.  It was being wholesaled at 102k with both rents equaling $1300 a month.  We closed on April 18 and the rents for the rest of April were pro-rated and credited to us on the closing statement, along with the tenants security deposits.  

We didn't have any access to the tenants prior to the closing.  It took us several days to get their contact information after we had to send one of our team members out to the property to get in touch with the tenants.  

The tenants stated that they sent their rent payments for May to the former landlord already and showed proof (deposit receipts) of doing so.  

I took a while to get a hold of the former landlord and when he finally answered our call he stated that he had not received one of the tenants rents at first.  Then when showed a picture of the receipt for the other rent deposit, he stated that he was charged an extra $300 deposit and pro-rated the rents for may at closing.

After looking over the settlement statement, I saw that the the rents for April were the only ones that were pro-rated and credited and the the tenant's $300 deposits were also credited (as they should be).  But there were no credits for the month of May.  

So I checked with the wholesaler and the title agency who did the closing.  Both stated that the former landlord should send the rents to us because they were rightfully ours.

After trying to contact the former landlord by phone with no success, I sent him a text following up and asking when we should expect to get the rents for May that were sent to him.  He responded saying "I think we are settled on the rents."

What would you do if you were in this situation?

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Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
9y

I'd take his butt to small claims court.  Get him served and make him show up.  The rents were obviously the property of the new owner (you).  

When I close on tenant-occupied property, I require my seller to bring a letter informing the tenants of the ownership change to the closing.  It can be a general letter stating that as of xx/xx/xxxx a new owner/manager named -------- will be stepping in.  My favorite day to close is the 3rd.  Prorated rents to me at closing for that month, then ample time to get things situated going forward.   

Then I mail the letters tenant letters, signed by the seller myself.  A couple days later I mail my welcome letter that has the pertinent instructions that would have prevented this problem.

Don't take this lying down and 'move on' @Shiloh Lundahl.  Take this guy to task.

Good luck and please keep us posted!

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  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    I'd take his butt to small claims court.  Get him served and make him show up.  The rents were obviously the property of the new owner (you).  

    When I close on tenant-occupied property, I require my seller to bring a letter informing the tenants of the ownership change to the closing.  It can be a general letter stating that as of xx/xx/xxxx a new owner/manager named -------- will be stepping in.  My favorite day to close is the 3rd.  Prorated rents to me at closing for that month, then ample time to get things situated going forward.   

    Then I mail the letters tenant letters, signed by the seller myself.  A couple days later I mail my welcome letter that has the pertinent instructions that would have prevented this problem.

    Don't take this lying down and 'move on' @Shiloh Lundahl.  Take this guy to task.

    Good luck and please keep us posted!

  • Real Estate Broker · Portland, ME · Member since 2016 · 63 posts · 55 votes
    9y

    If this isn't a make or break amount of money I wouldn't spend too much time on it. Have an attorney write a letter to the former landlord and then spend your time focusing on adding value or buying another property. I find that when I get caught up on a few hundred dollars I miss out on the bigger picture. When I'm focused on my mission - to build my portfolio - I'm much happier and more productive. 

  • Investor · West Hartford, CT · Member since 2015 · 102 posts · 29 votes
    9y
    I would get your attorney involved. We had the same issue with one of our residents and got the money back. We had our attorney and the sellers attorney both involved and made sure it was returned. The resident actually paid us first and then was reimbursed by the previous landlord. With the proof there shouldn't be any problems.
  • Investor · Riverside, CA · Member since 2015 · 280 posts · 111 votes
    9y

    The first step in going to a small claims court. Avenue is to simply send a letter of demand or demand of payment letter to the old LL. Once that us sent and you do not receive a answer or he declines to settle you can now go file for a case. You will need to serve him and file all paperwork. 

    I'm not a huge sue at the drop of a hat but I have (rarely) taken people to court as a last resort. I use a service that files all the paperwork and does  the service. 

    I don't understand why the guy felt May rent was due to him when the closing was in April. He no longer owned the house in May. 

  • Rental Property Investor · Chandler, AZ · Member since 2011 · 145 posts · 79 votes
    9y

    Before going to court type up and send (certified mail, return receipt requested) a professional looking demand letter. You can google examples of demand letters and believe me they work wonders. 

    Also, just my opinion, if you just 'let it go' you're doing no favors for the next investor who will have to deal with this.

  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Steve Vaughan Thanks for your suggestion on closing on the 3rd of the month.  I really like it and I think I will push for that along with signed letters from the pervious owners. 

  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Jason Kern So it won't make or break me, but it is $1300 which would be a few months of our monthly cashflow.  

    I do agree with you that a letter for an attorney is a good idea.  I will do that.  I also agree that taking the time to focus on this may cost me more money than I could recoup.

  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Zach Scheer Thanks for your comment.  I think legal counsel is a good idea and I will proceed with that.

  • Investor · Riverside, CA · Member since 2015 · 280 posts · 111 votes
    9y

    if it was a few hundred I would say just drop it. $1300 not so much. If you win you can enforce the judgement. 

  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Rob D. The issue I have is  my time is very limited. I am only in Arizona half the week, and during that time I work 10 to 14 hour days.  So to take away and entire day of work to go to court would not make it worth it to me.  My partner said that we should offer him a deal to settle the issue for $800.

  • Investor · Riverside, CA · Member since 2015 · 280 posts · 111 votes
    9y
    Originally posted by @Shiloh Lundahl:

    @Rob D. The issue I have is  my time is very limited. I am only in Arizona half the week, and during that time I work 10 to 14 hour days.  So to take away and entire day of work to go to court would not make it worth it to me.  My partner said that we should offer him a deal to settle the issue for $800.

    Well it's worth a shot. He may settle with you. Really depends on how aggressive you are about your money.  If you were local I would say go after all you can.  But I understand your dilemma. Hope you get some satisfaction 

    I did some long distance rentals. I sold them. the ROI just wasn't there after everyone got a piece of the pie. The saving grace I sold at the last bubble.

  • Investor · West Los Angeles, CA · Member since 2014 · 230 posts · 239 votes
    9y

    @Shiloh Lundahl

    I would at least send him a demand letter.  You may scare him enough to pay up and avoid court.

  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Steve Vaughan, @Jason Kern, @Zach Scheer, @Rob D., @Dovid Staples, @jeanette alder,  So I emailed my lawyer and he responded, "He actually has some criminal liability as I think the tenant could make the case for theft, but best to get it settled and if you are happy with $800 that is what matters."

    So my plan is to offer a deal to settle for $800.  I would rather lose $550 and save all of the time and effort it would take to try to recover it than to pursue it for hours and lose all the income  from the loss of work. 

  • Investor · Riverside, CA · Member since 2015 · 280 posts · 111 votes
    9y

    It can be construed as theft. Good luck. Hope you get something back

  • Real Estate Investor · Tempe, AZ · Member since 2012 · 874 posts · 648 votes
    9y
    The landlord is not going to send you anything. Don't bother with an attorney. File in small claims court for $50 or whatever it is and if the landlord knows he's in the wrong, he'll probably send the money instead of getting a judgement against him. You might not even have to show up if it's settled beforehand. A demand letter will do nothing.
  • Investor · Riverside, CA · Member since 2015 · 280 posts · 111 votes
    9y

    It can be construed as theft. Good luck. Hope you get something back

  • Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    9y

    We learned this lesson a while ago after a similar situation. Always request complete tenant contact info to be provided by the seller at closing. Tough lesson to learn, but it won't happen again. 

  • Levi T.Pro Member
    Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    Simple, off load the problem on the tenants. First tell the tenant they owe you the rent no matter what, they paid the wrong party. This will get them to start screaming at the old LL for you. Next go file a Warrebt In Debt on the landlord down at the court house. Won't take long, someone will produce the money!

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    I would not leave this be. You don't have to spend a lot of time on it. There are a lot of ways to go about it. I would not offer to settle. 

    1. Send, or have your attorney send a demand letter, certified mail. 

    2. Notify the tenant that the rent is unpaid and that the previous landlord has their money. That may be able to generate a criminal complaint.

    3. File a small claims case against him.

    I wouldn't offer to settle until all other avenues were exhausted. 

    Skyline Properties
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  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Michael Noto  thanks for your input. Next time will make sure that we get the complete tenant contact info before or at closing. 

  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Levi T.  I have a hard time offloading the problem onto the tenants because they didn't know about the sale. They were just trying to pay the rent on time.  Then the former landlord decided to take a little bit more profit for himself off the top.

  • Levi T.Pro Member
    Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
    9y
    Originally posted by @Shiloh Lundahl:

    @Levi T.  I have a hard time offloading the problem onto the tenants because they didn't know about the sale. They were just trying to pay the rent on time.  Then the former landlord decided to take a little bit more profit for himself off the top.

     Then just sue the landlord or eat the cost.  This is very common in larger transactions like this.  Tenant can go after that or landlord for illegally collecting rent, you can go out the other landlord for illegally taking your rent. It is how it is handled.

  • Rental Property Investor · Cleveland, MN · Member since 2017 · 518 posts · 354 votes
    9y

    Can the tenant stop payment on the check?

  • Investor · Cleveland, OH · Member since 2017 · 319 posts · 329 votes
    9y

    I also wouldn't try to offload the problem onto the tenants - if the first impression they get of you is of you coming after them for something that isn't their fault, that could set you up for a really bad relationship with them going forward.

    From the sound of it, the seller knew what he was doing when he cashed the checks, jumped at the chance to grab a couple extra bucks, and now he's trying to play dumb. The attitude of "I think the rent thing is settled" should change once he gets a summons.

    You could settle it for $800 if that's more convenient, but it sounds like it should be pretty easy to win in small claims. 

  • Shiloh LundahlPro Member
    OP
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @JD Martin Those are some good ideas.  Unfortunately, I did already offer the $800.  I wrote him an email stating "After speaking with the wholesaler, and the title company, they both stated that the rents that you received for the month of May should be coming to us.  My next step is to contact my lawyer to file court documents to recover the $1300 of rents, and all legal fees associated with this process.  Because we want to be done with this, we are willing to settle for $800.  You can send that check to: ....  If we do not receive payment by next week then we will be filing with the court."

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