Phil Querin Q&A: Resale Compliance – Fact and Fiction

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July 27, 2016
Phil Querin
MHCO Legal Counsel
Querin Law

Question.  We have a resale compliance form that we give to residents planning to sell their home on site. We recently had a resident tell us we could not dictate what they had to do in order to prepare their home for resale. Is that correct?

 

Answer.  Yes and no. ORS 90.510(4) provides that all rental agreements must contain certain provisions, and that unless the law allows otherwise, they may not be unilaterally amended without the consent of both parties. Subsection 90.510(5) sets forth the contents of the rental agreement, and subsection (5)(i) provides that it must describe:

 

 “(a)ny conditions the landlord applies in approving a purchaser of a manufactured dwelling or floating home as a tenant in the event the tenant elects to sell the home. Those conditions must be in conformance with state and federal law and may include, but are not limited to, conditions as to pets, number of occupants and screening or admission criteria….” (Emphasis added.)

 

ORS 90.680(10)(a) provides that if a landlord receives an application for tenancy from a prospective purchaser “

 

The landlord shall accept or reject the prospective purchaser’s application within seven days following the day the landlord receives a complete and accurate written application. An application is not complete until the prospective purchaser pays any required applicant screening charge and provides the landlord with all information and documentation, including any financial data and references, required by the landlord pursuant to ORS 90.510 (5)(i). (Emphasis added.)

 

ORS 90.680(10)(c provides that if a landlord receives an application for tenancy from a prospective purchaser:

 

(c) The landlord may not unreasonably reject a prospective purchaser as a tenant. Reasonable cause for rejection includes, but is not limited to, failure of the prospective purchaser to meet the landlord’s conditions for approval as provided in ORS 90.510 (5)(i) or failure of the prospective purchaser’s references to respond to the landlord’s timely request for verification within the time allowed for acceptance or rejection under paragraph (a) of this subsection. (Emphasis added.)

 

ORS 90.10(40) defines “Screening or admission criteria” to mean:

 

“…a written statement of any factors a landlord considers in deciding whether to accept or reject an applicant and any qualifications required for acceptance. “Screening or admission criteria” includes, but is not limited to, the rental history, character references, public records, criminal records, credit reports, credit references and incomes or resources of the applicant.”

 

Based upon the above, I believe that since the rental agreement may not be unilaterally modified, you are safer having all of your screening criteria in that document, than putting them elsewhere.

 

If there are other issues, e.g. with the condition of the home, when you learn that it is going to be sold on-site, you can issue a repair notice under ORS 90.620. That statute is quite useful in these situations. It provides that you can give the resident a 30-day notice of termination based upon repair or deterioration issues. Depending on the degree of repair work necessary, the resident can request additional time.

 

While it is probably true that the resident may not want to do the work, if and when a purchaser is found, you may give that notice to the purchaser.  Putting the home up for sale will not extend the compliance period. Thus, in giving the notice to the prospective purchaser, the issue becomes one of negotiation between seller and buyer. If they reach agreement (which will likely include some price concessions), if the work cannot be completed before the pending transaction closes, you can include completion deadline in the new rental agreement. The new purchaser cannot take possession without first signing the rental agreement and committing to a completion date.

 

Does all this mean that you cannot or should not develop a resale compliance form for your community? No. But to be forewarned is to be forearmed. In other words, an existing resident could push back if they did not like the provisions, and they might win that argument. The work-around, is that you should make sure your rental agreement contains a good set of screening criteria. MHCO’s is very complete. And if the home is in need of repair, you can always issue a 90.632 notice, and secure compliance either from the existing resident, or their prospective purchaser. Since you can make this a condition of acceptance of the prospective purchaser, and it will be written into the new rental agreement, I submit that you will be holding the better hand.