Phil Querin Q&A: Use of the MHCO Retail Installment Contract for the Sale of Pre-owned Homes

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March 15, 2017
Phil Querin
MHCO Legal Counsel
Querin Law

 

Question: In reviewing the new form 2A, the Retail Installment Contract, does it act as the security agreement on the home, or is there something else that must be filed?  Where is the security agreement filed?

 

Answer:    That is a good question.  First, to be clear for our readers, a “security agreement” is any agreement that serves as “security” on the property.  For example, a trust deed is recorded on real property, and secures the promissory note.  If the note is not paid, the holder can turn to the security, and sell it to satisfy the unpaid indebtedness.

 

Since manufactured homes are not real property, the document is different, but the concept is the same.  A Retail Installment Contract is defined in ORS 83.510(12). Its purpose is to retain a lien upon the manufactured home to secure a buyer’s obligations under the contract. Form 2A informs the buyer that the seller/dealer is claiming a security interest in the home for the duration of the contract, and that in the event of default the seller/dealer will have certain remedies to foreclose and/or repossess the home. Upon a buyer’s full payment and performance under the Retail Installment Contract, the seller/dealer is required to mail to the buyer good and sufficient instruments to indicate payment in full and to release all security rights in the home.

 

If the sale transaction is closed in escrow, there is nothing more for the seller to do to secure his/her security interest in the home, as escrow will submit the necessary documents to the Oregon Department of Business and Consumer Services.

 

However, if the seller/dealer does not close the transaction through escrow, they will have to perform the following steps themselves:

 

  1. Submit to the Department of Consumer and Business Services (DCBS) an application for an ownership document on behalf of the purchaser.

 

  1. The application must be on a DCBS-approved form, and include the following:
    1. The year, manufacturer’s name, model if available, and identification number for the home;
    2.  Any existing ownership document for the home or, if none, the homes certificate of origin or other document evidencing its ownership;
    3. The legal description or street address for site where the home is  or will be placed;
    4. If the home is sited in a manufactured housing community, the name of the community;
    5. The name and mailing address of each person acquiring an interest in the home;
    6. The name and mailing address of each person acquiring a security interest in the home; and
    7. Any other information required by the DCBS by administrative rule.

 

  1. If the seller/dealer is unable to comply with Sec. 2, above, within 25 business days of the sale/closing of the home, he/she must provide a notice of delay to the purchaser. The notice must contain:
    1.  The reason for the delay;
    2.  The anticipated extent of the delay; and
    3.  A statement of the rights and remedies available to the purchaser if the delay becomes “unreasonably extended.”[1]
  2.  Fail to comply with the above could result in the seller/dealer becoming subject to revocation or suspension of their license or being placed on probation by the DCBS pursuant to ORS 446.741.
  3. If they fail to comply with Sec. 2, above within 90 days of the sale/closing, they could become subject to criminal penalties under ORS 446.746 (1)(h).
  4. However, if the home buyer is not in compliance with the payment terms of their purchase or security agreement with you by the 20th calendar day after the sale/closing, the seller/dealer is not required to perform the steps in Sec. 2 until 25 calendar days after the home purchaser is in compliance with the payment terms. [Note: This does not excuse a seller/dealer from complying with Sec. 3, above, even though the purchaser is late on his/her payments.]

 

 

 


[1] Note: The statute does not define “unreasonably extended,” nor does it identify any particular remedies you might suggest.  If such a delay occurs, you should contact your own legal counsel, since you do not want to write such a letter to the purchaser identifying their “legal remedies” – that would be up to the purchaser’s attorney.