MHCO Introduces New Long Term Lease (MHCO Form 5F)

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MHCO

By:

Jeffrey S. Bennett, Attorney at Law
Warren Allen, LLP

 

A Historical Perspective

 

For many years, landlords and tenants alike have been asking for Leases that provide long term stability and predictable expectations. When compared to month-to-month tenancies or commonly used fixed term Leases (e.g., one or two year Leases), long term Leases fulfill those objectives while providing the parties with some much desired peace of mind.

 

Long term Leases have been in use in California and other states for many years. More recently, a small handful of Oregon park owners began offering long term leasing opportunities to tenants. The reported responses to those leasing opportunities have been overwhelmingly favorable.

 

New Forms

 

For the first time, MHCO is making long term Leases available to its members. The new Lease form is entitled, “MHCO Form 5F: Manufactured Dwelling Space Long Term Fixed Term Lease Agreement.” The corollary forms, which must be used in conjunction with form 5F, are entitled “MHCO Form 5G: Manufactured Dwelling Space Utility Addendum” and “MHCO Form 5H: Rent Addendum.”

 

The look and feel of the new Lease is a radical departure from prior formats. The new Lease contains clearer headings, consolidates similar concepts, and guides readers through its contents. The new Lease further adds many clauses that fill preexisting gaps and further clarify the parties’ rights and obligations throughout the term of the Lease. 

 

Familiarization and Independent Reviews

 

Before using the new Lease and the aforementioned corollary Addendums, members are encouraged to read them and to familiarize themselves with their contents. Members are also encouraged to forward a copy of all three forms to attorneys of their choosing, prior to using the Lease package, in order to procure independent opinions and advice. 

 

While MHCO believes the new Lease package complies with Oregon law, others may disagree. MHCO is not aware of any Oregon litigation focusing on the validity of these types of Leases, but that may be due to their recent introduction. In any event, make sure that the Lease and Addendums are within your realm of risk tolerance, should you elect to utilize the same going forward.

 

How to Use the Long Term Lease Package: Rent

 

Assuming you’ve decided to use the Long Term Leases, first compare the Lease language and customizable portions to the park’s goals. Pay special attention to such items as the duration of the Lease and the Addendums that must be – or may be – added. 

 

Since desired Lease durations and rent structures will inevitably vary from one park to the next, Lease sections 7.1 and 19.40 cross reference a Rent Addendum. That Rent Addendum (Form 5H) is a necessary addition to the Long Term Lease, as it sets forth the rent rates for each year of the lease term. 

 

MHCO’s Rent Addendum (form 5H) provides a clearly stated amount of rent for each year of the Lease. However, MHCO simultaneously recognizes that different parks may desire different Rent Addendum language and made sure that the Lease takes that into account. Parks that wish to use formula-based rent tiers or other structures can add their own Rent Addendums to the Lease, and the generic appearance of the title, “Rent Addendum” in Lease sections 7.1 and 19.40 allows for the integration of those customized, park-specific Rent Addendums.

 

The New Utility Addendum

 

A number of lawsuits focusing on utility billing practices have recently jumped into the spotlight. That litigation trend has triggered a change in the way utility billings are being handled via the new Long Term Lease.

 

Utility allocations and billing practices are far more complicated than most landlords have realized. Inserting utility clauses into the Long Term Lease became cumbersome, as the clauses burgeoned in their breadth and scope. Rather than bloat the new Lease with utility provisions, a new Utility Addendum (Form 5G) was created. As with the Rent Addendum, the Utility Addendum is a necessary component of a complete Lease package (which would minimally consist of the Long Term Lease, Rent Addendum and Utility Addendum). 

 

The new Utility Addendum may intimidate first time users. However, a quick perusal of the headings, followed by a more detailed reading of the options listed under each heading, will assuage those fears and reveal common patterns that are surprisingly user friendly. Nonetheless, landlords should take their time filling in Utility Addendums, so as to ensure they’re complete, accurate, and compliant with all relevant laws. 

 

MHCO’s Forms Database 

 

While three new forms have been described in this article, many other forms remain available to customers and may remain part of your Rental Agreement packages. For example, landlords will still provide Rules and Regulations (and check the correlating box in Lease section 19.40) and may use one of the many other Addendums listed in Lease section 19.40. Further, as new forms become available, they too may be incorporated into future Lease packages. 

 

Supporters, Detractors and the Future

 

Anytime a new form hits the market, there will be an inevitable division between its supporters and detractors. Further, most forms tend to evolve over time. (If the foregoing comments weren’t true, we’d be using the same Rental Agreements today that we had in place decades ago.) We anticipate that the Long Term Lease – and its related Addendums – will follow an evolutionary trend, just as so many other forms have done. Alas, MHCO’s goal of providing customers with contemporary forms that recognize the nuances of today’s practices will remain consistent. 

 

Should any member have questions, comments or suggestions regarding the new forms, please don’t hesitate to contact us. 

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