Working with Owners

When a mobilehome park is put “on the market,” its residents often miss the opportunity to buy it.  Many times they learn the park was for sale after it has been sold to a new “investor-owner.”

Why don’t park owners give the residents a chance to buy the park?

Typically, most owners believe the residents aren’t organized, or can’t get the necessary financing. The group is not “on the owner’s radar” as potential buyers.  This is sad, because often the owner’s best possible buyer is the resident group.

Some park residents believe various state laws gives them a “right of first refusal” to buy the park when it is put up for sale. This is often not true. 

The National Consumer Law Center, Washington, DC believes that manufactured home park resident groups have some form of Notice or Right of First Refusal in California, Connecticut, Florida, Maine, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, Oregon, Rhode Island, Vermont and (until the law was declared unconstitutional) Washington.  However, each of these state laws has different requirements and each provides park groups with various rights only if the group has taken proper steps as defined by the specific law.

For example, in Florida, resident groups have both rights of Notice and Right of First Refusal, but only if there is a resident association (as defined by the law) and that association has given a notice to the park owner.  Even under those circumstances, if a park owner receives an offer to buy the park without having offered it for sale, the only obligation on the park owner is to give the resident association Notice of the sale.  In California, Notice is required (but no right of first refusal) but only to a resident association that sends the park owner a letter each year that it is interested in purchasing the park.  Even then, the Notice requirement only applies if the owner lists the park with a licensed real estate broker.

Each year, bills are introduced in the various state legislatures to give “Right of First Refusal” or “Notice” to mobilehome park residents.  Few of these bills become “law” in any meaningful way.  Often, the primary benefit of the effort to pass such laws is to give the owners knowledge that resident groups want to purchase their parks, or to alert resident groups that someone somewhere thinks the group might be able to do it.   

It is imperative that your group knows and understands your rights under the law and that you take the appropriate steps to preserve those rights.  It is imperative that your group be organized and prepared to respond in an appropriate manner to the owner. Any positive response from the owner would lead to “next steps” that require action by your group.

No matter what rights your group has under the law, it is usually helpful to inform the owner that you are interested in buying the park.   Consider sending the owner an annual letter that indicates (among other items):

  1. The resident group is interested in purchasing the park should the owner desire to sell
  2. The resident group can pay a fair price for the park
  3. The resident group believes it can get financing to buy the park, and,
  4. The resident group believes that sale to the group can provide the owner tax benefits available from no other buyer.

These statements are true, and could help your group’s credibility as a buyer of the park.

Of course, a resident group and a park owner could make a contract giving “right of first refusal” to the residents. These agreements are very rare – park owners see little benefit in signing one.

Even in such cases, there are a number of lessons to be learned about resident purchase rights from the recent experience of the resident group of Brookhaven MHP, a 53-site park in Beaverton, OR.

Oregon parks are closing frequently due to escalating land prices, little or no restrictions on alternative uses such as home, apartment or condo development, minimal legal restrictions on park closures, and general lack of political willpower to fight closures.

Brookhaven residents did about everything right. They had a letter from the owner affirming his interest in allowing them to match an existing purchase offer ($4,320,000, about $81,500 a site). They sought organizational assistance and rapidly got commitments from over 90% of the residents. PMC Financial Services arranged financing for both a first mortgage loan to the resident corporation and individual loans for the residents needing financing for their share in the corporation. Their attorney continued the process of working with the owner’s attorney to formalize a Purchase & Sale Agreement.

Then the owner demanded a nonrefundable $250,000 deposit within a few days.

This was simply not possible. The owner then terminated the process and finalized his deal with the existing offer. Despite a call from the Director of the Oregon Department of Housing & Community Services, the owner refused to reconsider.

The residents subsequently received notice to move their homes.  Today that
park is vacant pending development with new conventional homes.

Hindsight suggests that the owner never really intended to sell the group the park, did not believe they could accomplish the purchase, was avoiding a potential law suit for not acknowledging the group’s right, and used their efforts as a bargaining chip with the new owner.

LESSONS LEARNED

(This is pretty blunt, so take it for what it’s worth):

IF YOUR GOAL IS TO PURCHASE YOUR PARK:

  • You MUST have a neutral or positive working relationship with the owner. If he does not view your group as real people capable of purchasing the park, or if your relationship is adversarial, you will fail in your goal.
  • DO NOT mention (EVER!!!) to the owner such things as lawsuits, condemnation/eminent domain actions or rent control, even if such matters are being considered by the group.
  • You MUST get organized now and develop an organizational and financial
    plan that has the potential for success. Your owner may not be interested in selling the park at this time, and you may have to endure lengthy delays in the process, but you must be prepared.
  • DO NOT use existing resident organizations in the park. Such groups typically have a full agenda and members with other interests. Form a special Park Purchase Committee composed of 10-15 members (representative of all groups within the park) who have the desire and skills to get the job done. Park purchases threaten many residents, so be prepared for suspicion and distrust.
  • DO have your most diplomatic committee members in direct contact with the
    owner. Such members need to be low-key, professional, presentable and gently persistent.
  • DO NOT spend any money. Appraisals, engineering reports, legal retainers,
    etc. accomplish nothing at this stage. If you have any money in the kitty, use it
    for stamps, copying, donuts, mileage and phone calls.
  • DO meet off site (there are churches, libraries, and city buildings available)
    and remember the walls have ears. This is not to say that you should not
    keep the other residents informed. Just be careful. Remember that the park
    manager may be a source for negative and divisive rumors.
  • DO NOT bother to incorporate or to form a nonprofit organization (unless you
    already have one or it is a requirement of state law) at this time. There is
    plenty of time later in the process. DO NOT get trapped into thinking that activities such as this accomplish anything. THEY DO NOT.

STAY FOCUSED ON GETTING THE OWNER SIGNED UP.
DO NOT GET BOGGED DOWN IN DETAILS THAT DO NOT MATTER AT THIS TIME.

  • DO NOT assume that state government, local government or nonprofit organizations will solve all your problems. The folks at these entities are very
    nice and want to help, but they are way understaffed, have little or no funding,
    and simply cannot deal with your transaction unless and until you have a
    signed deal. They typically do not provide all (or even most) of the funding
    you will need. Their usual role in a resident purchase is to provide technical
    assistance and, maybe, secondary funding which mitigates the impact of a
    resident purchase on low/moderate residents.
  • DO develop relationships with your local and county government leaders,
    building departments, zoning authorities, etc. They can provide valuable in-
    formation about your park. Financial assistance is rare, so if it is offered, get
    the details.  Clearly understand ALL of their requirements for any assistance
    they provide.  Remember that public officials look at everything (EVERY-
    THING!!!) from a different viewpoint than yours. They also are loath to take
    political risk unless they have to and unless they have consensus within their
    group.

For more information, please contact:
Deane Sargent at PMC Financial Services
Phone: 415-271-3919
Email Deane »
www.pmcfinancialservices.com