how to reconcile tenant credit/balance on closing

[Ki Lee]

Scenario - 4 units

Unit A - rent $500.  Paid on time                            0 balance

Unit B - rent $500.  Did not pay.                       $500 balance

Unit C - rent $500.  prepaid next month's rent - $500 credit

Unit D - rent $500. Paid on time                             0 balance

For simplicity sake, let's say that the buyer closed on the 31st, the last day of the month.  We don't have to worry about rent proration.

So Unit B tenant did not pay $500 rent, and Unit C tenant prepaid the next month's rent.

On closing, the buyer is due 0 in prorated rent because they closed on the last day of the month. 

Now, for the balances and credits - Does the $500 non-payment and $500 credit cancel each other out where the seller owes the buyer $0 at closing?  Or does the seller still have to pay forward the $500 prepayment from Unit C although there is $500 in uncollected rent from unit B?

[Ryan Daigle]

@Ki Lee if I were the buyer, I would expect a $500 credit for Unit B since that is rent paid for the first month of my ownership of it. And I would not expect to be docked $500 for Unit A since that was unpaid rent for the last month of your ownership. That will be marked down in your books as "bad debt". So a net of $500 coming to me, the buyer.