No Pay, No Stay...With a Heart
Sometimes we buy a mobile home park, especially from a mom & pop owner, and find there’s a tenant or two (or 25) living at the park under the good graces of the owner.
Such tenants make partial payments, rack up huge arrears balances and make chunky catch up payments when they get tax refunds or bonuses. Things are casual. Cash flow hates casual; it loves military precision.
But if you’re Pop, know all your tenants personally, and see them at Church on Sundays, it’s easy for tenants to pull at the heartstrings. This leads to fewer eviction filings.
Professional operators don’t run charities, which is why they implement the policy of “No Pay, No Stay”. The tenants are expected to pay their rent in full & on time, no exceptions.
Non-payers are assessed a late fee, given proper pay or quit notices and eviction proceedings start if the tenant doesn’t cure.
It’s harsh, but effective.
The problem with this absolute policy is there are humans on both sides of the equation. People loose jobs, people get horribly ill, people have accidents. Shit happens and nobody (including your employees) wants to kick someone when they’re down.
Therefore, this might be dumb from a business standpoint, but we make rare exceptions to our collection policy. This always on a case by case basis and it’s a high bar to qualify.
Even if you’re a stone cold robot on collections, here are a couple reasons for rationale exceptions:
Slow Turn Around + Sky High Renovations
Mobile homes have much slower turnaround than our apartment cousins. If the home was tenant owned, we have to go through the arduous process of obtaining title, which depending on the state, can take months.
Plus, there’s always some level of renovation that needs to be done. The degree of renovation is correlated to the age and quality of home. This is part for obvious reasons and in part because cheap homes attract tenants willing to use the home for WWE wrestling tournaments. This damage gets exponential if the tenant feels they’ve been wrongly evicted.
Constantly remodeling homes gets real expensive, real quick. This is especially frustrating when renovation budgets exceed the value of the mobile home.
Therefore, limiting turnover in parks with older homes becomes critical (unless you have a large budget for backfilling with new replacement homes).
So what sort of leeway do we give tenants? What exceptions are warranted & is there a way to enforce No Pay No Stay….with a Heart?
Long Term, Well Behaved Tenants Get Priority
Obviously people make mistakes & can be forgetful. It not uncommon for the sweet old lady with the well kept lot to forget to drop her check in the rent box.
If she has a long history of on time payments & no issues, were happy to waive her late fee. Your best and longest tenured tenants have earned a little grace. Ownership doesn’t treat Michael Jordan the same as Luc Longley.
Medical Emergencies
I heard it can be hard to send in your payment if you’re incapacitated at the hospital (excuses, excuses). Therefore we work with tenants with medical emergencies. Obviously if Billy in lot 45 claims to be hit by lightening one month, then a victim of a shark attack the next month…we change our tune.
Private/Public Assistance
In many cases a church, charity, or government agency will help delinquent tenants with rent. We do whatever we can to foster these relationships. We’d halt evictions & settle delinquent balances if the organization agreed to make us whole until the tenant got back on their feet.
Cash for Keys
Unfortunately, we’ve had uncooperative & difficult tenants who seemingly knew more about eviction law than our attorney. Sometimes we wonder if that tenant’s legal research time & talent might not be better used on more productive efforts, but that’s a post for another time.
To try and mitigate these situations, we’d rip the band aid off by offering ‘Cash for Keys’ (cough BRIBE) to turn and resell the home quickly and avoid a drawn out eviction process. It’s never fun to write a check to someone that is basically stealing from you, but in some high regulation states (NY, CA, etc.) this can cap your losses.
Slippery Slope
You’re probably thinking - that type of leniency can spiral out of control. True, it doesn’t always pan out and in many cases you’re just postponing the inevitable.
Honestly, it’s a bit of a balancing act & after trying every option here’s what we’ve found:
As mentioned, the most leniency was given to long-term, well-behaved tenants. If your new tenant at lot 10 asks for a late fee waiver after 3 months living there, hold your ground.
Some tenants will take advantage of kindness. Once word gets out ‘so & so’ got their late fee waived others start asking for the same treatment. Saving these exceptions for truly worthy situations should help with this.
Effort goes a long way. If a delinquent tenant is communicative & applies for help quickly, we may process eviction paperwork a bit SLOWER to allow for a positive outcome. This is probably the highest value tactic to stave off an otherwise preventable eviction.
Don’t get carried away with exceptions and accidentally violate fair housing laws.
CAVEAT + Cheat Code
Having a little compassion with tenants is an art form. This is especially true in softer markets, where collection issues can quickly spiral out of control. Frankly, the softer the market, the fewer exceptions you can afford to make.
You can be more flexible + generous in really strong markets. Why? You almost always get made whole on tenant turnover. The tenant might lose their job and sell their home to a relative (provided the new tenants makes the park whole on lot rent).
This is a lot harder to pull off in soft markets, where you typically eat any collections balance and have to front the capital on the turnover repairs.
Conclusion
As mentioned, many operators don’t allow exceptions under any circumstances. We envy their discipline and the simplicity of this policy, but we still prefer to create room for rare leniency and a touch of humanity.
This costs money short term, but we always thought it was a better long term tactic. Taking a hardline, every-time would make this industry a lot less fun, which would probably force us to exit the business prematurely.
Plus, just a touch of charity for deserving tenants helps with team morale (it’s hard to ask your employees to act as emotionless robots in the face of tenant tragedy) and avoids ugly news headlines (“Trailer Park landlord evicts terminal cancer patient & soon to be single mother of 4 over $50 water charge, news at 11”).
Your mileage may vary, but creating just a tiny bit of space for common sense exceptions is better suited for us vs. absolute policies such as no pay, no stay.
Happy Trails,
MHP Weekly