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Phil Querin Q&A: Selling Homes and Working With a Third Party Mortgage Banker & the SAFE ACT

Question*: If a community owner sells one or more homes (e.g. those received via abandonment or pre-abandonment) with the help of a Mortgage Loan Originator ("MLO") working for a third party mortgage banker or mortgage broker, after the buyer's installment contract is completed and signed, can the community owner then collect the payments himself? In other words, now that MLO has complied with the SAFE Act, can this receivable be returned to the community owner to collect the monthly payments? My concern is that someone might say that since the owner is now receiving the payments, he is engaged in the business of "loan servicing" - even though it's his own home; he's not in the lending or servicing business; and not receiving or expecting compensation for the act of servicing). It could pose a real financial hardship on community owners if they had to pay a third party for servicing that they can do themselves. The primary reason park owners do this is to fill vacant homes, not to make big money on the sale itself.

Changing 55 and Older Status and Community Rules

Question: A landlord changed the status of the community from "Family" to "55&Older" in June. Management did not change the rules and regulations. However, they did advertise the community as "55&Older -"; identified that status in the community's Application Criteria; and have met the requirements of the "80/20 Rule". Now the community owner is changing the rules. One of the many rule change includes altering the status of the community from "Family" to "55 & Older". It is likely that the residents will have enough votes in the petition to vote down the rule changes. Where does this leave the community's "55 & Older Status"? Does that status actually need to be in the rules?Answer: I believe the rule change is essential. The reason is that it is the primary document (along with the rental agreement) that defines how the park is to operate under a 55+ regime. Here is a brief summary of how these conversions should occur:Currently, in order to qualify for the 55+ exemption under the Fair Housing Amendments Act of 1989 ("FHAA -") and the Housing for Older Persons Act ("HIPA -") of 1999, a community must comply with the following requirements:1. Be intended and operated for persons age 55 or over. This intent can be met by such things as (1) The manner in which the community is described to prospective residents; (2) Advertising designed to attract prospective residents; (3) Lease or rental provisions; (4) The written rules and regulations; (5) Consistent application of the rules, regulations and procedures; (6) Actual practices; and (7) Publicly posting statements describing the facility as a 55+ community. The age verification procedures must be updated every two years. This means maintaining a complete file on each space, including with the tenant application updated information, circulated every two years, confirming the names and ages of all persons who are currently residing in the home.2. Have at least one person who is 55 years of age or older living in at least 80% of its occupied units. This 80/20 rule is critical. Generally, communities strive to be over 80%, since falling below 80% means immediate disqualification. Does this mean that the 20% margin must be reserved for families with children? The answer is "No." In fact, a 55+ community may strive for 100% occupancy by persons age 55 or over. Does it mean that community management must accept otherwise qualified age 55+ applicants when the second or subsequent person occupant is 18 years of age or older? Again, the answer is "No." If desired, the community may increase the age requirement for the second or subsequent occupant to 25 years, 30 years, or even 55+ years. Similarly, the community may impose a more restrictive minimum age requirement than 55. However, it is important for park owners and managers to make sure that all such age/occupancy requirements be properly reflected in the community's Rules and the Statement of Policy - and be consistently applied. 3. Publish and adhere to policies and procedures that demonstrate an intent to be operated as a 55+ community. This requirement is fairly self-explanatory. The community must make sure that in all that it does, from its advertising, rules, rental agreements, and all other policies, it always hold itself out as a 55+ facility. 4. Comply with HUD age verification of occupancy procedures to substantiate compliance with the requirement that 80% of the facility be intended to be occupied by at least one person age 55 or over. The law provides that the following documents are considered reliable for such verification: (1) Driver's license; (2) Birth certificate; (3) Passport; (4) Immigration card; (5) Military identification; (6) Any other state, local, national, or international official documents containing a birth date of comparable reliability or; (7) A certification in a lease, application, affidavit, or other document signed by an adult member of the household asserting that at least one person in the unit is 55 years of age or older. Today, if the community can meet the HOPA requirements in all respects (not because it discriminated in getting there, but simply by attrition of family occupants and the influx of more 55+ residents), it should be permitted to do so. The process would be fairly simple for those communities that exceed the minimum 80% floor (i.e. at least one occupant age 55 or over): Implement a rules change to conform with the 55+ laws, combined with new published policies and age verification procedures, which confirm the community's 55+ status. One caveat: Even though the Oregon landlord-tenant law does permit rules changes to implement material modifications in the parties' bargain, there is a risk of possible argument by families in the community, complaining that they are now limited in the pool of available buyers for their homes. However, this risk can be remedied by "grandfathering"those family residents in, thereby permitting them to sell their homes to other families. This assumes, of course, that by doing so, the community would not jeopardize its 80%-20% ratio. Before proceeding down this path, park owners are urged to contact their own legal counsel familiar with the FFHA and HOPA for advice and direction.

Phil Querin Q&A: Storage Agreement About to Expire Home Unlikely to Sell

Question: A community owner entered into a Storage Agreement on a home in early January 2011. The agreement provides that the home must be removed by November 30th if it does not sell. We are now approaching the end of November, and the community owner does not believe the home will be sold by the end of this month. What's next? Does the community owner take the homeowner to court? Doesn't the landlord have to give one year to the home owner?

Phil Querin Q&A: Storage Agreement About to Expire Home Unlikely to Sell

Question: A community owner entered into a Storage Agreement on a home in early January 2011. The agreement provides that the home must be removed by November 30th if it does not sell. We are now approaching the end of November, and the community owner does not believe the home will be sold by the end of this month. What's next? Does the community owner take the homeowner to court? Doesn't the landlord have to give one year to the home owner?

Landlord Requirements to have licensed plumber or electrician

Question: A landlord recently purchased a manufactured home in his community. He wants to fix the home up and then resell it. Does the landlord have to be a licensed plumber or electrician to do the respective work on the home?

Answer: Yes! It's one thing to be performing repairs on one's own home, and quite another to be doing so on a home intended for re-sale. But keep in mind that in either case, the repairs have to conform to all of the specialty codes - which is a reason enough for using a licensed and bonded contractor in either event. From a liability standpoint, the contractor should be thoroughly vetted through the Construction Contractor's Board. Make sure that the contractor has no complaints or other Board action. If the home is to be sold on an installment contract, make sure a current form of security agreement is used. Make sure the lien is properly filed with the Department of Consumer and Business Services and appears on the title to the purchaser's home until it is paid off. Make sure the Bill of Sale and, if applicable, the retail installment contract, both have extensive AS-IS language, making no express warranties and disclaiming all implied warranties. Make sure the buyer gets their own inspection of the home, inside and out, including all systems such as plumbing, electrical, HVAC, etc. I don't recommend letting the buyer waive the inspection - it could come back and bite the landlord if an unknown defect is later found. The landlord wants the buyer relying on his own expert, not on anything the landlord says. After the sale the landlord does not want any lingering liabilities. The landlord may likely have to be licensed as a dealer under ORS 446.003(8). Review ORS 446.616 for the rules concerning transfer of an interest in a manufactured home. Review ORS 446.611 for the rules regarding perfecting a security interest in the home. See ORS 446.641 regarding notification to the county of a transfer of ownership in the home. The landlord should be careful to record his interest first once it is acquired - and make sure title is clear when he first receives it. Otherwise, he may find himself trying to transfer an interest that the public records show belongs to his predecessor and/or has unreleased liens on it.

Landlord Requirements to have licensed plumber or electtrician

Question: A landlord recently purchased a manufactured home in his community. He wants to fix the home up and then resell it. Does the landlord have to be a licensed plumber or electrician to do the respective work on the home?Answer: Yes! It's one thing to be performing repairs on one's own home, and quite another to be doing so on a home intended for re-sale. But keep in mind that in either case, the repairs have to conform to all of the specialty codes - which is a reason enough for using a licensed and bonded contractor in either event. From a liability standpoint, the contractor should be thoroughly vetted through the Construction Contractor's Board. Make sure that the contractor has no complaints or other Board action. If the home is to be sold on an installment contract, make sure a current form of security agreement is used. Make sure the lien is properly filed with the Department of Consumer and Business Services and appears on the title to the purchaser's home until it is paid off. Make sure the Bill of Sale and, if applicable, the retail installment contract, both have extensive AS-IS language, making no express warranties and disclaiming all implied warranties. Make sure the buyer gets their own inspection of the home, inside and out, including all systems such as plumbing, electrical, HVAC, etc. I don't recommend letting the buyer waive the inspection - it could come back and bite the landlord if an unknown defect is later found. The landlord wants the buyer relying on his own expert, not on anything the landlord says. After the sale the landlord does not want any lingering liabilities.The landlord may likely have to be licensed as a dealer under ORS 446.003(8). Review ORS 446.616 for the rules concerning transfer of an interest in a manufactured home. Review ORS 446.611 for the rules regarding perfecting a security interest in the home. See ORS 446.641 regarding notification to the county of a transfer of ownership in the home. The landlord should be careful to record his interest first once it is acquired - and make sure title is clear when he first receives it. Otherwise, he may find himself trying to transfer an interest that the public records show belongs to his predecessor and/or has unreleased liens on it.

Increasing Late Fees

Question: A landlord currently charges a $25 late fee. She wants to increase it to $50. Can she do that and if so, what kind of notice should she give? Also, can she change the late fee from a flat amount to a percentage (e.g. 10%) of rent? Answer: Here is a summary of ORS 90.260, the late fee statute. It answers the questions posed above. (1) A landlord may impose a late charge or fee, however designated, only if: • The rent payment is not received by the fourth day of the period for which rent is payable; and • There exists a written rental agreement that specifies: o The tenant’s obligation to pay a late charge; o The type and amount of the late charge; and o The date on which rent payments are due, and the date on which late charges become due. (2) The amount of any late charge may not exceed: • A reasonable flat amount, charged once per rental period. “Reasonable amount” means the customary amount charged by landlords for that rental market; • A reasonable amount, charged on a per-day basis, beginning on the fifth day of the rental period for which rent is delinquent. This daily charge may accrue every day thereafter until the rent (not including any late charge), is paid in full, through that rental period only. The per-day charge may not exceed six percent of the amount of the “reasonable lat amount”, described above; or • Five percent of the periodic rent payment amount, charged once for each succeeding five-day period, or portion thereof, for which the rent payment is delinquent, beginning on the fifth day of that rental period and continuing until that rent payment (not including any late charge), is paid in full, through that rental period only. (3) In periodic tenancies (e.g. month-to-month), a landlord may change the type or amount of late charge by giving 30 days’ written notice to the tenant. (4) A landlord may not deduct a previously imposed late charge from a current or subsequent rental period rent payment in order to make the rent payment short so as to issue a 72-hour notice of nonpayment. (5) A landlord may charge simple interest on an unpaid late charge at the rate allowed for judgments (9.00%) and accruing from the date the late charge is imposed. (6) Nonpayment of a late charge alone is not grounds for termination of a rental agreement for nonpayment of rent, but is grounds for termination of a rental agreement for cause by using a curable 30-day written notice of termination.

Cable Company Offers Community Owner Cash and Equipment/Infrastructure Upgrade

Question:  A cable company has offered to install all of the equipment and infrastructure for park-wide cable services at no charge.  We are to receive a one-time payment in exchange for which we give the company an exclusive right to market their services to our residents. They have asked that we sign a written contract which is recordable.  The amount paid is confidential and that portion of the agreement may not be recorded.  There are several provisions that cause us some concern, one of which is whether there might be some violation of the Oregon landlord-tenant law.  What is your opinion?

 

Answer:  Without actually seeing the contracts, I can only address what I know about such agreements in general.  To that extent, this response must be considered general in nature, and not specific to any particular cable company or park.  I do not practice any form of law that deals with the regulation of utilities, so cannot comment on whether this arrangement complies with those laws.  You may wish to contact the appropriate regulator, just to make sure.

 

Oregon Landlord-Tenant Law.  In general, I know of no specific laws that would be directly violated by such agreements.  Cable services are covered under the law as "utilities. -"  Accordingly, ORS 90.532 governs, and you should review it.  I am assuming by your question, that the cable company has the right to contact the park residents and market their services.  Your question does not mention any costs to the park, so I assume the monthly service would be charged directly to the residents, if they choose to subscribe.  It is important that you become familiar with the subscription policies and fees, especially whether they are consistent with those provided outside the park.  Remember that you will be giving the company a "captive audience"and it may be difficult, if not impossible, to terminate the service, once you are under contract.  Will the marketing occur before installation of the infrastructure.  Will there be any minimum number of subscribers?  Will rates change and if so, could residents demand you change companies because their rates are not competitive?  How easily may the residents terminate their subscription services?

 

If you currently provide some type of cable service, either from this company or another, what is your billing arrangement?  If it is buried in the base rent, you may have to deal with whether you should treat this arrangement like a utility "conversion,"such that you must pull the charge out of your base rent, so that the residents are not double-billed.

 

Park Documents.  What do your rules and rental agreements say?  Is there anything in them that could run afoul of the agreements the company is asking you to sign?  While nothing specific comes to mind that could pose a problem, the best way to avoid the unexpected is to verify that there is no risk of some violation of the park documents by the cable agreements, or vice versa. 

 

General Observations. Here is a checklist of general issues you may wish to consider:

 

  • Confidentiality always concerns me.  Why does the company want it?  I suspect they don't want parks "comparing notes"on the deal they cut with their company.  While that is understandable, it poses the risk of inadvertent disclosure.  What is the "penalty"for disclosure?  Do you have to refund the initial payment made?  If so, does that mean the deal is over, or does the remainder of the agreement survive - that is, does the company still have the exclusive right to provide services in the park?  I think I would like to see some language which penalized only intentional or willful disclosures (assuming you have any ability at all to negotiate some of these terms).

 

  • I assume the company will own all of the equipment.  Are there certain limitations on their ability to come and go inside the park?  Specifically, is there a risk of noise, inconvenience, traffic issues, etc?  How long will installation take?  Will the park grounds be restored to their original condition?  Again, remember, once these agreements are signed, you're at the company's mercy on what they do.  Make sure their reputation for service and cooperation is good. 

 

  • What is the term of the agreement? I suspect it contains a provision for automatic renewal, absent one party or the other giving notice of termination?  While that is fair, you have to carefully read the agreements to see if there is any right to terminate without cause.  In other words, can you get out of the deal "just because,"or does there have to be a breach? 

 

  • If either side terminates does the initial payment have to be returned to the company?  If so, you might consider making that payment "nonrefundable"after a certain length of time, say five years.  You want to make sure that if the agreements become unenforceable due to some law or similar situation over which you have no control, that you do not have to refund the money.  That is why I suggest a period of years, after which the money becomes refundable.

 

  • Recording of any agreement is significant.  Once recorded, it will act as a sort of restrictive covenant on the land, and will continue ad infinitum.  In your case, I suspect that the recorded agreement will act as a sort of "floating"easement, giving the company general rights of ingress and egress to install, maintain and repair the equipment.  If the easement rights are not specifically defined, you may want to make sure you understand, in advance, where the equipment will be located.  You want to make sure there will be no risk that the company's right of access interferes with the residents' spaces.  It's easy to record such agreements on the public record, but much more difficult to remove them in the event of a dispute.  Do either of your agreements address that issue?  If you part ways with the company, are they obligated to remove their easement rights from the public record (e.g. by a recorded notice of abandonment of their rights under the agreement)?   Will you have to pay any costs to have this done?

 

  • You want to make sure that if the agreement is terminated the equipment must be removed promptly and the land returned to its general pre-installation condition.

 

  • What about liability?  It is not uncommon for these agreements to have cross indemnification provisions, whereby you agree to indemnify them for your negligence, and they do the same. 

 

  • Are there limitations on damages in the agreement?  Most companies attempt to place limits on the kinds of damages that may be recovered (e.g. prohibitions on punitive damages).  Generally, that is fine, but just make sure that these limits apply just to park ownership, as you cannot limit the residents' right vis a vis the cable company.

 

  • If the company has an exclusive right to market its services to the residents, you want to make sure you know what their marketing efforts will consist of.  You want to make sure it will not include personal solicitation to residents.

 

  • Check with other parks to find out whether they have similar agreements.  I acknowledge that they may not talk about it due to the confidentiality provisions, but suspect the agreement that may be recorded is not "confidential. -"  Your main concern should be whether other park owners are satisfied with this particular company. 

 

  • Before jumping into anything, find out if there are competing companies that may have similar programs.

 

  • How will you deal with residents if they ask you whether you received any payment for giving the company its exclusive rights?  The best response might be that your practice is not to discuss the park's financial arrangement with vendors.  Nevertheless, you should expect someone might press the issue.

 

  • How will the exclusivity provisions in the agreement affect a resident's right to have satellite service?  Does the agreement deal with the possibility that satellite providers may want to market in the park?  You may have some difficulty in preventing a resident from signing up for such service, so this issue should be addressed with the cable company ahead of time.  "Exclusive"is a pretty broad term.  Find out what it entails and make sure that it is sufficiently spelled out in the agreement before you sign.

 

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Medical Marijuana and Landlord Rights

Question: Our community is seeing an increase in the use of "medical"marijuana. Although those using it say they have "cards"permitting them to grow limited amounts, often this limited personal use appears to turn into more than that. We are noticing increasing late night traffic at some users' homes, and believe they are expanding their grow operations in order to sell the marijuana to unauthorized users. What can be done about this? It is quite disruptive to the rest of our community.Answer: A good discussion and summary of Oregon's medical marijuana law is found at the following link: http://public.health.oregon.gov/DiseasesConditions/ChronicDisease/medic… The Oregon statutes are located at this link: http://public.health.oregon.gov/DiseasesConditions/ChronicDisease/Medic… are the Oregon administrative rules:http://public.health.oregon.gov/DiseasesConditions/ChronicDisease/Medic… As you can no doubt see, these laws and rules are focused primarily on legal marijuana use, rather than illegal use. Although Oregon's landlord-tenant law has a statute giving a landlord the right to issue a 24-hour notice to residents engaged in the manufacture, delivery or possession of controlled substances, it does not include "The medical use of marijuana in compliance with ORS 475.300 to 475.346. -"In order to evict the offending resident(s), the difficulty is trying to prove that the resident is actually manufacturing, deliverying, or possessing marijuana in violation of the law. This is particularly tough since the landlord cannot gain access to the interior of the home or the backyard. (If the backyard is concealed by a high fence, I would probably not advise a landlord to take pictures or view the area by using a ladder or other similar means. Leave that for the police.All in all, I have three suggestions: (a) Go the police and see if you can enlist their help in stopping this activity; (b) Find out how to start a neighborhood watch program that will discourage persons driving in to buy drugs; (c) Carefully and patiently begin tracking neighbor complaints of late night activity that causes a disturbance to the other neighbors. Begin by first contacting the offending resident by phone or a personal visit, politely asking that the activity cease. If it continues, write a letter (not a termination notice). If it continues, then issue a 30-day termination notice for violation of ORS 90.740(3)(i), which requires that tenants "Behave, and require persons on the premises with the consent of the tenant to behave, in a manner that does not disturb the peaceful enjoyment of the premises by neighbors." Once this notice is given, if the conduct stops within the 30 days, you may re-issue a second notice with a 20-day non-curable termination if it re-occurs with 6 months following issuance of the first 30-day curable notice. I prefer this approach, since the landlord is not required to "prove"that the resident was actually engaging in the manufacture, delivery or possession of marijuana. All you need to do is establish the circumstances giving rise to the disruption and that it is interfering with the peaceful enjoyment of the other residents. The judge or jury will be able to "connect the dots."

Landlord's Right To Enter Home

Question: In this situation, the landlord (i.e., community owner) owns the manufactured home located on a space in the park. The resident gave a 30-day notice earlier in the month. Rent was paid to the 10th day of the following month. The resident left the home, taking his belongings, but claims he will be back to clean the home up and collect his $400 cleaning deposit. However, the electric company is coming out to shut off the power because the resident owes them for unpaid bills. The landlord is concerned about the pipes freezing, since the local temperatures at night drops into the low 20s. What are the landlord's rights as far as entering the home? Specifically, what can the landlord do to save the pipes? Can the landlord have the electric bill changed to his/her name, enter the property and turn on the heat and power and then turn it off during the day? Where is this covered in the Oregon Revised Statutes? Can the landlord apply the $400 toward funds advance toward the electric bill?Answer: Under this scenario, the landlord is also the owner of the home, so under certain circumstances, access would be permitted. Under the manufactured housing side of the landlord-tenant law, where the tenant owns the home, I would say that the only right of access - even in an emergency - is to the space itself and not the interior of the home. It would only be following the landlord's declaration of an abandonment under ORS 90.675, that he/she would have a right to enter the home itself. Until that right arises, I would probably advise the landlord to stay out of the tenant's home under almost any circumstances, since there is no provision under the manufactured housing side of the law that permits such entry where the tenant owns the home.In our present case, the landlord also owns the home, so his/her rights are the same as any other landlord of an apartment or other rental unit. A landlord's right of access where the landlord owns the home, would be found in ORS 90.322 90.322(1)(b) deals with emergency access:In case of an emergency, a landlord may enter the dwelling unit or any portion of the premises under a tenant's exclusive control without consent of the tenant, without notice to the tenant and at any time. "Emergency" includes but is not limited to a repair problem that, unless remedied immediately, is likely to cause serious damage to the premises. If a landlord makes an emergency entry in the tenant's absence, the landlord shall give the tenant actual notice within 24 hours after the entry, and the notice shall include the fact of the entry, the date and time of the entry, the nature of the emergency and the names of the persons who entered. [Underscore added. - PCQ] As for the application of the security deposit, I'm afraid it's a little more complicated than simply applying it toward monies expended to keep the electricity on. Your question called it a "cleaning deposit." If that is how it was designated, it suggests that it may be applied only toward cleaning of the home. The better term to use in the rental agreement is "security deposit"which is designed to "secure the tenant's performance under the rental agreement." If the rental agreement required that the tenant keep all such utility charges current, then the breach of that provision would entitle the landlord to apply the deposit toward the expenditure of funds to remedy the breach. The security deposit statute is ORS 90.300, and is helpful to read, as it addresses the landlord's duty to account to the tenant for the expenditure of funds within 31 days following termination of the tenancy, or the tenant's departure, if later than the termination.
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