Phil Querin Q&A: Selling New Manufactured Home for Community Sales

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March 24, 2014

Question. As a park, we would like to purchase new manufactured homes to fill vacant lots. We would purchase them from the manufacturer, set them up, and probably list them through a real estate agent for the marketing. We would not handle the financing, especially under the complicated Dodd-Frank stuff, which would require the prospective purchaser to seek their own means of coming up with the funds to make the purchase. We would not “carry the paper.” We assume that the real estate people are either MLO's themselves, or can point a prospective purchaser into the direction of a MLO. At this point, we believe that we have the financial portion on our side figured out, but run into a couple of legal questions that you may be able to help us with.

Today, I contacted the Oregon Division of Finance & Corporate Securities asking what type of Manufactured Structures Dealer (“MSD”) license we would need to purchase new homes from a dealer and resell them within our park. He explained that the Limited MSD license would suffice. I told him that I had read that the limited MSD license authorized the selling of no more than 10 pre-owned manufactured structures during a calendar year, and that my understanding is only abandoned structures and dwellings purchased by the licensee and sited at the licensee’s park at the time of sale fit under the LMSD license. I asked him if the sale of the structure “sited in the park” meant that when the park owner re-sold the unit the home was required to be sited in the park, or when the park owner purchased the home from the manufacturer the home needed to be already within the park. He told me that that was a good question that no one had asked before but still felt that a LMSD license would be okay.

Upon further checking I see that a MSD (not a Limited MSD) allows a business holding that license to sell new and used manufactured structures. Our questions are as follows:
• What type of a Manufactured Structure License would we need to sell new homes that we have purchased from a dealership or manufacturer?
• Can we as park even hold a MSD License?
• Would our idea of placing the marketing of the home into the hands of a real estate agent release us from having to become or hire an independent MLO?

Answer: The following answers should not be regarded as “legal advice” since this column is intended to be purely educational and for general information purposes. You need to consult your own attorney for a legal opinion. • You are correct about the law; the limited dealer’s license is just for park owners with abandoned homes. There is no provision for dealers with a limited license to sell new homes. According to the law, you need a regular dealer’s license. See, ORS 446.696, 446.701 and 446.706. • I am troubled that the DFCS said they thought it was OK for you to sell new homes under a limited license, since limited licenses are for abandoned homes which are (presumably) pre-owned. Having said that, if you wanted to proceed on the DFCS’s advice, I suspect that if some official later objected, they would have a hard time taking any punitive measures you’re your noncompliance. Of course, you never know. The IRS gives out information all the time, and following their advice is no defense to a violation. Why don’t you ask if they will put their verbal statement in writing? • I agree that the law says a dealer under a regular license (as opposed to a limited license) may sell new and used homes (so long as he/she discloses that they will sell used homes in the application). • Note that you do not need a MLO license to sell homes. You may use a real estate broker to list and sell your new homes. The fact that they are sited at your park and later sold does not make them “resales.” However, to offer or negotiate the financing terms of a purchase money loan, you would need the services of an Oregon licensed MLO (i.e. a mortgage broker or mortgage banker). The real estate brokers can handle the transaction, write it up, etc., but cannot advertise or negotiate specific financial terms were you to carry the paper. • However, if you are going to require that the buyers secure their own financing (i.e. you are not going to “carry the paper”), I see no reason that you need to worry about MLOs, since you will be selling for cash. You will not be taking payments over time. It will be the buyer’s lender who will be acting as the MLO (i.e. the mortgage broker or mortgage banker), and negotiating the terms of the purchase money loan to the buyer. • My reading of Oregon administrative rule 441-446-0203 prohibits dealers from acquiring an ownership interest in a park only appears to apply if you are going to offer or negotiate the terms of a residential mortgage loan, i.e. engage in MLO activities or are doing so under an exemption under the MLO laws. Since buyer financing is going to occur via third-party lenders, I do not believe you are prohibited as a “dealer” from owning an interest in a manufactured housing community. • From my perspective, you would be much safer to have someone with a full dealer’s license handle the sales program. The real estate licensee can list the homes, find the buyers, write up the transactions (making them subject to third-party financing, etc.). The dealer can handle the transaction from there. Footnotes: Footnote 1: 446.696 Renewal of dealer license. A manufactured structure dealer license is valid for three years, but the Director of the Department of Consumer and Business Services may adjust the term of an initial license for the purpose of establishing uniform expiration dates. A dealer may renew a license as provided by the director. The director may renew a license only if the dealer: (1) Delivers to the director a bond or letter of credit that meets the requirements under ORS 446.726. (2) Provides evidence acceptable to the director that the dealer obtained a corporate surety bond as provided in ORS 86A.227 if the dealer employs or intends to employ a mortgage loan originator, as defined in ORS 86A.200, or is otherwise subject to ORS 86A.200 to 86A.239. (3) Certifies to the director in a form and manner the director specifies by rule that the dealer has independently verified that every individual the dealer hired or intends to hire as a mortgage loan originator meets the requirements set forth in ORS 86A.200 to 86A.239 and in ORS 86A.186. (4) Pays the fee specified in ORS 446.721 for renewal of a manufactured structure dealer license. (5) Submits a completed application for renewal in a form approved by the director that includes: (a) The name and residence address of the dealer. If the dealer is a firm or partnership, the application must include the names and addresses of the members of the firm or partnership. If the dealer is a corporation, the application must include the names and addresses of the principal officers of the corporation and the name of the state in which the corporation is incorporated. (b) The name under which the business will be conducted. (c) The street address, including city and county in Oregon, where the business will be conducted. (d) If the location of the dealership is being changed at the time of renewal: (A) For a business that will be conducted in a residential zone, a statement by the dealer that all manufactured structures sold or displayed at that address will meet any architectural and aesthetic standards regulating the placement of manufactured structures in that residential zone. (B) For a business that will offer for sale new manufactured structures that are recreational vehicles greater than eight and one-half feet in width, a certificate from the applicant stating that the applicant will maintain a recreational vehicle service facility for those recreational vehicles at a street address provided in the application. (e) Information the director requires to efficiently regulate manufactured structure dealers and dealerships or other relevant information the director requires. [2003 c.655 §29; 2009 c.863 §30] Footnote 2: 446.701 Issuance of temporary manufactured structure dealer license. (1) If a licensed manufactured structure dealer dies or becomes incapacitated, the Department of Consumer and Business Services may issue a temporary manufactured structure dealer license to the executor, administrator or personal representative of the estate of the dealer or to an agent of the dealer approved by the department. A temporary license issued under this subsection expires after six months, but the department may extend the license for good cause. The department may not extend a temporary license if the license has been suspended or the licensee placed on probation by the department. (2) A person issued a temporary manufactured structure dealer license must deliver to the department a bond or letter of credit that meets the requirements under ORS 446.726. A bond or letter of credit covering a license term of less than one year must be for the sum otherwise required for each year a license is valid and must be renewed if the term is extended. The temporary manufactured structure dealer is responsible for ensuring that, during the term of the temporary license, the dealership and its employees comply with ORS 446.661 to 446.756. and rules adopted thereunder. This subsection does not relieve a manufactured structure dealer licensed under ORS 446.691 or 446.696 from liability for a violation arising out of actions or omissions by the dealer. (3) Notwithstanding ORS 446.731: (a) Issuance of a temporary manufactured structure dealer license does not, by itself, affect the rights or interests of any creditors of the dealer in dealership assets or inventory. (b) Issuance or expiration of a temporary license is not a transfer of interest for purposes of ORS 446.736. (4) A person obtaining a temporary manufactured structure dealer license must pay the applicable fee specified in ORS 446.721 for issuance of a temporary manufactured structure dealer license. [2003 c.655 §29a] Footnote 3: 446.706 Limited manufactured structure dealer; licensing. (1) A person who holds a limited manufactured structure dealer license issued under this section may sell during a calendar year up to 10 manufactured dwellings located at a manufactured dwelling park identified in the license. The manufactured dwellings sold under a limited manufactured structure dealer license must be dwellings that: (a) Have been abandoned as described in ORS 90.675 at any manufactured dwelling park. If the manufactured dwelling is not subject to sale by the limited manufactured structure dealer under ORS 90.675 (10), the dealer must have the certificate of title or registration for the dwelling transferred to the dealer prior to offering the dwelling for sale; or (b) Have been purchased by the park owner from a person holding title, and at the time of purchase by the park owner, were sited in the manufactured dwelling park identified in the license. (2) Notwithstanding ORS 90.525, if a limited manufactured structure dealer sells a manufactured dwelling that was abandoned at a manufactured dwelling park other than the park where the dwelling is being sold, the sale terms for the manufactured dwelling must require that the dwelling is to be sited under a rental agreement at the park where sold for at least 12 months following the sale. (3) Except as provided in ORS 446.741, the Director of the Department of Consumer and Business Services shall issue a limited manufactured structure dealer license to a person if the person: (a) Owns or operates a manufactured dwelling park as defined in ORS 446.003; (b) Submits a completed application for a limited manufactured structure dealer license in a form approved by the director; (c) Delivers to the director a bond or letter of credit that meets the requirements under ORS 446.726, except that the bond or letter of credit must be in the sum of $15,000 for each year that the license is valid; (d) Delivers to the director a corporate surety bond that meets the requirements specified in ORS 86A.227 if the person employs or intends to employ a mortgage loan originator, as defined in ORS 86A.200, or is otherwise subject to ORS 86A.200 to 86A.239; (e) Certifies to the director in a form and manner the director specifies by rule that the person has independently verified that every individual the person hired or intends to hire as a mortgage loan originator meets the requirements set forth in ORS 86A.200 to 86A.239 and in ORS 86A.186; (f) Is 18 years of age or older or is legally emancipated; and (g) Pays the fee specified in ORS 446.721 for issuance of a limited manufactured structure dealer license. (4) If the person is a firm or partnership, the application for a limited manufactured structure dealer license must include the names and residence addresses of the members of the firm or partnership. If the person is a corporation, the application must include the names of the principal officers of the corporation and residence addresses of the officers and the name of the state under whose laws the corporation is organized. If the person is the owner of a manufactured dwelling park, the person may submit a joint application on behalf of the person and a named park operator employed by the person. If the person is the operator of a manufactured dwelling park, the application must include the name and signature of the park owner. (5) A limited manufactured structure dealer license is valid for use at a single manufactured dwelling park. The manufactured dwelling park location must be specified in the license application. A limited manufactured structure dealer may not employ a salesperson. (6) A limited manufactured structure dealer license is valid for two years, but the director may adjust the term of an initial license for the purpose of establishing uniform expiration dates. (7) Notwithstanding subsection (6) of this section, the limited manufactured structure dealer license for the person expires immediately if the person ceases to be an operator or owner of the manufactured dwelling park at which the license may be used. The owner of a manufactured dwelling park shall immediately notify the director if a person licensed under this section ceases to be an owner or operator of a manufactured dwelling park at which the license may be used. (8) Notwithstanding subsections (6) and (7) of this section, if a licensed person ceases to be an operator of the manufactured dwelling park, the park owner may apply to have a corrected license issued to a new operator employed by the owner. A corrected license issued under this subsection is valid for the unexpired portion of the original license term. The director shall charge the fee specified in ORS 446.721 for issuing a corrected license. (9) A limited manufactured structure dealer may renew a license as provided by the director. The director shall renew a license only if the dealer: (a) Submits a completed application for renewal in a form approved by the director; (b) Delivers to the department a bond or letter of credit that meets the requirements described in subsection (3) of this section; and (c) Pays the fee specified in ORS 446.721 for renewal of a limited manufactured structure dealer license. [2003

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