Michael A. Parham
INDEX OF ARTICLES (Click on Link):
ADA Suits Against RV Parks & MHC's With RV Sections
Fair Housing—Do Not Adopt Special Rules Regarding Children!
My Tenant Appealed The Eviction—Now What?
What Notices Must I Give Tenants When I Sell My Park?
Handling Security Deposits
2016 Legislature Enacts Tree Maintenance Law
It’s election season! Rules regarding signs and flags in mobile home parks
New Poacher Bill (“Jeffrey’s Law”)
April 4, 2016 HUD Policy of Criminal Background Criteria
Local Rental Taxes
Dangerous Breeds And Fair Housing Laws
MHC Kitchens And Food Codes
Abandoned Personal Property In Mobile Homes
Park Closures Under Fair Housing Laws
Keeping Assessor's Records on RV's
Changes in Use and Mobile Home Relocation Fund
Drivers Licenses For Undocumented Immigrants
What To Do When The Poacher Shows Up (Part 1)
What To Do When The Poacher Shows Up (Part 2)
Park Owned Home Rentals
ALJ Decision Rules Parks Not Responsible For Century Link Trenching or Surface Line Liability
Recent Problems With Century Link/Qwest In Mobile Home Parks
Rental Tax on Utilities
There Is No Qualification/Certification For Assistive Animals!
The Dangers Of Using Old Legal Forms
Update On Rights Of First Refusal To Buy Mobile Homes
Criminal Background Checks Under Fair Housing Law
Tenants Defaming Parks
Utility Charges In MHC's And RV Parks
California Jury Awards $111 Million to MHP Tenants
Buying Parks—Due Diligence
He’s Not an Unauthorized Occupant—He’s Just “Visiting”!
Rental Forms Necessary In Parks
Workcampers And Workampers
Gas Line Encroachments
The Right Legal Document For The Right Situation
When Is A Caregiver Allowed, And Why Do I Need An Addendum?
Liability And Business Entities
Leases And Purchase Options
Closing Parks Due To Change In Land Use
Repossession of Manufactured Homes
MHP Non-Conforming Uses
Handicap Assistive Animals
Unusual Abandonment Situations
Sexual Orientation and Gender Identity Discrimination in the City of Phoenix
Obamacare and Small Employers
MVD Contractors Handling MH Abandonments
Medical Marijuana--Late 2012 Update
Firearms and Fireworks in Parks
Leases With Purchase Options
Drainage in Parks
Selling and Financing Homes in Your Community
What is the Test for Determining a Fair Housing Violation
Early Payment Penalties on New Loans Financing Parks
Rights of First Refusal to Buy Mobile Homes
Financing and Refinancing Apartments and Mobile Home Parks
Probate Free Transfer of Mobile Homes
Employee or Independent Contractor
Sewer and Trash Charge Furloughs in Mesa Repealed
Allowing Disabled Children in Age 55+ Communities
The Articles on this page apply only in Arizona communities and deal only with the application of the Arizona landlord tenant laws.
All articles (c) 2012, 2013, 2014 2015 and 2016, "Today & Tomorrow", Manufactured Housing Communities of Arizona. Reprinted by permission.
ADA SUITS AGAINST RV PARKS & MHC'S WITH RV SECTIONS
Arizona has become a target for lawsuits arising under the Public Accommodations section of the Americans with Disabilities Act (ADA). As the name implies, this section applies to “public accommodations” as defined in the ADA. There are twelve categories of these including places of transient lodging but not including residential communities. Many of the lawsuits have been filed by Theresa Brooke, a wheelchair bound woman who has sued more than 150 Arizona hotel owners for failing to provide wheelchair accessible pool lifts. She is not the only such plaintiff.
Parks have repeatedly asked if they need to bring their pools into compliance with the accessibility standards issued under the ADA. Specifically these standards have expensive pool lift requirements to enable wheelchair bound users to get into and out of the pool. I have said for years that as long as the pool is in a MHC and is limited to being used by residents and their guests and is not open to the public, the ADA and the pool lift requirements do not apply.
Here is an excerpt from a U.S. Department of Justice advisory issued in 1993 involving Title III of the ADA which covers this area of Public Accommodations:
In a mobilehome facility, common areas, such as recreational facilities, for example, that are restricted to the exclusive use of residents and their guests would be considered part of the residential facility and not a place of public accommodation even though places of recreation are listed among the categories of public accommodations under title III. However, where such facilities are available for use by persons other than residents and their guests, they are places of public accommodations within the meaning of title III.
Although 21 years old, I believe this policy remains accurate. As long as the public is not allowed use of the pool the ADA accessibility standards do not apply to it in an MHC.
The same logic would seem to apply to RV Parks and Resorts that are limited to long-term residence and not transient rentals. But those renting spaces overnight or for only a few days may qualify as public accommodations and may be subject to the ADA and one of these lawsuits if they do not have qualifying pool lifts.
Pleadings in some of these cases indicate that the suit is filed on the basis of a phone call by the plaintiff to the community office asking if there is a pool or spa and if so, whether it has a wheelchair lift. If the answer is “no”, the suit is filed.
Any park getting such a call should answer that the park only rents spaces to long-term residents (if that is true) and not get into the details of its facilities over the phone. If someone asks about the minimum stay requirement, respond with the truth. This goes not only for RV space rentals but for park owned home rentals as well. It would be wise to have a minimum one-month stay requirement since that would appear to clearly make the use residential and not transient.
Parks with short-term rentals and no pool lifts should immediately contact an ADA qualified contractor for the purpose of getting the pool and spa brought into compliance.
These plaintiffs seem to target small mom and pop operations who can ill afford the expense of litigation in the homes of getting a quick settlement of a few thousand dollars (which will all go to the attorney filing the suit) and an agreement to install the pool lift.
I am hopeful that parks targeted for these suits that do not fall under the ADA will fight back. But that will be up to the park operator and perhaps its insurance carrier if it has coverage for ADA litigation.
FAIR HOUSING—DO NOT ADOPT SPECIAL RULES REGARDING CHILDREN!
By: Melissa A. Parham
Our office sometimes comes across landlords of family communities (communities that are not 55+) who have sent letters to their tenants requiring that the tenants supervise their children at all times. We can’t stress this enough: SENDING SUCH A LETTER IS ILLEGAL AND CAN SUBJECT A LANDLORD TO SEVERE PENALTIES. We also often see rules and regulations landlords have adopted or signs landlords have posted stating rules that prohibit children from using certain facilities or doing certain things. Such rules also violate fair housing laws.
It is illegal to discriminate against anyone on the basis of “familial status.” Under fair housing laws, “familial status” means one or more children under the age of 18 living with either a parent, a legal guardian, or a designee with written permission of a parent or legal guardian for the child to live with him or her. It also means a pregnant woman or person in the process of securing legal custody of a child under 18.
If a landlord adopts rules requiring supervision of children or restricting children’s use of common area facilities, the landlord is most likely violating fair housing laws. A landlord cannot require parents to supervise their children when the children are outside the home. Likewise, a landlord cannot post signs prohibiting children from using the billiards room, laundry room, etc.
Exceptions are possible when a landlord can justify restrictions on children for health and safety reasons that can be proven with documentation (like literature from the manufacturer of a piece of exercise equipment that is considered dangerous for children of a certain age). If your park is considering adopting any restrictions regarding children, it should consult an attorney before doing so to avoid violating the law.
A good rule of thumb is that park rules and signage should never specifically refer to children or anyone under the age of 18. If a park wants to prohibit playing in the street, its rules should state, “no one may play in the street.” If such a rule is adopted, it must be enforced against everyone—not just children. Adults playing football in the street should be stopped just as children would be stopped. The park should not have signs posted at any community facility referring to children. For example, a sign stating that the billiards room is 18+ would violate fair housing laws, as would a sign requiring supervision of children in the laundry room. If you have such signs, take them down immediately.
Familial status discrimination also occurs when a landlord advertises or presents itself as an “adult community” when it is not actually an age qualified community. A family park should never state or imply that it is geared towards “adults.” It should also never try to steer people with children away from the park by stating that children would not have fun there, or there are not sufficient facilities for children in the park, etc. A landlord should treat everyone applying for tenancy the same and managers should not make comments about the makeup of the potential tenant’s family.
MY TENANT APPEALED THE EVICTION—NOW WHAT?
By: Melissa A. Parham
You served the termination notice, waited the required period of time, and went to court. You and your witnesses testified at trial and you got a judgment against your bad tenant. But, the tenant appealed. What does that mean?
Most eviction actions are filed in Arizona’s Justice Courts, so appeals from Justice Courts are the focus of this article. After a Justice Court enters judgment against the tenant, the tenant has five calendar days (not business days) to file an appeal to the Superior Court. The tenant starts this process by filing a Notice of Appeal. The tenant must also file a notice designating the record on appeal. That notice tells the court what the tenant wants the Superior Court to review.
Normally the record includes the pleadings, the audio/video recording of the trial, and any exhibits admitted. If the tenant chooses not to include certain items in the record, the landlord can file its own designation of the record requesting that those items be included. In deciding the appeal, the Superior Court can only consider the items and evidence in the record. It cannot consider new facts that were not brought forth at trial. Both tenants and landlords often misunderstand this and try to introduce new facts or evidence.
The tenant must also pay a series of costs and bonds. First, the tenant must pay $25.00 for the preparation of a record of the hearing. If the tenant wants to stop the landlord from executing the writ of restitution (removing the tenant from the property), the tenant must pay a supersedeas bond “in the amount of rent accruing from the date of the judgment until the next periodic rental date, together with costs and attorney fees, if any.” A.R.S. § 12-1179(C). If the tenant wants to stop the landlord from collecting the monetary portion of the judgment, the tenant must pay a bond in the full amount of the judgment.
The tenant must also pay rent to the court while the appeal is pending. These payments must be timely made in accordance with the lease. If the landlord wants these rent payments released to it each month, it must file a motion. Unfortunately, Justice Courts can be slow in releasing these monthly payments. We sometimes see overwhelmed courts holding multiple months of rent and eventually releasing them to the landlord all at once.
As long as the tenant makes the payments to the court, even if the court does not timely release them to the landlord, the writ of restitution cannot be executed. But if the tenant fails to make a monthly rent payment to the court, the writ of restitution can be executed and the tenant can be removed from the property.
The tenant is also supposed to pay a cost bond to cover the landlord’s costs on appeal. Unfortunately, the law allows the court to waive or reduce this bond if the tenant presents the court with an affidavit claiming poverty. The landlord is supposed to have an opportunity to object to the tenant’s affidavit, but, in practice, is often not given that opportunity. Regardless, objecting may be a waste of attorneys’ fees because it is usually easy for the tenant to prove that he or she cannot afford the bond.
After all of this is done, the tenant has 60 days to file an Appellant’s Memorandum. This is a brief that should tell the Superior Court what the Justice Court supposedly did wrong. Per court rule, this brief should include citations to the record supporting the facts the tenant alleges, legal citations supporting the tenant’s arguments, and a conclusion stating the remedy sought.
Unfortunately, most tenants represent themselves, disregard these rules, invent their own facts with no basis in the record, and include no legal citations. Normally the Superior Court will not strike tenants’ briefs but will waive the legal requirements to “insure a fair and just determination of the appeal.”
The landlord must file an Appellee’s Memorandum (its brief) 30 days after the tenant’s brief is filed. The landlord’s brief also must include citations to the record, legal citations supporting its arguments, and a conclusion stating the remedy sought.
After the bonds are paid and the briefs are submitted, the Justice Court transmits notice of the appeal to the Superior Court. If the tenant fails to take any of the required steps (for example, fails to timely file the notice of appeal; fails to pay for the transcript; or fails to file his memorandum) the appeal may be deemed abandoned and dismissed.
Once notice of the appeal is transmitted to the Superior Court, the Superior Court requests additional fees from the parties. This occurs after both sides have submitted their written briefs. The Superior Court appeal fee is over $100.00 and, frustratingly, many tenants fail to pay it. If this happens, the appeal is deemed abandoned and is dismissed, and everyone’s time has been wasted.
If the tenant and landlord pay their Superior Court appeal fees, the Justice Court transmits the record to the Superior Court and that court reviews the appeal. The Superior Court may ask the parties to participate in oral argument, but this rarely happens. The parties may also request oral argument in their briefs, but the request is not necessarily granted.
The Superior Court reviews a huge amount of appeals, so it can take months (or even a year) to get a decision. Eventually the Superior Court issues a written decision setting forth the facts of the case, the applicable law, and the court’s conclusion. After the decision is made, either party can move for a rehearing. If no such motion is filed and the Justice Court’s decision was upheld, the case goes back to the Justice Court to release any bonds to the landlord and allow the writ to be executed. If the Justice Court’s decision was reversed, the case goes back to the Justice Court for a new trial.
Appeals can be painful, particularly when the case involves something other than payment of rent and the landlord is stuck with a bad tenant for as long as the tenant makes rent payments to the court. For example, a tenant who is evicted for having a messy space can appeal and stay in the park as long as pays rent to the court. The effect of this is that the park may have to live with a rule-violating, empowered tenant who feels like he can do whatever he wants because he appealed. If the tenant commits a new violation, however, the park can serve a new notice and start a new eviction. If the tenant appeals the second eviction, although he would already be paying rent to the court on the first eviction, he would have to come up with money to pay the landlord’s new costs and attorneys’ fees to the court as part of the second supersedeas bond.
We handle numerous eviction appeals every year. We highly recommend that if your tenant appeals, you consult an attorney experienced in eviction appeals to guide you through this complicated and frustrating process.
WHAT NOTICES MUST I GIVE TENANTS WHEN I SELL MY PARK?
By: Melissa A. Parham
Mobile home parks are being bought and sold left and right. Several clients have asked me whether they must give their tenants notice that the park is being sold. Generally, a park owner does not have to notify tenants before the park is sold to a new owner, unless the tenants have been granted a right of first refusal to buy the park in the Statements of Policy. But, certain disclosures must be made when a park is sold to prevent the old owner and manager from being held liable for the new owner’s actions or inactions.
A.R.S. § 33-1432(A) requires a landlord to disclose, among other things, the following items to the tenant in writing: (1) the name and address of the authorized manager; (2) the name and address of the park owner; and (3) the name and address of a person authorized to act for and on behalf of the owner for purpose of service of process and for the purpose of receiving notices and demands. A.R.S. § 33-1432(B) requires that information to be “kept current” and “refurnished to the tenant upon the tenant’s request.” A.R.S. § 33-1432(C) states that § 33-1432 extends to the new owner and operator. A former owner who fails to comply with the statute becomes an “agent of the landlord” for purposes of services of process and for “performing the obligations of the landlord” under the Arizona Mobile Home Parks Residential Landlord and Tenant Act (the “Act”). In other words, if the former owner fails to disclose the new ownership to the tenants, the former owner can be held liable for maintaining the park and receiving notices. Both the old owner and the new owner should notify tenants of the change.
Additionally, A.R.S. § 33-1435(A) states, “[u]nless otherwise agreed, a landlord who conveys premises that include a mobile home space subject to a rental agreement in a good faith sale to a bona fide purchaser is relieved of liability under the rental agreement and this chapter as to events occurring subsequent to written notice to the tenant of the conveyance.” (Emphasis added). A.R.S. § 33-1435(B) states, “[u]nless otherwise agreed, a manager of premises that include a mobile home space is relieved of liability under the rental agreement and this chapter as to events occurring after written notice to the tenant of the termination of his management, except that such notice shall not terminate any agreement or legal liability.”
In short, when a park owner sells a mobile home park, he must immediately send a written notice to all tenants letting them know: (1) that the park has sold; (2) the date of the sale; (3) the name and address of the new owner; and (4) the name and business address of the new manager or management company. If he fails to do so, he may be held liable for maintaining the premises and for anything that occurs at the premises. The new owner, too, should send out such a notice to the tenants.
We strongly recommend that old and new park owners send this notice to all tenants via certified mail. The statutes at issue do not specify how the notice of sale of the park should be delivered. We therefore refer to the general notice statute in the Act—A.R.S. § 33-1412—which provides that if a notice is sent to the tenant via certified mail, it is deemed received either when it is actually received, or five days after mailing, whichever is first.
HANDLING SECURITY DEPOSITS
By: Melissa A. Parham
We recently represented a client that was purchasing a mobile home park. Shortly before close of escrow, our client learned that security deposits in the park were mishandled. Deposits had randomly been demanded from tenants throughout their tenancy; the amounts demanded exceeded what was legally permissible; and the deposits had not earned any interest. Needless to say, our client was (rightfully) worried about its own liability when it came time to return tenants’ security deposits.
Many parks do not require any security deposit for space rentals. Parks should always require security deposits for park-owned homes. The rules governing security deposits vary depending on the type of rental involved.
Mobile Home Space Rentals
Security deposits for mobile home space rentals are governed by A.R.S. § 33-1431. A mobile home space rental landlord cannot demand a security deposit or prepaid rent of more than two months’ rent. The landlord must pay the tenant at least 5% annual interest on any required security deposit. The interest must either be paid annually or compounded annually. The amount of the deposit cannot be changed after the initial rental agreement is executed. At the termination of the tenancy, the security deposit must be returned to the tenant within 14 days of termination of tenancy and delivery of possession (possession of the space is returned when the mobile home has been removed; alternatively, if the home is sold, no back rent is owed, no damages have been done, and a new tenant begins paying space rent, possession should be considered delivered and the deposit should be returned).
If rent is owed or the tenant damaged the premises (beyond normal wear and tear) and the landlord intends to withhold all or some of the deposit, the landlord must send the tenant a written notice itemizing any deductions taken and informing the tenant of any additional amounts the tenant owes, or, if any of the deposit remains, including a check to the tenant for the remainder.
If a space rental landlord fails to pay interest on a security deposit, fails to return the deposit at termination of tenancy and delivery of possession, or fails to send the tenant a written itemization of deductions taken from the deposit together with any amounts owed, the tenant may file a lawsuit and recover any amounts due to him plus damages of twice the amount the landlord wrongfully withheld.
Park-Owned Home Rentals
A.R.S. § 33-1321 governs security deposits for park-owned home rentals. A park-owned home landlord cannot demand a security deposit or prepaid rent of more than one and one-half month’s rent. Upon a tenant’s move-in, the landlord must provide the tenant with a signed copy of the lease and a form for specifying any existing damages to the home. We recommend that the landlord take dated photographs or a video of the home showing its condition at move-in. The landlord must also provide the tenant with written notification that the tenant has the right to be present at the move-out inspection. The MHCA Green Book contains a form that can be used for these purposes.
For a park-owned home, a landlord is not required to pay interest on the security deposit. Upon termination of tenancy, the security deposit may be applied to the payment of any rent owed and any damages to the home (excluding normal wear and tear). Within 14 days (excluding Saturdays, Sundays, and legal holidays) of termination of tenancy and return of possession, the landlord must send the tenant an itemized list of all deductions taken from the deposit together with a check for the amount due to the tenant (if any). This accounting must be sent to the tenant’s last known address via first class mail. We recommend sending one security deposit accounting to the tenant via first class mail, plus an extra copy via certified mail. Always keep a copy of the security deposit accounting and proof of mailing.
In practice, the landlord should inspect the home immediately after the tenant vacates. The landlord should always contact the tenant and request the tenant’s presence during the move-out inspection (unless the tenant was evicted for criminal activity and the landlord fears him). During this inspection, the landlord should take photographs of any damage that exceeds normal “wear and tear.” The landlord should then prepare an itemized security deposit accounting applying the security deposit to any rent owed and damages (beyond normal wear and tear) to the premises. If the landlord uses vendors for any repairs the landlord should ensure that he or she gets receipts so the receipts may be included with the accounting sent to the tenant. If money is due to the tenant, it should be returned with the accounting; if money is due to the landlord, it should be demanded in the accounting.
If the landlord fails to account and deliver any remaining deposit to the tenant within 14 days, he may be liable for the remaining deposit plus double the amount wrongfully withheld.
Keep in mind that the landlord is required to mitigate its damages. This means that if the tenant vacates the home before the rental agreement’s expiration, the tenant remains liable for the rent for the remainder of the lease term and the security deposit may be used to pay for such rent. But, the landlord must take reasonable measures to re-rent the home to minimize damages. If the landlord re-rents the home after the security deposit accounting has been sent and this results in refundable security to the tenant, the landlord must immediately forward the tenant an updated accounting along with the amounts owed.
Security deposit lawsuits are extremely common, particularly regarding park-owned homes. They are often filed in small claims court and present a huge annoyance for landlords, particularly where double damages can be imposed if the landlord violated the relevant statute. A landlord can never simply forfeit a refundable deposit and must always itemize where the deposit was applied and send an itemization to the tenant within the required time frames.
2016 LEGISLATURE ENACTS TREE MAINTENANCE LAW
The 2016 legislature enacted HB 2304 that was later signed into law by the Governor. HB 2304 adds two new sections to ARS § 33-1434:
D. For new tenants who are moving into a mobile home park, any rental agreements that are executed or adopted after December 31, 2016 shall specifically disclose in writing any requirement that the tenant maintain one or more existing trees located on the mobile home space.
E. Any change regarding the tenant's obligation to maintain any one or more trees located on the mobile home space constitutes a substantial modification of the rental agreement pursuant to section 33-1452.
It also amends ARS § 33-1452 to add a new section B reading:
B. Beginning May 31, 2016, a new rule adopted after the execution of the tenant's initial rental agreement that imposes a reoccurring financial obligation on a tenant is not enforceable against the tenant.
Parks should evaluate their current policies regarding trees and consider the following actions:
1. If you maintain all trees in the park including on tenant spaces and intend to continue doing so, no action is required.
2. If you did not change your tree maintenance policies by May 31, 2016. and subsequent change in park rules shifting this to tenants is not going to be effective.
3. New ARS § 33-1451 (B) is pretty vague whether it concerns a rule like tree maintenance but meeting its deadlines avoids a dispute whether the rule imposes a "reoccurring financial obligation" on tenants.
4. A new rule to this effect should not be considered a "substantial modification" to a rental agreement since according to the latest ALJ decision on the subject, it is already the obligation of tenants to maintain trees under the law (ARS 33-1451 (A)).
5. All parks imposing tree maintenance responsibility on tenants should immediately begin using rental agreement forms with such a provision in them. All new tenants in these parks should have rental agreements with this provision. All renewal rental agreements with current tenants should also be on this form.
NOTE: MHCA rental agreement forms in the 2016 Blue Book contain provisions for tree maintenance by tenants. The 2016 Grey Book has a new section at the end extensively covering tree maintenance responsibilities.
IT’S ELECTION SEASON! RULES REGARDING SIGNS AND FLAGS IN MOBILE HOME PARKS
By: Melissa A. Parham
Tenants sometimes want to post political signs on their mobile home spaces, particularly during election season. Occasionally tenants fly controversial flags on their spaces that offend other tenants. Throughout the year, we hear from parks where tenants have posted unsightly or offensive signs that management would like taken down.
The only statute in the Arizona Mobile Home Parks Residential Landlord and Tenant Act addressing signs is A.R.S. § 33-1452(E)(7). It states that a mobile home park cannot prohibit a tenant from advertising the sale or exchange of the tenant’s mobile home, including the display of a “for sale” or “open house” sign on the home or in the home’s window. That sign cannot be larger than 12 inches wide by eighteen inches long. The statute also provides that tenants may place the same signs on a central posting board in the park. Nothing in the Act addresses political or other signs.
A.R.S. § 33-1452(A) allows a mobile home park landlord to adopt rules and regulations regarding the tenant’s use and occupancy of the premises. Those rules are enforceable if they are intended to promote the “convenience, safety or welfare of the tenants on the premises, preserve the landlord’s property from abusive use, preserve or upgrade the quality of the mobile home park or make a fair distribution of services and facilities held out for the tenants generally.” Rules must: be reasonably related to the purpose for which they were adopted; be applied to all tenants fairly; be sufficiently explicit to be understood; not be intended to evade the landlord’s obligations; and be provided to the tenant before the tenant enters into the rental agreement.
Mobile home park landlords can adopt rules regarding signs and flags to “upgrade the quality of the park.” The justification for such rules would be that certain types of signs and flags are unsightly and damage property values. A reasonable rule regarding signs would be to prohibit all signs with the exception of the “for sale” and “open house” signs required by the Act. A reasonable rule regarding flags would be to prohibit all flags but the current accepted flag of the United States of America.
Parks that already have rules prohibiting signs are justified in enforcing those rules against tenants posting political signs. Tenants may claim that they have a Constitutional right to post political signs, or that the laws governing HOAs allow them to post political signs. As a mobile home park is private property, a park is allowed to prohibit political signs and does not violate the law in doing so. And, laws regarding HOAs do not apply to mobile home parks. In the current political climate, parks would be wise to enforce their sign rules against tenants posting political signs in order to avoid tenant conflicts.
Parks are also justified in prohibiting all flags but the current accepted flag of the United States of America. In adopting such a rule, the park must be specific regarding exactly what flag is allowed. Simply stating that the “American” flag is permitted could lead to arguments from tenants. A rule regarding flags should not only state that the current flag of the United States of America is the only flag permitted—it should also specifically describe that flag as the flag that has 13 alternating red and white stripes and 50 white stars on a blue background. We recently encountered two parks that had rules stating that the “American” flag could be flown, where tenants flew the Confederate flag and argued that it was a type of American flag.
In short, park rules can and should prohibit tenants from posting signs other than “for sale” or “open house” signs. Likewise, park rules can and should prohibit the flying of flags other than the current accepted flag of the United States of America, specifically described as having 13 alternating red and white stripes and 50 white stars on a blue background. Allowing other flags or signs could lead to tenants posting signs that say “Trailer Trash” (a client of ours recently dealt with that sign) or “F*** [Insert Your Park’s Name Here] Mobile Home Park” or flying the Confederate flag.
NEW POACHER BILL (“JEFFREY’S LAW”)
On May 12, 2016, the Governor signed into law HB 2259, creating new restrictions on poachers and giving parks valuable tools with which to deal with them. The effective date of this law will be August 6, 2016.
Poaching means trespassing on the landlord's property to induce residents to violate leases by breaching rights of first refusal, or removing homes without obtaining clearances for removal. A number of characters have gotten into this business and have made a lot of money off of it in recent years. Some will buy the home cheap inducing tenants to violate rights of first refusal in rental agreements, and then lie about the price and offer to sell to the landlord at an inflated price. Some of this conduct is fraudulent.
Some will remove homes without a clearance for removal, and one of the more creative even got a Phoenix Police official to sign a letter, later acknowledged by him to be a mistake saying the poacher had the right to do this.
HB 2259 has two key provisions. To begin with it amends ARS §33-1451 to add a new section C reading as follows:
C. A person shall not enter a mobile home park and begin work on the removal of a mobile home from a mobile home park without first satisfying the requirements for a clearance for removal as prescribed in section 33-1485.01. A person who has not satisfied the requirements for a clearance for removal as prescribed in section 33‑1485.01 and who refuses to leave and remove their removal equipment from the mobile home park on request from the landlord commits criminal trespass in the third degree pursuant to section 13‑1502. This subsection does not apply if the landlord refuses to provide the clearance for removal if the requirements in section 33‑1485.01 are satisfied.
So if a poacher or moving contractor shows up and begins tearing down the home without a clearance for removal first being obtained, this statute applies. A park facing this should prepare and give a “TRESPASS NOTICE TO POACHER OR POACHER’S AGENTS.” A copy is printed elsewhere in this publication. Give one to every single person on-site involved in the activity. Tell them to leave immediately or you will call the police and have them removed and arrested.
If the police are called and refuse to remove the people or say it is a “civil matter”, show them that notice and point out the statute quoted in it. If they still fail to act, insist they call a supervisor. If nothing comes of it, get names and badge numbers and refer it to your lawyer.
Note: If you have wrongfully refused to issue a clearance for removal even though a responsible party was identified and rent through the removal date was paid, this statute does not apply. Be sure you are in the right.
When delivering these notices, take pictures of the vehicles, equipment and members of the removal crew for use in later prosecution if that becomes necessary.
The second part of this law amends ARS §41-2186, the dealer and licensee disciplinary action statute by adding a new basis for the FBLS Department to take disciplinary action against a dealer, salesperson, installation contractor and other licensee, reading as follows:
The doing of any other wrongful or fraudulent act in conjunction with the sale, transfer or relocation of a mobile home in this state.
If you can prove a dealer or one of his salespersons lied to a tenant about being able to sell his home and the right of first refusal; that the licensee fraudulently marked up the price when offering to sell the home to the park; or that the licensee ignored the clearance for removal requirements of the law in removing the home, you can and should file a complaint with the Department. Be sure it is a strong, well documented complaint because we believe the Department will be hesitant to act on any but the most serious, provable violations.
This bill started out a lot bigger but got whittled down during the legislative process. Fortunately the most important elements got through.
Janna Day almost worked herself to death this legislative session. Not only on this bill but in defeating or watering down other bills. There was a lot of anger and second-guessing directed at us this session. It was not unusual for Janna to be writing status reports after midnight to Susan and me. Susan was on top of this process the whole time and spent a lot of time at the capitol. Finally your volunteer Board was wonderful with several members appearing at legislative hearings to testify on both our bills and the several AAMHO bills that were also being considered.
That’s what it takes to be successful, and this year we were successful.
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TRESPASS NOTICE TO POACHER OR POACHER’S AGENTS
If a buyer of a home or contractor shows up to begin preparing a home for removal, but a Clearance for Removal has not been issued, and if they will not leave the Park, prepare this notice and hand deliver it to each individual on the Premises involved in the moving preparation. Try to get names for the blank spaces and include the name of the contractor whose equipment is on the site. If you can’t get names and they refuse to leave you may call the police and tell them those people are trespassing and you want to serve the notice and have them leave. The statute making this a criminal trespass is quoted in the notice. Note: You cannot enforce a trespass if the requirements for a Clearance for Removal have been met but you refuse to issue it.
(Name of Community)
NO TRESPASSING NOTICE
RE: Removal of Mobile Home Located on Space _______ of this Community
YOU ARE HEREBY NOTIFIED, pursuant to A.R.S. §§ 33-1451 (C), 13-1502, and common law that you are not permitted to be on the property of:
Name of Community: _____________________________________________________
Located at: ______________________________________________________________. This community is private property. The representative signing this No Trespassing Notice has lawful control over the community. You are not allowed in the community until you have obtained a Clearance for Removal of the mobile home located on the above referenced rental space. Should you return to or be found in the community at any time from this date forward, you will be removed as authorized by law and you will be prosecuted in accordance with the foregoing unless you have a Clearance for Removal. A.R.S. § 33-1451 (C) provides as follows:
A person shall not enter a mobile home park and begin work on the removal of a mobile home from a mobile home park without first satisfying the requirements for a clearance for removal as prescribed in section 33-1485.01. A person who has not satisfied the requirements for a clearance for removal as prescribed in section 33‑1485.01 and who refuses to leave and remove their removal equipment from the mobile home park on request from the landlord commits criminal trespass in the third degree pursuant to section 13-1502. This subsection does not apply if the landlord refuses to provide the clearance for removal if the requirements in section 33‑1485.01 are satisfied.
A.R.S. § 41-2186 (6) makes the following a disciplinary offense for an Office of Manufactured Housing Licensee: “The doing of any other wrongful or fraudulent act in conjunction with the sale, transfer or relocation of a mobile home in this state”.
DATE:_______________________, 20____ ______________________________Manager
How Served: Personal Delivery _____ Certified Mail _____
APRIL 4, 2016 HUD POLICY OF CRIMINAL BACKGROUND CRITERIA
Set forth below is a summary of the main points in a 10 page HUD policy paper released on April 4, 2016 on the use of criminal background criteria to screen applicants for tenancy.
Blanket policies of refusing to rent to anybody with a criminal record are de facto discrimination, HUD says — because of the systemic disparities of the American criminal justice system.Black men are imprisoned at a rate nearly six times that of white men, and Hispanic men at more than twice the rate of white men.
A landlord violates Fair Housing laws when his policy or practice has an unjustified discriminatory effect, even when he has no intent to discriminate. Under this standard, a facially neutral policy or practice that has a discriminatory effect violates the law if it is not supported by a legally sufficient justification.
Thus, where a practice that restricts access to housing on the basis of criminal history has a disparate impact on individuals of a particular race, national origin, or other protected class, such policy or practice is unlawful if it is not necessary to serve a substantial, legitimate, nondiscriminatory interest of the landlord, or if such interest could be served by another practice that has a less discriminatory effect.
For purposes of the following summary it is assumed that any criminal background criteria has a statically greater effect on protected minorities.
In a fair housing case the landlord will need to prove that the challenged policy or practice is justified – that it is necessary to achieve a substantial, legitimate, nondiscriminatory interest of the landlord. The interest may not be hypothetical or speculative, meaning the landlord must be able to provide evidence proving both that he has a substantial, legitimate, nondiscriminatory interest supporting the challenged policy and that the challenged policy actually achieves that interest.
Ensuring resident safety and protecting property are among the fundamental responsibilities of a landlord, and courts may consider such interests to be both substantial and legitimate. But the landlord must be able to prove that making housing decisions based on criminal history actually assists in protecting resident safety and/or property. Assertions based on generalizations or stereotypes that any individual with an arrest or conviction record poses a greater risk than any individual without such a record are not sufficient.
A landlord with a policy of excluding individuals because of prior arrests without conviction cannot satisfy its burden of showing that such policy or practice is necessary to achieve a legitimate, nondiscriminatory interest. For that reason, a landlord who denies housing to persons on the basis of arrests not resulting in conviction cannot prove that the exclusion actually assists in protecting resident safety and/or property.
In most instances, a record of conviction (as opposed to an arrest) will serve as sufficient evidence to prove that an individual engaged in criminal conduct. But landlords that apply a policy or practice that excludes persons with prior convictions must still be able to prove that such policy or practice is necessary to achieve a legitimate, nondiscriminatory interest.
A landlord that imposes a blanket prohibition on any person with any conviction record – no matter when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then – will be unable to meet this burden.
A landlord with a more tailored policy or practice that excludes individuals with only certain types of convictions must still prove that its policy is necessary to serve a “substantial, legitimate, nondiscriminatory interest.” To do this, he must show that the policy accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not.
A policy that fails to take into account the nature and severity of an individual’s conviction is unlikely to satisfy this standard. Similarly, a policy that does not consider the amount of time that has passed since the criminal conduct occurred is also unlikely to satisfy this standard, especially in light of research showing that, over time, the likelihood that a person with a prior criminal record will engage in additional criminal conduct decreases until it approximates the likelihood that a person with no criminal history will commit an offense.
Accordingly, a policy that fails to consider the nature, severity, and remoteness in time of criminal conduct is unlikely to be proven necessary to serve a “substantial, legitimate, nondiscriminatory interest” of the landlord.
The Fair Housing Act provides that it does not prohibit “conduct against a person because such person has been convicted … of the illegal manufacture or distribution of a controlled substance as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802).” Accordingly, a landlord will normally not be liable for excluding individuals because they have been convicted of one or more of the specified drug crimes, regardless of any discriminatory effect that may result from such a policy.
Landlords should review and revise their criminal background screening criteria in light of this new, 2016 HUD policy statement.
LOCAL RENTAL TAXES
I wrote an article in 2014 about local rental taxes (called "Transaction Privilege Taxes" or TPT's) and the fact that they are typically imposed on all landlord revenues from residential rentals including base rent, late fees, pet fees, guest fees and the like. The purpose of that article was to make clear that unless they qualify for an exemption under the relevant ordinance, landlord utility charges are included in what is taxed.
The TPT ordinances create exceptions for metered utilities that are separately metered and charged to tenants but only if the charges are equal to the exact amount paid by the landlord for the utility being passed through to tenants. This is almost never the case with utilities separately charged by park landlords meaning utility revenues normally must be included when TPT taxes are calculated.
Effective January 1, 2016 the City of Phoenix raised its TPT rate from 2.0% to 2.3%. When we notified clients of this in December we received a lot of feedback indicating some park operators did not even know about the tax, and many others did not understand how it works.
Virtually all municipalities in Arizona have a rental (TPT) tax on residential landlords. If rentals are for more than 30 days the state sales tax does not apply. But municipal rental taxes do. There is a model Arizona uniform ordinance that municipalities have adopted. The relevant provision in the model code reads:
Sec. ___-445. Rental, leasing, and licensing for use of real property.
(a) The tax rate shall be at an amount equal to _______ percent (___%) of the gross income from the business activity upon every person engaging or continuing in the business of leasing or renting real property located within the City for a consideration, to the tenant in actual possession, or the licensing for use of real property to the final licensee located within the City for a consideration including any improvements, rights, or interest in such property; provided further that:
(1) Payments made by the lessee to, or on behalf of, the lessor for property taxes, repairs, or improvements are considered to be part of the taxable gross income.
(2) Charges for such items as telecommunications, utilities, pet fees, or maintenance are considered to be part of the taxable gross income.
. . .
(b) If individual utility meters have been installed for each tenant and the lessor separately charges each single tenant for the exact billing from the utility company, such charges are exempt.
Under these ordinances it has generally been understood that all landlord revenues from rental including base rent, late fees, pet fees, guest fee and the like are subject to the rental tax. That includes utility charges imposed by landlords (subject to the very narrow exception).
Some municipalities have begun auditing landlords to determine if they have been remitting rental tax on utilities. These audits can go as far back as six years. As I pointed out in the earlier article, landlords would be well advised to review what they are charging and remitting rental taxes on.
If you operate a park and are not collecting and remitting a municipal TPT tax at all, you are probably not in compliance with the local tax ordinance. In light of the expanding TPT audits that are going on, you should bring your park into compliance with these requirements.
Many parks have facilities where residents who are not properly using them could be injured. Examples are woodworking and lapidary shops, weight and exercise rooms, and of course pool and spa areas. Parks will often require residents to sign forms requiring them to release the park from liability in case they are hurt while using the facility, and will refuse access to residents who refuse to sign.
These are called “anticipatory releases” because they involve someone releasing the park from liability for injury before the injury occurs—a release in anticipation of possible harm.
Recently the Oregon Supreme Court concluded that a ski area's anticipatory release exculpating it from personal injury negligence claims was unconscionable and therefore unenforceable. The case is Bagley v. Mt. Bachelor, Inc. 356 Or. 542 (2014).
The plaintiff was a skilled snowboarder who was badly injured while using the Mt. Bachelor ski and snowboarding facilities. He alleged his injuries were due to Mt. Bachelor's negligent design and failure to maintain the snowboarding area.
The Oregon Supreme Court rejected the release and applied a multifactor analysis in concluding it violated public policy, was unconscionable and therefore was unenforceable.
The Court did say that not all anticipatory releases would be unenforceable in the state, but would be subject to a case-by-case analysis. Courts will examine the terms of the release and the circumstances in which they were entered. This examination will include whether the release language is conspicuous and unambiguous, whether there is disparity in the parties' bargaining position, whether the release is offered on a take-it-or-leave-it basis or if there is an opportunity to negotiate the terms of the release, whether it is offered in the course of a consumer transaction, whether enforcement would result in a harsh or inequitable result.
Arizona is not Oregon and it is an open question how Arizona courts would deal with this issue. But at the least parks that rely on anticipatory releases should re-examine them.
I have always believed that too much faith is placed in the protections supposedly gained from the use of anticipatory releases. While it probably does not hurt to require them under proper circumstances, there is no substitute for good liability insurance coverage, especially when the park may be sponsoring hazardous activities or operating potentially hazardous facilities.
DANGEROUS BREEDS AND FAIR HOUSING LAWS
Most parks have rules restricting pets. Some prohibit them altogether. Of the rest, some have pet sections; most have size and weight limitations for dogs; and most limit the number of pets allowed. Many parks have rules prohibiting dangerous breeds.
Reasons for Dangerous Breed Restrictions
A number of studies of death and injury caused by dogs show certain breeds have a higher incidence of attacks by certain breeds. Pit Bulls almost always lead the list that usually includes Rottweilers, Chows, Wolf-Hybrids and Dobermans.
But while there is a correlation between breed and frequency of attack, many experts believe that being one of those breeds does not necessarily mean the dog is dangerous. They point to other factors such as environment, preconceived notions of what is dangerous, and demographics of populations owning those breeds, etc.
Others believe the numbers speak for themselves and safety dictates those breeds be excluded from residential areas. Landlords are aware of these and also of pressures from tenants to ban dangerous breeds and adopt rules doing so.
Many individual homeowner insurance policies prohibit homeowners from owning dangerous breeds or exclude coverage for their actions. However it is somewhat of an urban myth that park liability insurance policies require landlords to prohibit tenants from owning them. While some park policies may do so, I have seen many that contain no such provisions.
I believe that a prudent landlord should prohibit dangerous breeds and recommend a dangerous breed prohibition in park rules and regulations. At the very least the tenant with a dangerous breed (and maybe any dog) should be required to produce evidence he has homeowner's or renter's insurance providing coverage for damage caused by the dogs.
It is a violation of Fair Housing laws for any person to refuse to make a reasonable accommodation in rules, policies, practices, or services, when such accommodations may be necessary to afford a person with a disability equal opportunity to use and enjoy a dwelling unit (including mobile home and RV spaces), including public and common use areas.
This can include exceptions to pet restrictions when necessary to allow the disabled resident to have an "assistance animal."
In an April 30, 2013 publication, HUD (which enforces Fair Housing laws) covered this subject. HUD defines “assistance animal” as an animal that “works, provides assistance, or performs tasks for the benefit of a person with a disability, or provides emotional support that alleviates one or more identified symptoms or effects of a person’s disability.” In other words, an “assistance animal” can be any type, breed, or size of animal and does not have to be trained or certified.
The HUD publication provides that when a resident makes a request for reasonable accommodation involving an assistance animal:
The request may . . . be denied if: (1) the specific assistance animal in question poses a direct threat to the health or safely of others that cannot be reduced or eliminated by another reasonable accommodation, or (2) the specific assistance animal in question would cause substantial physical damage to the property of others that cannot be reduced or eliminated by another reasonable accommodation. Breed, size, and weight limitations may not be applied to an assistance animal. A determination that an assistance animal poses a direct threat of harm to others or would cause substantial physical damage to the property of others must be based on an individualized assessment that relies on objective evidence about the specific animal's actual conduct - not on mere speculation or fear about the types of harm or damage an animal may cause and not on evidence about harm or damage that other animals have caused.
Essentially if a resident requests an exception to a pet restriction to allow a dangerous breed assistance animal, and backs the request up with medical evidence of the need for the dog, the landlord is usually going to need to approve it unless there is evidence that that particular dog has caused injury or damage in the past.
Before an eviction can be filed, a proper notice of termination of rental agreement or demand for possession must be properly served on the tenant or occupant. The required time periods must have expired. The violations must not have been cured or the rent paid. And he must still be living in the community, or in the case of space rentals, his home must still be on the space regardless of whether or not he is still residing in it.
If a tenant has moved out but abandoned his home, we normally do not file an eviction. Send a ten-day notice of abandonment to the lienholder or legal owner if different from the tenant.
If the tenant is the owner of the abandoned home and it is free and clear or the lienholder fails to respond to the abandonment notice, pursue a landlord lien sale or bonded title remedy instead of an eviction.
In the case of a park-owned home rental, a tenant is not deemed to have surrendered possession of the home until he has vacated and returned the keys.
This article is limited to evictions filed in Justice of the Peace Courts.
Filing the Eviction
If the total rent due is less than $10,000, the eviction should be filed in the local J.P. Court. When rent due exceeds $10,000, the eviction must be filed in Superior Court.
Once the termination notice or demand for possession has matured, a summons and complaint must be prepared. The summons contains the trial date and is directed to the defendant telling him he is the subject of an eviction action. It tells him when the initial court date is. The case will be set for the initial appearance a few days after the case is filed.
The complaint will identify whether it is a rental eviction or some other kind of case and will give the reason the landlord is seeking to evict the residents. In addition a copy of the notice of termination or demand for possession given the tenant or occupant must be attached to all copies of the complaint.
The court approved Residential Eviction Information Sheet must be attached to all copies of the summons.
The court will file the original of the complaint upon payment of a filing fee. The clerk will provide copies for the process server who must serve the defendant with the summons and complaint. The law requires the defendant to be served several days prior to the trial.
Trial Court Proceedings
On the initial appearance date, the judge will review the case file and be sure that everything required by the law or eviction rules is in it. If the defendant does not show up, the judge will confirm that the termination notice or demand for possession is in proper form, that it correctly informs the defendant of the reason for the eviction, that all required time limits have expired, and that there is no apparent reason to delay granting the eviction judgment.
If the defendant appears, the judge will ask him if he has any legal grounds to contest the eviction. Hard times, financial problems, and unrelated disagreements with the landlord are not legal grounds to dispute it. If there is no legal basis to dispute the eviction, the judgment will be signed. If there are, the case will usually be set for trial a few days in the future at which time both sides will present their cases and the court will decide.
Defendants sometimes file motions to vacate or set aside after eviction judgments are entered. The law provides that such motions shall not delay enforcement of the eviction judgment unless a judge first finds good cause.
A losing party has five (5) calendar days after the judgment is signed to file a notice of appeal. A defendant wishing to appeal must post several bonds and is supposed to pay rents while the appeal is pending. Under internal court rules these payments are supposed to be made to the court. This includes the posting of all bonds and the payment of rent.
A timely filing of a notice of appeal will suspend the enforcement of an eviction judgment if the proper bonds are posted. A notice of appeal filed by a defendant transfers the case to the Superior Court that will hear the appeal. Before the file actually gets sent to the Superior Court, under court rules, all appeal papers continue to be filed with the J. P. Court.
The time for filing a notice of appeal is not extended by the filing of a motion to vacate or set aside.
If a material and irreparable breach eviction judgment is appealed, and the dangerous situation continues after the notice of appeal is filed, the landlord may file a motion seeking to lift the stay of execution of the writ of restitution. In this case, the J. P. Court is required to treat the motion as an emergency matter and to conduct a hearing on the motion within three days.
The law is unclear whether the court can allow the writ of restitution to be enforced under these circumstances if the defendant has paid rent to the court. If the motion is granted, the writ will be enforced by the constable and the defendant removed despite the pendency of the appeal.
Enforcement of Judgments
Most judgments do two things; they award a sum of money to the landlord (e.g., for rent, court costs and attorneys fees); and they award possession of the premises to the park (i.e., they order the defendant to vacate).
Most of the time money judgments are simply not collectible. If a defendant had money, he would usually not be evicted in the first place. Moreover, Arizona law creates exemptions for most property that people normally own.
The judgment for possession will order the defendant to vacate and restore possession of the space to the landlord within five calendar days after it's entry. An exception is a material and irreparable eviction where the defendant only has 24 hours to move out.
This means the defendant and all of his belongings must be removed from the premises within five calendar days (24 hours in a material and irreparable eviction).
If the defendant is not out by then, the landlord may then have a writ of restitution issued. A writ of restitution is a directive from the court to the constable to forcibly, if need be, remove the residents and their belongings from the premises.
If the landlord waits more than 45 days to apply for a writ, he must give a satisfactory explanation why it took so long. If any money was accepted during that time, the explanation needs to include what it was for and that it did not create a new tenancy. The Eviction Rules allow issuance of a writ without explanation for 45 days after entry of the eviction judgment.
The normal practice of the Constable is to visit the defendants, give them a few days to move, and tell them they will be forcibly removed if they don't leave voluntarily. Most of the time this will be the end of it; the defendants will move.
If the defendants refuse to move, it is then up to the Constable to forcibly remove them. Unfortunately, the landlord must make the physical arrangements and pay the costs. Also the park needs to have lockout devices to go over the doorknobs for the Constable (sometimes called “cuffs” or “clamshells”). Many locksmith shops sell these.
At this time, utilities provided by the landlord can be disconnected.
If former occupants return to the home after the constable had removed them, they can be arrested for criminal trespass. Unless they have the landlord's permission to enter (for example to get their possessions), the landlord should call the police if they are seen in the home.
This does not mean they can't visit other people in the community; only that they cannot go back into the home without the landlord's consent.
Occasionally, a defendant will file for bankruptcy. Two things result from bankruptcy filings. First, rent due at the date of filing will be discharged (forgiven) in a Chapter 7 bankruptcy, or paid only in part and installments under a Chapter 13 plan. Second, the law imposes the "automatic stay" which prohibits the landlord from evicting for grounds existed at the time the bankruptcy was filed.
Rent due at the time of bankruptcy filing should usually be written off (pre-petition rent). As of the date the bankruptcy was filed, the tenant owes nothing.
Rent coming due after filing (post-petition rent) is owed. If not paid, the landlord needs to apply to the Bankruptcy Court for an order lifting the automatic stay and permitting it to proceed with the eviction. Once the stay is lifted a five or seven day non-payment of rent notice can be served, and thereafter, an eviction action can be filed. Do not serve the five or seven day notice before the stay has been lifted.
MHC KITCHENS AND FOOD CODES
A recurring problem in MHC's involves the use of kitchen facilities. Most parks have clubhouses with kitchens in them that are available for tenant use. Often these kitchens are not equipped with commercial grade appliances but are more in the nature of large kitchens found in private residences. However they are not used the way private residence kitchens are used.
Typically they get used when either the park or tenant organizations sponsor social functions. Some of these functions are in the nature of "pot luck" with residents bringing their own food already prepared for serving. Others involve the use of kitchen facilities for actual food preparation. A few functions are free or paid for entirely by the sponsoring organization. But most charge something to those attending them.
Private residential kitchens are, of course not regulated by the government. However public kitchens, most notably restaurant kitchens are regulated.
MHC's over the years have had to deal with local health department inspections and have often been told to close the clubhouse kitchen or become licensed to operate a public kitchen. Generally the inspections are triggered by resident complaints.
These facilities fall under a number of regulations. To begin with there are Federal standards that appear in Federal Food Code Recommendations of the United States Public Health Service, Food and Drug Administration. State and local health codes generally adopt various versions of these as their standards. Arizona at the State level has adopted the 1999 version. These apply to "Food Establishments" which are defined in the Food Code as follows:
(a) "Food establishment" means an operation that stores, prepares, packages, serves, vends, or otherwise provides food for human consumption:
(i) Such as a restaurant; satellite or catered feeding location; catering operation if the operation provides food directly to a consumer or to a conveyance used to transport people; market; vending location; conveyance used to transport people; institution; or food bank; and
(ii) That relinquishes possession of food to a consumer directly, or indirectly through a delivery service such as home delivery of grocery orders or restaurant takeout orders, or delivery service that is provided by common carriers.
There are a number of exceptions to the definition mainly having to do with people preparing food at home for consumption at charitable or social events. The Federal Code is enforced by local, state, or federal enforcement bodies or authorized representatives having jurisdiction over the food establishment. These "Regulatory Authorities" have the authority to modify the federal code requirements with prior federal approval.
Arizona's Department of Health Services is a "Regulatory Authority" and has adopted the Federal Food Code with some modifications in the Arizona Administrative Code. The State Code differs from the Federal Code by including the following additional exclusions:
A. Except as provided in subsection (B), this Article applies to any FOOD ESTABLISHMENT.
B. This Article does not apply to the following, which are not subject to routine inspection or other regulatory activities by a REGULATORY AUTHORITY:
. . .
9. Food or drink that is:
a. Served at a noncommercial social event that takes place at a workplace, such as a potluck;
. . .
c. Not potentially hazardous and prepared in a kitchen of a private home for occasional sale or distribution for noncommercial purposes;
So the State Code makes an exception to the definition of "Food Establishment" for "pot lucks" at workplaces. It is debatable whether a MHC kitchen qualifies as a workplace but the other exception would seem to cover pot lucks anywhere--non-hazardous food prepared in a private home kitchen.
Ultimately local health departments enforce these regulations. They too can make modifications in the regulations. Pima County for example has the following in its MHC regulations:
8.20.090 - Food service requirements.
A. The storage, preparation and serving of food shall comply with the requirements of Chapter 8.08.
B. A separate inspection shall be made of the food operation in accordance with Chapter 8.08.
C. This rule will not apply to occasional "pot luck" gatherings attended by park tenants and guests.
There is no definition of "pot luck" in the Pima County regulation. For lack of anything better, it may be well to follow another State's definition. In the fall of 2004, the Washington State Board of Health decided to exempt potlucks, both private and open to the public, from the state's food code. It defined a potluck as an event where:
(a) People are gathered to share food;
(b) People attending are expected to bring food to share;
(c) There is no compensation provided to people for bringing food to the event;
(d) There is no charge for any food or beverage provided at the event; and
(e) The event is not conducted for commercial purposes.
Maricopa County does not seem to have a "pot luck" exception to the treatment of MHC kitchens as "Food Establishments" like Pima County does. I cannot find any such exception in the Pinal County Food Code either.
It appears that with the exception of Pima County, MHC kitchens need to satisfy local requirements pertaining to "Food Establishments" before they can be used to stage social events including "pot lucks". There may be "pot luck" exceptions in the other 12 counties I did not review but it would be advisable to check with the local county health department before allowing such use.
Food Codes are health and safety codes. They impose requirements dealing with sanitation, food handler training, food preparation and storage, etc. They get into such things as facility design and layout and the kinds of equipment required in these kitchens. Violations can result in citations, fines and "cease and desist" orders.
Local health departments may have special event permit licenses available and MHC kitchens may satisfy requirements necessary for these. The local county health department should be consulted before allowing any such event.
ABANDONED PERSONAL PROPERTY IN MOBILE HOMES
Park Owned Rental Homes
1. After Eviction
Park owned homes that are rented out are covered by the Arizona Residential Landlord and Tenant Act that begins at ARS § 33-1301. There are forms covering park home rentals in the MHCA Green Book including forms referred to below.
If you have obtained an eviction judgment, the judge will issue a writ of restitution either five days or, in the case of an immediate eviction, 24 hours after the judgment is entered, allowing a constable to lock the tenant out of the home. However the landlord must take certain steps to deal with the tenant’s belongings.
Generally the landlord must hold the property for 21 days. The landlord must prepare an inventory and promptly notify the tenant of the location and cost of storage of the personal property by sending a notice by certified mail, return receipt requested, addressed to the tenant's last known address and to any of the tenant's alternative addresses known to the landlord.
If the tenant does not make contact and the waiting period expires, the landlord may sell or otherwise dispose of the property but first should give the tenant a notice of declaration of abandonment of personal property.The landlord shall hold the tenant's personal property for an additional period of ten days after the landlord's declaration of abandonment.
The notices should include the following: a copy of the property inventory; the location; the cost of storing the property; and the deadline for claiming it.
The abandoned property may be stored in the former tenant’s rental unit, any other available unit on the premises, or off the premises if there is not another available rental unit. The landlord must use “reasonable care” when holding a tenant’s property.
To avoid problems, be careful when moving and storing the tenant’s belongings until the tenant reclaims them or they are disposed of.
If the tenant returns after receiving one of the notices, the landlord need not release the property until the he pays the costs of moving and storing it. There are exceptions to this rule for certain items, which the tenant may take back at any time: clothing, the tools, equipment, or books of a trade or profession, and identification or financial documents, including those related to immigration status, employment status, public assistance, or medical care.
If the tenant offers in writing to his other property and pay for any charges related to removing and storing the items, the landlord has five days to return the property in exchange for the payment.
Arizona law requires the landlord to mail any excess proceeds from selling the property to the tenant at the tenant’s last known address. The landlord must keep the money for the tenant for at least 12 months.
2. Non-Eviction Situations
If a tenant simply disappears, dies, or vacates after the tenancy ends, and property is left behind in the home, the landlord may not dispose of property left behind unless he first gives the tenant notice of abandonment of the premises and waits for five days. Send the tenant a notice by certified mail, return receipt requested, addressed to the tenant’s last known address and any other known alternate addresses you know of. A copy must be posted on the front door of the home.
Five days after notice of abandonment has been both posted and mailed, the landlord may retake the dwelling unit. The landlord should then send a declaration of abandonment by certified mail, return receipt requested, addressed to the tenant’s last known address and any other known alternate addresses you know of. A copy must be posted on the front door of the home.
The declaration of abandonment must give the location of the property and advise that the tenant has ten days to claim it. If the tenant responds in writing before the landlord disposes of the abandoned property, the tenant has five days to reclaim the belongings, but first must reimburse any costs incurred in moving or storing the items. The landlord shall hold the property for a period of ten days after the declaration of abandonment.
The landlord may store the abandoned property in the tenant’s former rental unit or any other available unit, a storage space the landlord owns, or off the premises. The landlord must use “reasonable care” when holding the tenant’s property.
After the ten-day waiting period is over, the landlord can sell the abandoned property to cover anything the tenant owes including the costs of storing and selling the items. If the tenant returns within ten days of receiving the notice, the landlord need not release the property until the tenant pays the costs of moving and storage except for the following items, which the tenant may take back at any time: clothing, the tools, equipment, or books of a trade or profession; and identification or financial documents, including those related to immigration status, employment status, public assistance, or medical care.
The law has no provisions dealing with abandoned personal property of a tenant in a home on a space rented by the landlord. The reason of course is that the tenant typically owns the home (or at least the landlord does not own it) and property of the tenant in the home is in his own home.
In fact the Arizona Mobile Home Parks Residential Landlord and Tenant Act that begins at ARS § 33-1401 has specific provisions prohibiting landlords from even entering tenant homes in parks.
However the problem of what to do with abandoned tenant personal property arises in situations where the landlord obtains ownership of the home and discovers personal property left behind in it. Examples are homes where title has been obtained as a result of a landlord lien sale or bonded title application following abandonment of the home. Other examples are surrenders of titles by tenants moving out and repossession of landlord financed homes.
Since there are no statutory provisions dealing with personal belongings of tenants is such situations, and since there has been some sort of landlord-tenant relationship in the past resulting in those items being left in the home, the logical thing to do is follow the same procedures and statutes mentioned above for park owned home rentals—the Non-Eviction Procedures outlined above. The same kinds of notices and procedures referred to above would be followed using forms in the MHCA Green Book.
Selling Abandoned Items
We usually recommend conducting a public auction of any abandoned personal items under any of the above scenarios. A notice of sale should be prepared identifying the items to be sold and setting a time and place of sale (usually where the items are being kept). It should be published in a newspaper of general circulation in the County where the park is located at least twice with the last publication at least five days before the date of sale.
PARK CLOSURES UNDER FAIR HOUSING LAWS
In Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 576 U. S. ____ (2015),the Supreme Court held that “disparate impact" claims can be brought under the Fair Housing Act.
"Disparate impact" goes beyond intentional discrimination and prohibits normal business practices that have discriminatory outcomes. "Disparate impact" punishes practices not intended to discriminate, but which statistically have a greater impact on a protected class than on others.
Under this decision, if such a result occurs because of an action taken by a park, a protected class disproportionately impacted by the action or an individual member of the class may make a fair housing complaint or file a discrimination suit in court. Under "disparate impact" procedures the legal burden shifts, once the impact on minorities is shown, to the landlord to prove the action is necessary to achieve legitimate, non-discriminatory interests.
In its opinion the Court tried to add some protections against abusive claims, stating that "practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system" may be legitimate. Housing providers cannot be liable under a "disparate impact" theory if they can show that a policy is necessary to achieve a valid goal.
The Court also opined that profit is a valid interest.
The opinion went on to say that "disparate impact" claims couldn’t be based solely on statistical disparities. A complainant would have to show that a housing provider's policy actually caused the disparity.
This industry has been operating under the assumption that "disparate impact" is the operative test for discrimination despite past misgivings about whether that is what the law intended. This decision should thus not cause a great number of new problems in day-to-day operation of parks.
However a large number of old parks with lots of pre-HUD homes are either closing or about to start the closure process. While these closure decisions are driven by legitimate interests (high vacancies; dearth of homes that will fit in and are affordable; ancient infrastructure; neighborhood development, etc.), the fact is that these parks also have cheap rents and low home prices, and as a result are occupied largely by economically disadvantaged and often minority populations. When they close, the people required to find new homes and move are going to be largely minority populations.
Shortly after the Supreme Court released this decision I was contacted by the Arizona Attorney General's Office for information on the large number of park closures it was hearing about. The concern of course was over the effect this would have on minorities being displaced. I explained the economics leading to park closures and equally important, the extensive closure assistance offered to parks and their tenants by MHCA.
MHCA offers assistance in this area by coordinating meetings with tenants to explain relocation benefits, to bring other parks in the area in to help relocate tenants, to bring home buyers, sellers and relocation contractors in, to answer questions, and to do everything possible to make this difficult process as pain free as possible for residents of these communities.
Closing parks entails being sensitive to the impact of residents being displaced and it is just good business to ease the process for them as much as possible. In so doing it may also be possible to avoid "disparate impact" claims that which may wind up in the park's favor will nonetheless be difficult and expensive to deal with.
In the case of change in use and redevelopment of older parks, if the majority of the people displaced are protected minorities, the actions can be viewed as having a "disparate impact" on a protected class under the fair housing laws. A fair housing complaint could be the result. Hopefully the Supreme Court language endorsing such actions for nondiscriminatory valid business reasons will enable such complaints to be defended
By: Melissa A. Parham
Several years ago Mike wrote an article titled "Trees" about tree maintenance responsibility in mobile home parks. It appears in the 2007-2011 Articles page on this site. As he pointed out trees are expensive to maintain. Palms are common, grow tall, get messy, need annual trimming, and climbing one can be dangerous. Maintaining trees can be expensive. The bigger the tree, the more expensive it is to keep up.
Some parks require tenants to maintain trees on their rental spaces while others still do it themselves and yet others require tenants to cover the expense when the park has it done.
ARS §33-1434 of the MHP Landlord Tenant Act requires landlords to maintain the “premises”, defined at ARS §33-1409 as the entire park. But ARS §33-1451 requires tenants to maintain that part of the “premises” that they rent--their spaces.
In 2010, an ALJ decision confirmed this saying tenants are responsible for maintaining trees on their spaces. The key passage in the decision read:
9. The Petitioners in this matter failed to establish that the applicable law requires the mobile home park landlord to be responsible for the maintenance of the space once it has been rented to a tenant. To the contrary, the tenant has this responsibility, which includes the responsibility to trim the trees that grow on the rented space, regardless of who planted them.
Since then AAMHO has been pushing for the legislature to amend the law to relieve tenants from this obligation. The bills introduced in the years since the decision have varied in their requirements and all have been defeated thanks to MHCA lobbying efforts. However it is possible a bill could get through sometime in the future.
Generally the AAMHO bills would require landlords to maintain trees unless parks specifically require tenants to do so as of the date the bill is enacted. In some bills the requirement to maintain trees in park rules would be sufficient. But in the bill introduced in the 2015 legislative session the rental agreement would need to specify tenants are responsible for tree maintenance.
Because such a bill may eventually be enacted, we believe landlords should be proactive. If the park's policy is for tenants to be responsible for tree maintenance, we believe rental agreement forms should be changed to specifically provide that tenants have this obligation. We also believe the park's rules should have a clear statement on the subject as well.
The new, 2015 edition of the MHCA Blue Book has rental agreement forms and suggested park rules that have been updated to include these provisions.
KEEPING ASSESSOR'S RECORDS ON RV's
Maricopa County Assessor's Office representatives have recently been visiting RV parks for the purpose of enforcing requirements to keep Assessor Registers on RV's. Mobile home parks are familiar with these requirements since such record keeping is expressly imposed on them by the mobile home parks landlord tenant act, ARS § 33-1478 (B). There is no similar statute in any of the landlord tenant laws that apply to RV parks. But the obligation still exists.
To begin with, the definition in the tax codes applicable to these requirements is quite different from our landlord-tenant law definitions of mobile home and RV. Here is the tax code definition from ARS § 42-19151:
Definition of mobile home
In this article, unless the context otherwise requires, "mobile home" means a structure that is transportable in one or more sections including the plumbing, heating, air conditioning and electrical systems that are contained in the structure and that, when erected on site, is either of the following:
1. More than eight feet in body width, thirty-two feet or more in body length and built on a permanent chassis.
2. Regardless of the size, used as a single family dwelling or for commercial purposes with or without a permanent foundation.
This captures park models, and most other RV's.
Homes not used for residential purposes are not subject to this tax but are subject to other fees. Here is the exemption statute, ARS § 42-19153:
Application and exemptions
This article does not apply to:
. . .
2. Any trailer that is eight feet or less in width and less than thirty-two feet in length and that is not used as a place of residence or for a commercial purpose. A license tax in lieu of ad valorem property taxes is assessed on those trailers in the same manner as on other vehicles.
Rental tax laws treat residence for more than 30 days as a residential use.
Using this definition, here is the statute requiring use of the mobile home registers, ARS § 42-19154:
Landowner's register of mobile homes and monthly report; violation; classification
A. If a person permits a mobile home to be placed on land that the person owns, possesses or controls in a manner that permits the mobile home to be occupied as a dwelling or sleeping place for one or more persons for a period of thirty days or more, the person shall keep a register containing information that is required by the department.
B. The department shall prescribe, and the county assessor shall furnish, forms for maintaining the register. A copy of the information in the register for each month shall be sent to the county assessor within ten days after the month covered by the report.
C. A person who knowingly fails to maintain the register or make the report required by this section is guilty of a class 2 misdemeanor.
The Department of Revenue creates these forms. Registers are maintained by mobile home parks and are completed by tenants as they buy homes in the park or bring them in from outside. Every occupied space in the park should have a register form on file. Parks normally keep these in a file box for easy access. In addition to allowing the assessor’s office information, they can be invaluable to parks when homes are abandoned. We can get the information we need to start landlord lien sales and to contact lienholders from these forms.
RV parks as well as mobile home parks need to send reports of movements on units each month to the assessor’s office.
Here is a link to the site where you can get the register forms:
Here is a link to the site where you can get the 30 day report forms:
Another statute quoted by assessor representatives is ARS § 42-19155, but it does not really directly apply to RV and mobile home parks—it applies to homeowners and their duty to pay taxes and prevents them from moving homes until taxes are current.
Unlawful sale or removal of mobile home; classification
A. It is unlawful to knowingly move or sell a mobile home on which applicable ad valorem taxes imposed under this chapter have not been paid and are delinquent.
B. A person who violates this section is guilty of a class 1 misdemeanor. Any fine collected under this subsection shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund.
The assessor has also cited ARS § 33-1478 to RV parks but as pointed out above that is part of the mobile home parks landlord tenant act and really does not apply to RV parks unless there are more than four mobile homes (using landlord tenant definitions) in them. This statute allows MHP’s to force tenants to complete the register cards. There is no counterpart in the long-term RV act but the legal obligation still exists under the statutes quoted above.
CHANGES IN USE AND MOBILE HOME RELOCATION FUND
I wrote on this subject in 2013 but it seems timely to follow that up given what is happening in the market.
This year (2015) a number of mainly older parks have either sold or at this writing are in escrow that the buyers intend to close and convert to some other use. Usually the land those older parks occupy can be more profitably used for apartments, office buildings, shopping centers, or occasionally single-family housing.
It is a shame to see these parks close since they provide affordable housing as most MHC's do, and since it is so hard to get MHC zoning on other parcels to replace this affordable housing.
In a similar situation, in the mid 1980’s, a number of older parks were closed in order to redevelop the land they occupied. As a result, financial hardships were common and some tenants were forced to simply abandon their homes. To deal with this situation, a series of statutes was added to the mobile home parks landlord tenant act which largely remain in force today.
The Original Plan
Under these statutes as first written, a number of requirements were imposed on park owners:
1. Statements of Policy. The requirement for these first appeared. One of the things they were required to disclose was the period of time before any change of use is expected. ARS §33-1436 (B) (2).
2. Pre-termination Notice. ARS §33-1476 (H) was added requiring parks to notify tenants that a change of use was planned. The notice was also required to advise that the park intended to evict tenants when this happened, but that they would first get a 180 day notice of termination of rental agreement.
3. Termination Notice. ARS §33-1476.01 (A) was added requiring the park to notify all tenants and the Fire, Building and Life Safety Department in writing at least 180 days prior to the effective date of the termination of their rental agreements due to a change in use. In addition, ARS §33-1476 (B) (3) included “change in use of land” as one of the reasons for which a tenancy could be terminated.
4. Relocation Fund. ARS §§33-1476.01, 1476.02, and 1476.03 were added. This created a fund administered by the State to provide the money to tenants forced to relocate due to a change of use to help with relocation expenses.
(a) Money for the fund comes from yearly tax assessments on tenant owned mobile homes. Additional money comes from landlords who are closing parks. However the obligation to reimburse applies only when a home is relocated due to a change in use of the land, butnot those resulting from rent increase or changes in age restrictions.
(b) The Fund is required to pay eligible tenants for actual expenses for relocating homes within a 50-mile radius of the vacated park subject to maximum limits. This includes the cost of taking down, moving, and setting the home up at a new location.
(c) Tenants moving into the park after a Pre-Termination Notice has been sent out are not eligible for relocation benefits.
(d) If the landlord relocates the tenant at the park’s expense, the tenant is not eligible for relocation benefits.
Changes to the Plan
A few years after the original statutes were enacted the definition of "change in use" was expanded to included redevelopment of an old park into a more modern park provided certain restrictions were met.
To mitigate the consequences of conversions of Age 55+ parks, in 2011 the law was changed by the addition of a new ARS § 33-1476.05. This new law allows tenants in parks being changed from Age 55+ to all age status to relocate out of the community and to be reimbursed by the Relocation Fund.
The law requires landlords to give at least 60 days’ notice of the change and of the tenant’s entitlement to Relocation Fund benefits to all tenants. A form for this is in the MHCA Blue Book. The tenants then have 180 days to arrange for their relocation and see benefits from the Fund.
As of 2015, the following benefits are available to tenants:
1. Relocations. Actual expenses up to $5,000 for a singlewide and $10,000 for a multi-section home are available to displaced tenants. This includes take down, moving, and set up costs, provided the home is moved to a new location within a 50 mile radius. At the discretion of the Department, up to $2500 is available if the home is a ground set unit. This $2,500.00 is available for relocations due to change in use of the land but not those resulting from change in age restrictions.
2. Abandonments. A 25% cash payment from the fund can be paid where a tenant abandons a home in a park involved in a change in use or redevelopment program or where the tenant abandons the home after getting a 10% plus CPI rent increase notice. This 25% benefit does not apply to the extra $2500 available when ground set homes are involved. It also does not apply to relocations due to change in park age restrictions.
If there is a change in use of the park, the landlord must reimburse the fund $500 for each singlewide and $800 for each multi-section home moved for which benefits were paid. This reimbursement doubles if the change in use happened before the time declared in the parks statements of policy. There is no obligation to reimburse the fund if the relocation is due to redevelopment of the park, rent increases, or change in age status.
For additional tips on how to handle the closure process see my 2013 article on my website at http://www.michaelparhamlaw.citymax.com/2012-2015_Articles.html - 04-15-1
DRIVERS LICENSES FOR UNDOCUMENTED IMMIGRANTS
By: Melissa A. Parham
A new federal court decision requires Arizona to issue drivers' licenses to undocumented immigrants who have been granted deferred action from deportation--"Dreamers".
The Judge noted that Arizona refused to accept federal work authorization documents issued to Dreamers, even though the state had long accepted those same documents for other immigrants seeking driver’s licenses. It was this inconsistent treatment that resulted in the decision.
The case highlights the fact that many people without lawful residence status will still have Arizona drivers' licenses as well as Social Security Numbers and work histories. It also raises the question of how this affects landlord screening practices.
The purpose of fair housing laws is to prevent discrimination on the basis of protected class. Nothing forbids fair screening guidelines and applying them equally to all applicants. The question is whether you treat applicants differently because of protected status. If your criteria are blind to minority status, and you apply it consistently, you may turn down applicants who do not qualify.
The key is making the process fair--ensuring it does not directly or indirectly discriminate on the basis of protected class. You may have a rule that requires all applicants to show photo ID, and you could turn down applicants who cannot produce a photo ID. The practice becomes illegal if you apply the rule inconsistently.
Photo ID is not going to automatically screen out all non-US citizens. Everyone should be able to produce some form of photo ID--now including Arizona Drivers' licenses by undocumented residents.
Just stay away from doing anything to restrict residency because of national origin. As long as an applicant can prove who he/she is and has an acceptable credit and criminal background, the applicant is eligible for tenancy regardless of national origin or, for that matter, immigration status.
WHAT TO DO WHEN THE POACHER SHOWS UP (PART 1)
Arizona is besieged with Poachers. These are people who buy homes in parks for the purpose of moving them elsewhere. Sometime they go to other parks in the state; sometime they go out of state. And sometimes the poacher is running a scam to defraud the park out of money. Sometimes it is a combination of the two.
Many Poachers are questionable characters. In order to lawfully buy and sell homes people must have some sort of dealer or broker license from the Fire, Building and Life Safety Department. The qualifying party on the license is subject to some background checks and must pass an exam and operate trust and escrow accounts. But the salespersons who work for these dealers are subject to almost no background checks.
Successful Poachers make pretty good money for relatively little work.
The basic concept of the MHP Landlord Tenant Act is that tenants own their own homes and have the right to sell them to whomever they want. Some parks have a difficult time dealing with this since they hate to see homes leave creating vacant spaces. But that is the business they have chosen. These legal rights of tenants and pressures on landlords to keep homes in parks have created the opening for Poachers to prey on them.
But there are some things parks can and should do to protect themselves from Poachers. The law does give parks some tools.
1. The Right of First Refusal
A number of parks include a provision in their rental agreements entitled "Right of First Refusal". What this says is that if the home is to be sold to someone who intends to move it out of the park, the tenant must give the landlord a 72 hour opportunity to match the purchase offer and if the landlord elects to do so, the home must be sold to the park. The price is the same as what the outside seller offered the tenant. If the landlord does not agree to buy the unit for that price within 72 hours the tenant is free to sell it at or above that price to the third party. But if he decides to sell it cheaper he must again give the park a chance to match the lower offer.
The standard right of first refusal does not apply if the home is to be sold to someone intending to become a tenant and keep the home in the park. The reason is to avoid situations where it could be used by a landlord to prevent protected minorities from moving in and violating fair housing laws.
Rights of first refusal are a good thing to include in rental agreements. But a park including them needs to be able to explain to suspicious tenants that there is no way they can be hurt by them since they are guaranteed the price they want.
In my view these rights are legal under the MHP Landlord Tenant Act. The Act at ARS § 33-1413 (C) states: "The rental agreement may include conditions not prohibited by this chapter or other rule of law governing the rights and obligations of the parties." There isn't anything anywhere else that prevents or restricts these so they are valid.
Most Poachers have adjusted to these rental agreement provisions and once they line up a sale they will offer the park a right to match the offer and prevent the home from leaving. If the right is not honored and the park is unable to prevent the poacher or a buyer from the Poacher from removing the home, the tenant can be sued for damages for breach of contract.
When the right is violated and the home sells, the park must allow it to be removed. The Poacher or the buyer of the home from the Poacher of the home was not a party to the rental agreement that created the right. So while the buyer gets to remove the home the now ex-tenant can be sued for selling the home in violation of it. There can be instances where the buyer knew about the right and may have encouraged the tenant to breach it. In those rare cases where buyer complicity can be proven, it may be possible to go to court, force the home to be sold to the park, and stop removal of the home.
Sometimes the Poacher will create a phony offer for the park to match. For example getting the tenant to agree to sell the home for $5,000.00 and then telling the park the home is going to be sold for $10,000.00 is fraud and for that matter is a crime. ARS § 13-2310 states in part:
A. Any person who, pursuant to a scheme or artifice to defraud, knowingly obtains any benefit by means of false or fraudulent pretenses, representations, promises or material omissions is guilty of a class 2 felony.
B. Reliance on the part of any person shall not be a necessary element of the offense described in subsection A of this section.
C. A person who is convicted of a violation of this section that involved a benefit with a value of one hundred thousand dollars or more is not eligible for suspension of sentence, probation, pardon or release from confinement on any basis except pursuant to section 31-233, subsection A or B until the sentence imposed by the court has been served, the person is eligible for release pursuant to section 41-1604.07 or the sentence is commuted.
It is my understandings that there is at least one prosecution of a Poacher being investigated as this is written.
When confronted with an apparently false offer, the park should (1) show the Poacher or the tenant presenting the offer this statute and (2) demand to see the written offer. If the Poacher is presenting the offer the park should try to verify it with the tenant.
2. Clearance for Removal Process
In 2003 ARS § 33-1485.01 was enacted as part of the MHP Landlord Tenant Act. It deals with the removal of homes from parks by anyone including a tenant, a buyer, a dealer or a lienholder. Anyone wanting to pull a mobile home out of a park is subject to this statute. That includes Poachers.
Basically the statute says that a home cannot be removed from a park until the manager has provided a Clearance for Removal. The statute imposes sanctions on anyone removing a home without a Clearance for Removal at Subsection C by making him liable for double the rent due at the time of removal. This is in addition to any other sums the person may be liable for under the MHP LTA. Subsection A requires it to identify the date of removal, the mover, and the “responsible party” who will see to the restoration of the space after removal. If the “responsible party” is not licensed by the State, the park can require a special security deposit of $1,000.00
Subsection D says the “responsible party” must clean up and restore the space to the condition required by the park's rules and regulations. If this is not done, the park may serve a ten-day notice specifying what needs to be done and serve it on the “responsible party”, the last tenant and any successor in interest. If the work is not completed within ten days (15 days if sent by certified mail) the landlord can have the work done and sue all of those parties for the reasonable cost of doing so.
But the “responsible party” can only be required to restore the space to the condition specified in the park rules. All landlords should address these subjects in the rules. If they do not the space can be left in a mess. But if there are stringent clean up requirements, the "responsible party" must comply.
Many parks are including the requirement that all concrete on the space be removed when the home is moved out. This makes sense since homes are different dimensions and the concrete often has been poured to fit the dimensions of the home leaving the space. Concrete removal is hard work and expensive, and if a home has marginal value, the requirement to remove the concrete may kill the sale or at least bring the sales price to a reasonable lever for the park top match.
Most times the "responsible party" is a transporter. Often it is also licensed as an Installer by the Fire, Building and Life Safety Department. In fact it must hold such a license or one from the Registrar of Contractors to be exempt from the $1,000.00 moving bond requirement mentioned above.
It is up to this "responsible party" to ensure the space is left in compliance with park rules. But like many Poachers, some of these transporters/installers will cut corners. Some will try to get away with leaving the space a mess. Some will tell the park they will not do what the rules require. And some just never come back to complete the work.
When confronted with this, the park should send the "responsible party" a 10-day demand to complete the work before doing the work itself. If the notice is not complied with 15 days after it is sent by certified mail, the park should then have it completed, thereafter filing suit against the "responsible party" for the cost plus any other damages. Most of these "responsible parties" have assets that can be seized to satisfy a judgment and could be put out of business by a few such judgments.
WHAT TO DO WHEN THE POACHER SHOWS UP (PART 2)
1. Common Scenarios
Phony Right of First Refusal Offer. Demand to see the written offer and make a copy. Show the Poacher the criminal statute quoted above. Talk to the tenant and see if the price in the offer is correct and maybe show him the statute as well. If they all insist the offer is legitimate and will not admit it has been inflated, the park needs to decide whether to match it or let the home go. Just a gut feeling that the offer is a phony is not enough to interfere with the sale.
Poacher/Responsible Party Requests a Clearance for Removal. There is a request form and a clearance form in the MHCA Blue Book with instructions. Use those forms. Be sure to get the request form filled out completely and ensure that all rent is current through the removal date (you cannot require payment of rent due under a lease that comes due after the month of the home move out though you can sue the tenant for that rent if the space is not re-rented). Be certain to give the responsible party the park rules addressing the condition the space must be left in and if he balks, be sure he knows he will be sued for the cost to the park of doing it if he refuses.
Transporter Shows Up Out of the Blue. If you see a tear down crew start work but a clearance for removal has not been issued, tell them to leave immediately and block the home. If they do not leave, call the police and ask that they be trespassed from the park. The transporter of Poacher may show the police a title and argue that they have the right to remove their home. Your response should be that they have the right to remove the home only after getting a clearance for removal and show the police a copy of ARS § 33-1485.01 if you have it (or even a copy of this article if you don't). Hopefully the officers will tell the transporter this is a civil matter and until a court rules, to leave and trespass them. If instead the officers tell you to let the home go, get their names and badge numbers so you can file a claim against the city or county for your resulting damages. Also photograph the moving crew, their trucks and license plate numbers.
2. Preventive Measures
Tenant Alerts. If you have rights of first refusal in your rental agreements, periodically put out a flyer advising tenants they are subject to it. Also alert them that there are a number of con artists trying to get offers on homes. Tell them if they want to sell, the park is buying homes and they may get the best price and fastest sale by coming into the park office. Post it on the bulletin board as well.
Rental Agreements. Review your forms and be sure there are rights of first refusal in them. MHCA Blue Book rental agreement forms have them and you can see the kind of language to use there. Also be sure they have provisions requiring the space be left in compliance with park rules when homes are removed.
Rules and Regulations. Review these also and be sure they have specific provisions describing the condition the space must be left in when homes are removed. Be sure concrete removal is included if appropriate.
Don't Poach. If you are poaching homes from other parks, don't be surprised if they begin poaching from you. Remember the old saying--"what goes around, comes around."
As a park operator, you have chosen to get into residential rental business where the tenant, not the landlord owns the actual dwelling unit. There are a lot of benefits that flow from that.
But the one huge downside is that since the tenant owns the home, he has the right to sell and/or remove it since it is his property. The MHP Landlord Tenant Act imposes restrictions on how he can exercise his right to sell and/or move the home that are designed to protect the landlord. But the bottom line is that when those restrictions have been satisfied, the home will leave.
Not everyone involved in moving homes is a Poacher or a Grifter. There are plenty of legitimate reasons tenants or their buyers may want to relocate a home, and most dealers involved in home sales are not Poachers but just business people making a living honestly selling brokered homes.
Unfortunately, a number of Poachers have discovered that by exploiting this relationship and by adding a dose of criminality and fraud to the mix, they are able to profit greatly.
Hopefully a criminal prosecution or two and some long needed changes to the law will go a long way towards mitigating this problem. But as long as there are other parks out there willing to pay the Poachers for homes and in effect underwrite their activities, this is going to be a long-term problem in the MHP industry.
PARK OWNED HOME RENTALS
In the last few years I have been suggesting to park operators facing vacancy problems that they consider renting park owned homes. I don't like the home rental business and park owners did not become park owners to rent dwelling units. But in the current economic climate, we sometimes don't have choice.
There are two main reasons for considering this.
The economy in Arizona often makes it impractical for people to buy manufactured homes.
More importantly, recent changes in federal laws make it almost impossible for potential buyers to obtain credit. Government regulations have pretty much eliminated owner financing of homes, especially older ones that in the past were almost always financed that way.
Federal and Arizona versions of the SAFE Act require loan processing to be handled by licensed mortgage loan originators. For older homes that is prohibitively expensive. The Dodd‐Frank Act makes credit sales for used mobile homes difficult by keeping an owner from describing financing details and referring buyers to lenders.
These same laws effectively outlaw even most rent with purchase option arrangements.
There is a rental market for park owned home if landlords are willing to put up with the headaches that go with them.
With park owned home inventories increasing due to landlord lien sales, abandonments, and voluntary title surrenders, and with landlords forced to exercise first refusal rights and buy homes to prevent their removal, rentals may be the only answer to getting unoccupied spaces generating revenues.
Renting a park owned home is like renting a house; it is the rental of a "dwelling unit" and is covered by the Arizona Residential Landlord and Tenant Act. This is the same law that applies to apartment and single-family home rentals.
The Mobile Home Parks Landlord and Tenant Act does not apply to park owned rentals.
Park owned homes are rented under a residential rental agreement, not a mobile home space rental agreement. MHCA publishes the Green Book with rental forms as well as a variety of notice and other tenancy forms tailored to the Residential Act and the rental of park owned homes.
Never use mobile home space rental agreement or notice forms when dealing with park owned rentals. The "perpetual lease" provisions of the Mobile Home Parks Act do not apply to dwelling unit rentals. The tenant can be terminated for nonpayment of rent after service of a five-day notice, or for no reason on a thirty-day non-renewal notice. When good cause for termination of a tenancy occurs before the end of a rental period, a 10-day, 5-day or immediate termination notice can terminate the tenancy, depending on the kind of violation involved.
Under the Residential Act the landlord is responsible for keeping the mobile home habitable and in compliance with codes. This is the main drawback to park owned home rentals. Unlike space rentals, the home belongs to the landlord and the landlord must maintain it in compliance with health and safety codes and keep it in a habitable condition except for those conditions caused by the tenant.
ARS §33-1321 states that "the landlord and tenant of a single family residence may agree in writing, supported by adequate consideration, that the tenant perform ... specified repairs, maintenance tasks, alterations and remodeling, but only if the transaction is entered into in good faith, not for the purpose of evading the obligations of the landlord and the work is not necessary to cure noncompliance with..." keeping the premises habitable and in compliance with codes. No agreement can waive this habitability duty.
Our experience is that there will be a higher rate of evictions than with space rental tenants, but the evictions will be simpler and faster.
Additionally there will be more wear and tear, and greater repairs necessary. Park owners will assume the obligation to supply heat, air conditioning, and functioning utility systems and appliances. Landlords also need to ensure their homes are well maintained to avoid claims that the park is hurting tenant home resale values. But the extra cost of park owned home rentals should be offset by higher by higher rents.
Parks need to protect their investments by requiring maximum security deposits. ARS §33-1321 allows a landlord to require a deposit up to 1 1/2 times monthly rent, more if the tenant "voluntarily" puts up a larger amount. Since manufactured homes are susceptible to considerable damage, deposits should reflect that risk, especially in all-age parks and those that allow pets.
Vacant homes may be difficult to insure, and the landlord wants to be certain that all park owned homes are insured, occupied and unoccupied alike. Careful coordination with the landlord's insurance company is important.
Tenant associations sometimes claim that park owned home rentals are comparable to sub-leasing, and assert that if the landlord rents homes, they should also be allowed to. But that is simply not true. Park employees are on-site at all times to control park owned home tenants while subtenants are not continuously supervised by individual home owners. In many parks they have no relationship at all with the park landlord.
ARS §33-1343 (D) allows the landlord to enter a park owned rental unit on a minimum two days' advance notice. Landlords should arrange to regularly conduct periodic inspections of the interior of their rental units to ensure proper upkeep.
Before deciding to get into this business, landlords should check their park financing documents. In the last few years, lenders including Fannie Mae, Freddie Mac, and other commercial lenders have included provisions in their loan documents prohibiting or restricting park owned home rentals. Be careful not to inadvertently create a default under your park's mortgage documents.
ALJ DECISION RULES PARKS NOT RESPONSIBLE FOR CENTURY LINK TRENCHING OR SURFACE LINE LIABILITY
A new decision by the Mobile Home Parks Administrative Law Judge makes it clear that parks have no legal responsibility to subsidize Century Lint for telephone line maintenance. Nor do they have any obligation to cover Century Link liability if people get injured by cables placed on the surface of parks as temporary repair work. The full decision can be read at this link: http://www.michaelparhamlaw.citymax.com/f/Holiday_Palms--Century_Link_ALJ_Decision--2014.pdf
Over the last several years Century Link has been telling both park landlords and tenants that it cannot continue to service, maintain and repair its landlines in manufactured home communities.
It cites a tariff on file with the Arizona Corporation Commission as legal authority for this position. It also says that same tariff requires park landlords to give it new easements for telephone lines, to agree to be responsible for any trenching work necessary to perform repairs on underground lines, and to grant it releases of liability and indemnification agreements in case anyone gets injured by temporary telephone cables laid on the surface of the park.
What it fails to disclose to parks when demanding they sign documents agreeing to undertake these obligations is that the tariff was written by Century Link itself, was simply approved by the Corporation Commission as part of its approval process covering rates charged by Century Link, and that it is in no way binding on private manufactured housing community landlords.
Century Link when asked to repair their telephone landlines, often tells tenants who are Century Link customers that unless the landlord gives into its demands, it cannot make the necessary repairs. Their service technicians will blame the landlord, telling tenants that the landlords are not complying with requirements of the Arizona Corporation Commission in refusing to be responsible for necessary trenching and for relieving them of liability for injuries that may be caused by their temporary surface cable installations.
Both Melissa and I have written articles in this publication over the last few years explaining the situation and informing parks that despite what Century Link says, the landlord is not responsible for subsidizing its telephone landline infrastructure maintenance. We have encouraged both parks and tenants to file complaints against Century Link with the Corporation Commission when confronted with these claims and demands.
But the Commission has failed to take any action and Century Link persists in this conduct. With one exception, I have been stonewalled by the company when I have written its legal counsel about the situation.
This past summer, acting on what they had been told by Century Link a group of tenants filed an Administrative Law Judge complaint against Holiday Palms MHP claiming it was the park’s responsibility to do what Century Link was demanding. The tenants in this case were represented by AAMHO. For some reason they wanted the landlord to assume this expensive obligation despite the obvious fact that doing so would trigger large rent increases to cover those new expenses.
I represented the park and made the arguments explained above. I also pointed out that telephone utilities across the country are trying to abandon their old landline systems since they are expensive to maintain, are wearing out, and represent last century’s technology.
Telecommunications providers are more focused on wireless technology as we get further into the 21st century. Eventually the old “legacy” landline systems will be completely abandoned. But until then it makes sense for those companies to try and shift the cost of maintaining the old systems onto others including park landlords while they continue to collect the revenues from telephone customers until the infrastructures are completely shut down.
The hearing on the ALJ complaint was held on November 21, 2014. MHCA Executive Director Susan Brenton was the park’s only witness. She testified on the background of the MHP LTA and why it did not include telephone service as an essential utility that parks are required to provide. She explained what Century Link is doing to parks all across Arizona. She described what she and the MHCA leadership had done to try and get Century Link and the Corporation Commission to stop shifting this burden to MHC landlords.
On December 19, 2014 the decision of the ALJ was released, finding in favor of the park and declaring that MHC’s under the MHP LTA do not have the responsibility of maintaining Century Link telephone lines or its infrastructure. Here is the key passage from the ALJ decision:
“This case is governed by the Arizona Mobile Home Parks Residential Landlord and Tenant Act found at Arizona Revised Statutes Title 33, Chapter 11 (A.R.S. §§ 33-1401 through 33-1491). The furnishing of outlets for telephone lines, and the maintenance thereof, is not a utility that is required by Arizona Mobile Home Parks Residential Landlord and Tenant Act found at Arizona Revised Statutes Title 33,Chapter 11 (A.R.S. §§ 33-1401 through 33-1491)”.
This is a long overdue outcome. Parks across the state should become familiar with this decision. They should print it out and give it to Century Link whenever presented with demands that they give it new easements, agree to cover its maintenance and repair expenses, or give it special liability releases.
Without Susan Brenton, MHCA and their institutional knowledge of the background, history and purpose of the MHP LTA, this outcome may have been different.
RECENT PROBLEMS WITH CENTURY LINK/QWEST IN MOBILE HOME PARKS
By: Melissa A. Parham
Recently our office has received numerous complaints from different mobile home parks about actions that Century Link/Qwest (“Century Link”) has taken. Century Link has been laying its telephone and internet cables on the ground in parks, rather than burying them. This placement of the cables is dangerous and people could easily trip over them and be injured.
Century Link is telling parks that the park is responsible for performing trenching work and burying Century Link’s cables. In some parks, Century Link will not provide telephone or internet service to tenants who live in the middle of the park, and will only provide service on the outskirts where cables can be laid along and over walls. In some areas this presents an additional problem for tenants because there are few options for alternative telephone service, and because some tenants do not have cell phones and a home phone line is their only means of calling for emergency services.
Century Link claims that an Arizona Corporation Commission (“ACC”) tariff requires mobile home parks to perform the trenching work to bury Century Link’s lines. This is simply not true. An ACC tariff, though effective as to regulated public utilities, does not mandate a privately owned and operated mobile home park to do anything. Rather, a space rental mobile home park must comply with the Arizona Mobile Home Parks Residential Landlord and Tenant Act (the “Act”) (or, if the park is renting park-owned homes to tenants, the Arizona Residential Landlord and Tenant Act). Neither Act requires a landlord to provide telephone or internet service to tenants. Further, the ACC tariff to which Century Link refers parks does not even apply to mobile home parks. Section 2.8 of that tariff limits the tariff’s application to “buildings,” and a mobile home park is not a “building.”
Century Link has also apparently told some parks that its easement within the park requires the park to provide telephone service or to bury Century Link’s lines. This is also not true. The typical Century Link easement merely allows Century Link to enter the park and provide service. It does not require parks to spend their own money to assist Century Link in its efforts to provide telephone and internet service to tenants.
Both Mike Parham and I have written to Century Link to attempt to resolve these problems. For one park, Mike finally received a response from Century Link’s corporate counsel, and Century Link agreed to remove its cables (which were simply laid on the ground) from the park. This solution may not work for all parks, particularly where tenants have no other source of telephone service. But, parks do not want to end up liable if a tenant trips over cables that Century Link just left sitting on the ground.
2016 Update: If all else fails, parks should simply remove cables left on the surface and advise tenants that they either need to get Century Link to bury them or get a different kind of phone service such as VOIP or a cell phone.
RENTAL TAX ON UTILITIES
Almost all municipalities in Arizona have a rental tax on residential landlords. If rentals are for more than 30 days the state sales tax does not apply. But municipal rental taxes do. These are called "Transaction Privilege Taxes" or TPT's.
There is a uniform ordinance that most municipalities have adopted. The relevant provision is usually the same from municipality to municipality except for the tax rate that varies between 1% to more than 3% depending on the location. Here is the City of Phoenix version of the relevant ordinance (the Phoenix tax rate is 2%):
14-445 Rental, leasing, and licensing for use of real property.
(a) The tax rate shall be at an amount equal to two percent of the gross income from the business activity upon every person engaging or continuing in the business of leasing or renting real property located within the City for a consideration, to the tenant in actual possession, or the licensing for use of real property to the final licensee located within the City for a consideration including any improvements, rights, or interest in such property; provided further that:
(1) Payments made by the lessee to, or on behalf of, the lessor for property taxes, repairs, or improvements are considered to be part of the taxable gross income.
(2) Charges for such items as telecommunications, utilities, pet fees, or maintenance are considered to be part of the taxable gross income.
. . . .
(b) If individual utility meters have been installed for each tenant and the lessor separately charges each single tenant for the exact billing from the utility company, such charges are exempt.
Under these ordinances it has generally been understood that all landlord revenues from rental including base rent, late fees, pet fees, guest fee and the like are subject to the rental tax. That includes utility charges imposed by landlords.
However subsection (b) creates an exception for metered utilities that are separately metered and charged to tenants. Some landlords have assumed that when metered utilities are submetered and billed to tenants, those utility charges are exempted from the rental tax. But as the highlighted language points out, for the exclusion to apply the landlord is limited to charges equal to the exact amount paid by the landlord for the utility being passed through to tenants
State landlord tenant law addresses what a landlord can charge for utilities.
The Residential LTA that applies to rental of dwellings at ARS §33-1314.01 allows a landlord to submeter and pass through its exact charges pro-rata to submetered usage. It also allows an administrative fee. Alternatively it allows landlords without submeters to allocate their costs under other formulas. The problem here is that if submeters are not used, the exclusion does not apply.
A City of Phoenix administrative law judge decision has also held that if an administrative fee is added, the exclusion does not apply. There must be submeters and the total tenant bills must be exactly what the landlord has paid for the exclusion to apply.
Under the Mobile Home Parks and the Long Term RV Rental Space LTA's, landlords may separately meter and charge up to the single-family residential rate. It is highly unlikely that the total tenant charges in the aggregate will exactly equal what the landlord has paid. Once again the exclusion would not apply.
Remember that the City of Phoenix ordinance referred to is just an example. Almost every municipality in Arizona has the same provision in its rental tax ordinance except for the percent of tax that is imposed.
Some municipalities have begun auditing landlords to determine if they have been remitting rental tax on utilities. These audits can go as far back as six years. Landlords would be well advised to review what they are charging and remitting rental taxes on.
THERE IS NO QUALIFICATION/CERTIFICATION FOR ASSISTIVE ANIMALS!
Under the Americans with Disabilities Act (ADA), a “service animal” means any dog (or miniature horse)that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. The ADA applies to “public accommodations,” which may usually (if the disability and service the animal provides are not obvious) make limited inquiry into: (1) whether the animal is a “service animal” required because of a disability; and (2) what work or task the animal has been trained to perform. Where the ADA applies, the public accommodation cannot ask about the person’s disability, require medical documentation, require a special identification card or training documentation for the animal, or ask that the animal demonstrate its ability to perform the work or task.
But, the ADA generally does not apply to housing communities (though it does apply to certain short-term rentals, like overnight or weekly RV stays). Housing communities generally are not “public accommodations” within the meaning of the ADA. The Fair Housing Act (FHA) does apply and it has entirely separate requirements for what are called “assistive animals.” These are not limited to dogs or miniature horses. The category includes:
Emotional Support Animals or Comfort Animals. These are often used as part of a medical treatment plan as therapy animals. They provide companionship, relieve loneliness, and sometimes help with depression. They do not perform physical tasks and do not have special training to assist the person’s disability like service animals.
Therapy Animals. These are not defined by federal law. They provide people with therapeutic contact to improve their physical, social, and mental functioning. They are not limited to working with people with disabilities.
The FHA definition of discrimination includes the refusal to grant “reasonable accommodation in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.”
Waiving a no-pet rule and pet deposit to allow a person with a disability to have an assistive animal constitutes a reasonable accommodation. Courts have held that landlords must use “a flexible standard, based on the needs of the particular tenant” when responding to a reasonable accommodation request.
Inquiries into the existence, nature, and extent of disabilities are generally prohibited. But an individual with a disability who requests a reasonable accommodation may be asked to provide documentation so that the landlord can properly review the accommodation request if either the disability or the need for the animal is not apparent.
The landlord can ask a person to certify, in writing, (1) that the tenant or a member of the household is a person with a disability; (2) the need of the animal to assist the person with that specific disability; and (3) that the animal actually assists the person with a disability.
If there is a requested accommodation for an assistive animal that provides emotional support, a landlord is within its rights to ask for documentation from a health care provider (physician, psychiatrist, social worker, or other mental health professional) that the individual has a disability and that the animal in question will provide some type of disability-related assistance or emotional support.
A landlord may not ask an applicant or tenant to provide access to medical records or provide detailed or extensive information or documentation of a person’s physical or mental impairments.
The FHA does not require an assistive animal to be trained or certified!Although dogs are the most common type of assistive animal, other species may also constitute assistive animals.
Pet Rules/Pet Agreements
Recently we have been seeing pet rules and pet agreements in parks that require people claiming to need an assistive animal to provide proof that the animal has been trained and/or certified.
Setting aside the problem with so many internet websites selling certification kits to anyone wanting one, in essence creating phony assistive/service animals, this is not a proper inquiry to make or a proper requirement to impose on the person seeking approval.
If the need is apparent, the animal should be approved. If the need is not apparent, the documentation described above may be requested. But proof of training or certification may not be required, and just doing so may well constitute a fair housing violation.
Parks should review their pet rules and pet agreements to ensure they do not violate these requirements. If they do, immediately change them and seek to replace existing pet agreements with new ones that satisfy fair housing laws.
THE DANGERS OF USING OLD LEGAL FORMS
By: Melissa A. Parham
MHCA has published form books since 1987. For most of those books, new editions are published every one to two years. Over time, the federal and state governments pass new laws, and trends and problems in the manufactured housing industry change. Those changes necessitate changes in the forms in the MHCA form books.
Using outdated forms can get a landlord in trouble. If the forms are tailored to old laws that have changed since the forms were printed, they may violate the law and could subject the landlord to liability. A landlord should update its form books whenever a new edition is published. And, whether or not you use form books, it is wise to have an attorney review and tailor your legal documentation on a regular basis to ensure it complies with current laws. Some examples of changes in the law and industry trends follow.
The old “Reasonable Accommodation Assistive Animal Request” form in the MHCA form books required a disabled tenant’s medical provider to initial a special section of the form if the tenant requested an accommodation to have a “dangerous breed” of dog as an assistive animal.
But in 2013, HUD issued a memorandum on assistive animals that stated that a housing provider cannot deny an assistive animal request due to “mere speculation or fear about the types of harm or damage an animal may cause” or due to “evidence about harm or damage that other animals have caused.”
Accordingly, a landlord cannot deny a reasonable accommodation request because the assistive animal at issue is a “dangerous breed”—rather, that specific animal must have actually caused damage or harm in the past.
Logically, if a housing provider cannot refuse to accept an assistive animal based on fears about its breed, the housing provider cannot place extra burdens on a tenant seeking to have an assistive animal that is classified as a “dangerous breed.” Placing such burdens on a tenant is likely, in HUD’s view, a violation of fair housing laws.
Because of that change in HUD’s interpretation of the law, the MHCA “Reasonable Accommodation Assistive Animal Request” forms were changed to eliminate the “Dangerous Breeds” section. Using an old version of the form could cause a park problems if faced with a fair housing complaint.
Rights of First Refusal
There was a time when mobile home poaching was not a significant problem. Within the past few years, however, we have heard constant complaints from clients about individuals and other park operators poaching homes from their parks.
Parks can help protect themselves from poachers by having a “Right of First Refusal” in their leases, which requires the tenant to give the park the opportunity to buy his or her home at the same price and on the same terms as any offer that he or she receives.
Old lease forms may not contain the “Right of First Refusal” since poaching has only recently become a serious problem.
Rules for Space Restoration
Along the same lines, parks can help protect themselves against poachers with clear rules regarding restoration of the mobile home space after the removal of a home. The Blue Book Rules and Regulations were modified in recent years to require the removal of all accessory structures and all concrete.
As mentioned in previous MHCA articles, removing concrete is expensive and such a requirement often makes poachers think twice about poaching a home in that park. If a park is using old forms or has not had its rules reviewed and updated recently, it probably does not have thorough rules regarding space restoration.
Fair housing and privacy laws have changed over time. As a result, housing providers cannot ask tenants requesting an accommodation for a live-in caregiver to provide them with a physician’s “treatment plan.”
There was a time, however, when such a request was allowed under the law (in fact, Arizona’s current caregiver statute, which requires a “treatment plan,” violates federal law and has not yet been updated).
Older versions of the MHCA form books had a “Caregiver Reasonable Accommodation Request” form that required tenants to provide the park with a six-month treatment plan. That is no longer allowed and more recent versions of the form books have been updated to reflect that change.
Jury Trial Waiver
It is critical to have a jury trial waiver provision in tenants’ leases. Crafty tenants who have no lease or who are on an old or bad lease with no jury trial waiver often request a jury trial in an eviction action—and they are entitled to one. It takes a long time for a court to convene a jury, and attorneys’ fees are far higher in cases tried before a jury. A jury trial will significantly delay and increase the cost of an eviction action.
Very old versions of MHCA form books may contain leases without a jury trial waiver. Again, it is wise to update your forms regularly and have an attorney review them to make sure that they contain such critical provisions.
Where to Get the Mobile Home Parks Residential Landlord and Tenant Act
Mobile home park landlords are required to give new tenants a copy of a summary of the Arizona Mobile Home Parks Residential Landlord and Tenant Act created by the Department of Fire, Building and Life Safety. Landlords must also make the summary “available” to all tenants. Previously the Secretary of State provided parks with a full copy of the Act to provide to tenants. Landlords should make sure to use the most recent version of the summary published by the Department.
In a nutshell, using old, outdated legal forms can get a landlord into trouble. Attorneys stay in business because laws and current issues are constantly changing. Likewise, MHCA updates its form books regularly because the law is constantly in flux. It is far less expensive to purchase an updated form book and have an attorney review your rental and legal documentation than to defend and possibly lose a lawsuit or fair housing complaint. Update your forms regularly!
UPDATE ON RIGHTS OF FIRST REFUSAL TO BUY MOBILE HOMES
In 2012 I wrote an article on Rights of First Refusal. To minimize the risk of having homes leave, a number of parks include these provisions in their rental agreements. What they say is that if the home is to be sold to someone who intends to move it out of the park, the tenant must give the landlord a 72 hour opportunity to match the purchase offer and if the landlord elects to do so, the home must be sold to the park.
The price is the same as what the outside seller offered the tenant. If the landlord does not agree to buy the unit for that price within 72 hours the tenant is free to sell it at or above that price to the third party. But if he decides to sell it cheaper he must again give the park a chance to match the lower offer.
The standard right of first refusal does not apply if the home is to be sold to someone intending to become a tenant and keep the home in the park. The reason for that is to avoid situations where it can be used by a landlord to prevent protected minorities from moving in.
The MHP LTA at ARS §33-1413 (C) states: "The rental agreement may include conditions not prohibited by this chapter or other rule of law governing the rights and obligations of the parties." There isn't anything anywhere else that prevents or restricts these so they are valid.
Sometimes a dealer encourages tenants to list and sell homes that will be removed, and there are a few dealers that buy the homes themselves and pull them out. A dealer or anyone else buying a home for removal knowing about the right of first refusal can be sued for damages for bringing about a tenant's breach of contract.
Recently a few dealers have been sued by parks that obtained temporary restraining orders preventing the homes from leaving. There are one or two dealers that engage in this kind of conduct and once in awhile a park will decide it has had enough and will sue to stop it. The key here is to be able to prove the dealer knew about the right.
Stopping Homes Sold in Breach of the Right from Leaving
Several provisions in the MHP LTA guarantee the right of the owner of the home to remove it whenever he wants, so long as all current obligations are paid, even if the removal takes place before a current lease term expires.
ARS §33-1452 (E) says: "A person who owns or operates a mobile home park shall not . . . 3. Deny any resident of a mobile home park the right to sell the resident's mobile home at a price of the resident's own choosing during the term of the tenant's rental agreement . . ."
ARS §33-1451 (B) says: "The landlord shall not interfere with the removal of a mobile home for any reason other than nonpayment of monies due as of the date of removal even if the term of the rental agreement has not expired."
ARS §33-1481 (C) says: "A mobile home that is subject to a judgment for forcible detainer may not be removed from its space until the provisions of section 33-1451, subsection B have been satisfied."
ARS §33-1485.01 (B) says: "The landlord shall not interfere with the removal of a mobile home for any reason other than nonpayment of monies due as of the date of removal even if the term of the rental agreement has not expired."
So it can be argued that as long as rent is current, the owner of the home, including a buyer participating in a seller's breach of a first refusal right can remove the home. That is not to say that the first refusal right is not valid. But the argument would be that the remedy for a breach is a suit for damages, not blocking the home from leaving.
I wrote in 2012 that in my view, the first refusal right couldn’t be construed to prevent the buyer from removing the home since so many other parts of the MHP LTA guarantee that right. The tenant is obligated to comply with it, but if he refuses to do so, the only remedy in my view was a suit for damages.
Dealers read my articles, and some seem to have based their poaching businesses on my concerns that parks may not be able to stop removal of homes when the Right of First Refusal was being violated.
One park filed suit against Trend Star Homes and sought an injunction preventing it from removing a home sold to it by a tenant in disregard of the Right of First Refusal. A hearing took place in the Superior Court and the court found that the right of first refusal in standard language was in the tenant's rental agreement and that Trend Star knew about it when buying the home from the tenant.
At the conclusion of the hearing the Court made the following interim findings:
THE COURT FINDS that there is a right of first refusal in this case. The notice of the intent to sell was not provided to Plaintiff as contemplated in the rental agreement. Therefore, the Plaintiff was deprived of the opportunity to exercise its right to purchase the subject property.
THE COURT FINDS that Defendants Hazelwood are bound by the first right of refusal. Defendant Trend Star Homes, Inc., through Mr. Eckert, was aware of the right of first refusal when he entered into the agreement with Defendants Hazelwood. Therefore, Defendant Trend Star Homes, Inc. is also bound by the first right of refusal.
THE COURT FINDS that there is a strong likelihood of success on the merits with regard to enforcement of the first right of refusal.
THE COURT FINDS that damages are not an adequate remedy in this matter. The hardship favors Plaintiff in this matter.
THE COURT FINDS that public policy would favor enforcement of the first right of refusal in the contract signed by Defendants Hazelwood.
For these reasons and the reasons expressed on the record,
The Court is inclined to grant Plaintiff’s request for a preliminary injunction.
The Court is further inclined to order that Plaintiff shall post a security bond in the amount of $21,500.00.
A little later the Court made some additional findings:
THE COURT FINDS that the agreement for the first right of refusal in the addendum is not a “prohibited provision” within the meaning of A.R.S. §33-1414 and is enforceable notwithstanding A.R.S. §33-1451(B) and §33-1485.01(B) and that is application in this matter is not unconscionable within the meaning of A.R.S. §33-1411.
As far as the trial court is concerned, Trend Star made a mistake in relying on my concerns as expressed in my 2012 article in buying homes for purposes of removal in disregard of the Right of First Refusal which it know about.
Its not often that I am happy to be wrong but this is one of those times. The decision in this case is by an experiences and very capable Superior Court Judge. While the case could be appealed and the decision could be reversed, his findings and rulings make a lot of sense in this case and I expect even if appealed the decision will stand.
CRIMINAL BACKGROUND CHECKS UNDER FAIR HOUSING LAW
There is a lot of misinformation floating around about the use of criminal background information to screen applicants and use of the Crime Free Addendum. Crime free addendums should always be used as part of tenant rental agreements. They mainly just restate what the law is (i.e., that an immediate eviction may be filed against a resident for serious criminal conduct in the community) but they help with evictions.
I think some of the confusion over criminal background screening comes from the interpretation of fair housing laws to consider some disqualifying criminal background criteria as discriminatory under the “disparate impact” test used by fair housing enforcement agencies.
“Disparate impact” means unintentional discriminatory results from a facially neutral policy. Some attorneys including me believe that the Fair Housing Act does not allow disparate impact claims. Unfortunately the federal courts have allowed them, though they have applied different standards. Until the U.S. Supreme Court changes this, it seems to be the law of the land.
The main concern in requiring applicants to undergo criminal background checks is the safety of others on the premises. Landlords can be held liable if they fail to use reasonable care to protect residents from foreseeable risk of harm.
Fair housing laws protect against discrimination on the basis of race, color, national origin, religion, sex, disability, and familial status. These are inherent characteristics of a person. Committing a crime however, is something a person chooses to do.
The protected classes are are irrelevant in determining what kind of tenant an applicant will be. But a criminal record is relevant in determining whether the applicant will be a good tenant since it indicates a disregard for safety or property. This is a material business reason for a landlord to screen applicants’ criminal history.
It is important for landlords to structure screening criteria to limit the likelihood of liability under fair housing laws while still protecting tenants, employees, venders, and the property.
A blanket prohibition against criminal convictions probably violates fair housing laws because of a disparate impact upon racial and ethnic minorities, more so than screening criteria containing selective prohibitions against criminal convictions. But it is unclear how narrow the scope must be.
The Fair Credit Reporting Act allows tenant screeners to access arrest records up to seven years old. But landlords should not rely on arrest records to make a decision about tenancy. The Supreme Court has said that “the mere fact that a man has been arrested has very little, if any, probative value in showing that he has engaged in any misconduct.”
Expunged, Purged, and Sealed Convictions
Criminal records can be expunged from the public record for a variety of reasons. Landlords in my view should disregard records that are expunged, sealed, or closed. Criminal record checks should not contain such records but sometimes erroneously show them.
Time Since Conviction and Nature of Crime
There are conflicting studies dealing with the likelihood of persons convicted of various kinds of crimes to engage in criminal conduct in the future. Given this fact, but also considering the concerns of landlords to ensure the safety and security of tenants, employees, and vendors, and to protect property and property value, policies should be carefully drafted.
It is reasonable to have different policies for different kinds of crime. Serious property crimes, violent crimes, and sex offenses, may warrant prohibiting applicants from tenancy for more years from the date of conviction than lesser crimes. Drug-related convictions may be treated differently depending on the severity of the charge. A drug distribution conviction presents a higher risk than one for drug possession. The number of convictions an applicant has may also be a consideration.
Federal law prohibits applicants who are subject to a lifetime registration requirement under a state sex offender registration from public housing. This kind of history puts other residents at risk. The public nature of the sex offender registry also means that a landlord allowing sex offenders may face a decline in applications, anger by current tenants, and damage to its reputation.
Moreover, renting to registered sex offenders would not likely reduce any disparate impact on racial or ethnic minorities since statistically there appears to be no greater incidence of sex crimes in minority groups than non-minority groups.
It’s probably a good idea to adopt a policy prohibiting registered sex offenders.
Drafting criminal background criteria restricted to serious crimes, taking into account the time since the conduct incurred in light of how serious it was, and applying it to everyone normally should not create a disparate impact claim. There will be some who point to statistics showing that minorities are disproportionately convicted of such crimes. But with serious, especially recent dangerous crimes, any disparate impact claim should be overcome.
Disparate impact arguments can also be made that certain kinds of crime can be linked to mental disabilities. Crimes such as drug use and shoplifting tend to be disproportionately committed by mentally impaired people, who often are homeless. Such minor crimes should be excluded from the landlord’s criteria, especially if they took place in the distant past.
Any adult intending to live on the premises should be screened. This includes residential caregivers.
TENANTS DEFAMING PARKS
Every month I get a couple of complaints from parks about tenants saying bad things about them. With the ease of posting comments on YELP and on line forums, the ability to create special Facebook pages, and the fact that dedicated websites can be created for almost nothing, it is easy for tenants to publicize awful comments about landlords.
The problem for those tenants is that no one is really interested in that stuff. Most folks that stumble onto the comment can see it for what it is and disregard it. Despite how aggravating it is to the landlord, there really is no damage to him since no one cares and few people even see that stuff.
My advice is almost always the same. Ignore it and it will go away. But if the landlord retaliates or tries to fight back, the exchange can take on a life of its own and start to attract attention. In other words, responding to the provocation gives the disgruntled tenant what he is seeking in the first place.
Nevertheless there is some legal basis for a landlord taking action.
In a July 2013 decision in Bently Reserve L.P. v. Andreas G. Papaliolios, a California Court of Appeals case, the defendant used a false online screen name to write an anonymous YELP review about his former apartment landlord and its owner. The “review” stated that the building was occupied by “sociopathic narcissistic” owners who drive out other occupants with noise intrusions, eviction notices, and abhorrent behavior that likely contributed to the death of three tenants. This former tenant went on to state that the review was based on first-hand experience with the building owners and that he had personally witnessed why “there is NO RENT that is low enough to make residency” at the building worthwhile.
The landlord sued for publishing defamatory statements. The defendant filed a Motion to Strike arguing that the online review was mere opinion and not a factual assertion. The court agreed that many Internet reviews are “nothing more than ranting opinions that cannot be taken seriously”. But it went on to say that there is no “free pass” for Internet commentary susceptible to being read as containing factual assertions.
As a result of this case and the principles it sets forth, the volume of online defamation litigation will likely increase. But going back to my first point, such suits will only focus attention on what the disgruntled tenant said in the first place. Moreover Defaming Parks--2014, lawsuits are expensive, and the likelihood of actually collecting any damage award from a MHP tenant is pretty slim.
In addition, landlords must take care in filing suits of this sort under so called “anti SLAPP laws”. A strategic lawsuit against public participation (SLAPP) is a lawsuit that is intended to intimidate and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition. The typical SLAPP plaintiff does not normally expect to win. His goals are accomplished if the defendant gives up and abandons the criticism. A SLAPP can also intimidate others. The suit may be preceded by a legal threat.
Filing such a suit can run afoul of what are known as anti SLAPP laws. Arizona has such a statute at ARS § 12-751. This allows a defendant in such a case to file a motion to dismiss on the ground the statute bars the action. The court is to hear the motion promptly, and if it agrees, to dismiss the case and award the defendant his costs and attorneys' fees. If the court determines the case was frivolous it can impose additional monetary sanctions against the plaintiff.
So this is yet another reason to avoid rising to the bait when inflammatory accusations are made.
UTILITY CHARGES IN MHC'S AND RV PARKS
A common area of tenant complaints is improper utility charges by parks. The MHP Landlord Tenant Act and the Long Term RV Rental Space Act limit landlord utility charges to the local utility provider’s single-family residential rate. "Utilities" means water, gas, electricity, sewer service, and trash removal. Landlords sometimes miscalculate rates when separately charging tenants for utilities.
A landlord charging tenants separately for utilities cannot charge more than the local providing utility's single-family residential rate. It doesn't matter what the landlord pays for the utility service; the limit is the provider's single-family residential rate.
If it is a metered utility (gas, electricity and water) there must be separate meters for each tenant and billings must be made based on periodic (usually monthly) meter readings. Parks charging for metered utilities that don’t have individual tenant meters should not be separately charging for those utilities.
Different localities and different utilities have different kinds of rate structures for metered utilities. Usually the single-family residential rate consists of two components. One is the base monthly charge. This is a fixed amount each month. Most utility providers include a certain amount of usage in this base rate (i.e., the rate includes a certain number of cubic feet of gas, kilowatts of electricity, or gallons of water). The second component is a commodity charge. If the customer uses more than the amount of the commodity that is included in the base rate, the excess is separately calculated and added to the bill.
If the utility is not metered (sewer and trash), the single-family residential rate is usually a fixed monthly charge. In the case of sewer, however, in most places the utility provider adjusts the monthly rate each year based on water usage during the winter months.
This may mean a landlord must be separately charging water in order to charge sewer since it needs to be able to determine water usage in the winter months to adjust sewer bills. However one way around that is to charge the absolute minimum allowed by the provider's single-family residential rate each month making annual adjustments irrelevant.
If the local utility provided allows service suspensions when customers are away, parks must do so as well. This is a common oversight by landlords.
Mobile Home Parks found to have overcharged for utilities or to refuse service suspension requests allowed under the single-family residential rate can be ordered to refund overcharges by Administrative law Judges. RV Park tenants can sue in Justice Court for overcharges if the tenants are long term (over 180 day rental agreement) tenants.
The law permits MHC and RV Park landlords to separately charge for utilities provided the following restrictions are complied with.
1. If the utility is metered, separate meters need to be installed at each rental space. The meters need to be read each month with opening and closing readings taken.
2. The amount charged each month cannot exceed the single-family residential rate of the local utility provider (normally the provider from which the park is obtaining the utility service). In the case of water produced from a park owned well or sewer service provided by a park septic system or package sanitary plant, it would be the single-family residential rate of the nearest provider in the area where the park is located.
3. Each month the park must provide the tenant a utility bill formatted in a manner similar to the local utility provider’s bill showing how the charges were calculated. In the case of metered utilities the bill must show opening and closing meter readings. There are billing services that produce rent statements including utility bills monthly that do a good job of this.
4. In order to bill for sewer in most places, water needs to be metered. The reason is that after the first year, most (but not all) sewer utilities recalculate the monthly charge by determining water usage during the winter months. Without meters, determining water usage is impossible making the sewer recalculation impossible. However it may be possible to charge the minimum single-family rate without separate water charges.
5. In the case of RV parks, metered utilities can be charged to long term RV space tenants (those under rental agreements of 180 days or longer) with another method not available to MHC’s—the ratio allocation basis.
6. Finally, the rate to be charged is the single-family residential rate of the providing utility, not the rate it charges the park that usually is a commercial rate even if described as a rate per space. In identifying the rate to be charged, be sure to check the single-family residential rate.
CALIFORNIA JURY AWARDS $111 MILLION TO MHP TENANTS
This past April (2014), a San Jose, California jury awarded a group of 61 tenants of a local mobile home park $111 million, the largest such award for a failure-to-maintain lawsuit against a mobile home park in California.
California has long has a problem with tenants suing parks for large amounts of money as pain and suffering damages for the landlords’ alleged failures to maintain their communities as required by the law and their rental documents. A few law firms were set up in the 1980’s specializing in these kinds of suits in California. They had unparalleled success in pursuing them and at one point most park liability insurance companies stopped writing park liability insurance in that state.
A few of these suits were well merited. There are some slumlords in the mobile home park business and this seems to be the only way to get their attention. But in most cases the claims were blown out of proportion to reality. Large awards resulted from imperfections in the jury system, and the fear of unjustified jury awards led many park operators to agree to pre-trial settlements that were out of proportion to any real damage suffered by the residents.
It was largely to divert these kinds of claims out of the court and jury system that the Arizona mobile home parks hearing officer (now ALJ) function was created in 1986. In the nearly 30 years we have had this procedure available in Arizona, hundreds of cases have been filed by tenants claiming various kinds of failures by their landlords to maintain their communities. While we have not always been happy with the results in individual cases, as a whole this system has worked well here.
We have not read a headline like this one in Arizona since 1986.
Although failure to maintain claims are routinely filed as ALJ complaints in Arizona, there is no legal requirement that they be filed with the ALJ or that prevents court suits from being filed (though there is an argument that can be made to the contrary).
One thing to include in park rental agreements to at least prevent such a case filed in court from getting before a jury is a jury trial waiver provision. Such a provision should not limit itself to eviction cases but should cover all cases arising out of the rental agreement or the tenancy.
It goes without saying that the best way to avoid these kinds of lawsuits is to maintain the park, enforce maintenance rules against residents, and respond promptly and effectively to resident complaints. It also would be a good idea to check with the park’s insurance agent to make sure the landlord is covered by liability insurance protecting against claims such as these and that the limits of coverage are high enough.
In the San Jose case, the verdict is clearly excessive. It is likely the trial judge will reduce it to a more reasonable level. In addition the park operator (a well respected national company) is going to appeal whatever final damage award comes out of this case since it does not believe that any assessment of damages is appropriate in the circumstances.
Incidentally the media constantly referred to this as a “trailer park” and while I don’t really know, my guess is that this pejorative term was used in the trial as well. It would not be surprising to learn that this verdict was the result of the prejudice against “trailer parks” that we so often encounter.
BUYING PARKS—DUE DILIGENCE
The market for Arizona manufactured housing communities seems to have picked up in the past year. Whenever a purchase is being considered, the buyer needs to perform certain due diligence. This is especially true when the sale is on an “As-Is” basis as most of them are. When a buyer acquires a park on this basis, he takes the risk of all defects with the possible exception of material non-apparent defects known to the seller but not disclosed to the buyer.
Because of this the buyer needs to carefully scrutinize all aspects of the park so there are no unpleasant surprises when the sale closes. It is impossible to give an all-inclusive list of what to look for but here are a few areas to be aware of.
Every rental agreement should be reviewed to be sure they are not of unusually long duration and do not restrict the landlord’s rights to increase rents. Be careful of rental agreements that automatically renew form more than one month after the original term expires. Do not assume every tenant is on the same form of rental agreement. Look carefully at all of them.
Review the Statements of Policy. Some parks do not have them despite the law requiring it. In that case get something in writing from the seller clearly stating that the park does not have and has never had Statements of Policy. In reviewing Statements of Policy pay special attention to ensure that there is no right of first refusal for tenants to purchase the park. Also be sure there are no limitations on the landlord’s ability to increase rents other that giving the 90 day notice the law requires.
Review the landlord’s three year rent increase history. All parks are supposed to have these available. Remember that rent increases of more than 10% plus CPI in a 12 month period in the aggregate give the tenants the right to relocate at the expense of the Relocation Fund.
Review the park rules and take a close look at the park to see if those rules are actually being enforced.
Ask to see all termination notices given to tenants in the last twelve month period whether or not they resulted in an eviction being filed. This may give some idea of the quality of tenant relations and management effectiveness.
Fair Housing Matters
If this is an Age 55+ Park ask to see the most recent survey. All such communities are required to document their age mix every two years with a written survey. This should show the park has over 80% of its spaces occupied by an age 55 or older resident. Look at the park’s signs, advertising, website, and other public materials to ensure the age status is correctly presented.
Ask to see all fair housing complaints files if any complaints have been filed against the park in the preceding three years. Ask how many reasonable accommodation requests have been made by disabled residents in the past three years and what actions were taken with respect to each.
Be sure to identify all spaces where reasonable accommodation requests were granted for residential caregivers and assistive animals. Understand the details and ensure no extra charges for the accommodation are being imposed.
Be attentive to rent rolls and rent collection records. The rent income records of the park for each space should be examined to see if the tenant is current. Where rent is one or more months past due, check to see what is being done about it. If there is some sort of work-out agreement, examine it to see if the tenant is current with payments under it and whether it is reasonable.
Where the park has sold homes, is financing them and the sale includes the lender's interests under the sale contract, conduct a similar inspection of the loan payment records. Also be sure that the loan and title documents on the home are correct and in the file. Normally the original title to the home showing a lien in favor of the lender (here, the park) should be in the file.
If rent to own contracts are involved, be sure to understand the legal problems associated with them and be sure there is a valid title in the file that can be transferred to the tenant at the appropriate time.
Where rent delinquencies exist, visit the space to see if it is occupied. Often the home is abandoned and the park is avoiding doing anything about it. Sometimes parks get the paperwork completed to transfer title under MVD bonded title procedures or landlord lien sales but just put the paperwork aside to avoid a trip to the MVD. Once in a while the paperwork gets lost and much of it may be irreplaceable.
Check the status of all abandoned homes.
For any utilities separately charged by the park, be sure the charges do not exceed the single family residential rate of the local utility provider. If water, sewer or gas is being separately charged, be sure each space is separately metered and month meter readings are being taken in order to calculate charges.
Learn whether the local utility provider allows for temporary service suspensions (furloughs) when single family residential customers are temporarily away. Check whether park residents have been requesting furloughs and what is done on those requests. Determine how many seasonal visitors there are and calculate the financial impact if all residents eligible for furloughs requested them.
Determine if what the park pays for utilities is being recovered by the charges paid by residents. Determine if the rate being paid by the park could be lowered by shifting to another available tariff.
If the park is on septic or has a package treatment plant, check the county health department for violations and for information on the background of the park’s system. See if there is local sewer service available or being extended and whether an effort will be made to force the park to connect. If so, what will it cost. Have the septic or package plant thoroughly inspected by qualified professionals to ensure it is in good working order. Be sure that a package plant has qualified and licensed operators.
All parks have underground utility systems including water and sewer lines. The law imposes on the owner the obligation to know where these components are located and when called on to do so, to be able to “blue stake” them. A buyer should ensure he gets the best available drawings, plats, etc. showing the location of all underground utilities in the park.
In older parks, underground water, gas and sewer lines may be wearing out and either in need of or approaching the need for major repairs or replacement. Have these examined and determine what the recent failure and repair history is.
Parks with a well could be having water supply or quality problems. The capability and recent history of the well should be investigated.
Ask for copies of all Administrative Law Judge Complaints filed by park residents in the preceding three years and get copies of the final Orders in each case. Also get copies of all lawsuits filed by residents or former residents against the park in the preceding three years and determine the outcome of each case.
Determine if there is an AAMHO chapter or other tenant association in the park. Try to learn what sort of relationship the park has with that association. If possible, talk to the association officers about how landlord tenant relations are.
Occasionally a park will become non-compliant with local zoning laws over time. Or the laws themselves may be changed and the now non-conforming use may be “grand fathered” in. A prudent buyer will check such things as whether the number of spaces there are actually permitted by the local zoning restrictions, whether the MH-RV space allocations are permissible, whether set-backs of homes are in compliance or, if not, the terms under which the violations are “grand fathered”, etc.
Park Owned Homes
If you are also acquiring park owned homes, be sure to understand any restrictions imposed by your lender on rental or sale of park owned homes. Verify that the seller has valid, free and clear titles on all of them and that personal property taxes are current.
If homes are rented, understand the different laws that apply to them and the maintenance responsibilities of the landlords. Have the seller arrange an inspection of all occupied park owned homes so their condition and any deferred maintenance needing attention can be determines.
If you will be selling these homes be sure to understand licensing requirements to engage in the sale business as well as federal requirements for financing them imposed by the SAFE Act, Dodd Frank and other laws.
This is the tip of the iceberg and mentions only a few issues unique to manufactured housing communities. Use the services of a qualified MHC broker or consultant to help with the due diligence process if you are not an experienced, savvy park buyer.
HE’S NOT AN UNAUTHORIZED OCCUPANT—HE’S JUST “VISITING”!
By: Melissa A. Parham
Lately we have seen a lot of cases involving mobile home park tenants who allow people who have never been park-approved to move into their homes. When confronted by park management, these tenants claim that the unauthorized occupants are merely “guests.” The tenants then claim this “guest” defense in eviction proceedings. Sometimes the tenants are successful.
In one recent case, a woman and her husband applied for tenancy in a mobile home park. In his application, the husband denied having any felony convictions. But, upon running a background check, the park learned that the husband had multiple felony convictions, and rejected his application. The wife assured the park that her husband would not live with her. The park trusted her statements (unwisely, in retrospect), approved her, and allowed her to move in. Unfortunately, the husband quickly began “visiting” his wife. It appeared to the park that the husband was spending almost every night in his wife’s home. Other residents saw him around the park walking the couple’s dog and doing their laundry. Eventually the park learned that the husband was parking his car in a nearby neighborhood and entering the park on foot to stay with his wife nightly and avoid detection by management and neighbors. The husband continued “visiting” even after the park delivered multiple 14/30 notices to the wife. Ultimately the park delivered a repetitive conduct notice to the wife arising out of all of the 14/30 notices for the unauthorized occupant. The wife pleaded with the park to approve her husband.
In the eviction, the wife claimed that her husband was merely her “guest.” She presented some questionable evidence that the husband did not live with her. This included both of their testimony; the testimony of a woman who claimed that the husband was actually living with her even though her lease with her apartment complex did not list him as a tenant or occupant; and mail addressed to the husband at that other address. The park presented testimony from management regarding how often the husband was seen at the wife’s home and how often he appeared to be staying there overnight. The park had kept written logs detailing when the husband was seen around the park. Unfortunately the judge believed the tenant and her witnesses, and the tenant prevailed.
These “unauthorized occupant” situations can present major problems for mobile home parks. The Mobile Home Parks Residential Landlord and Tenant Act (the “Act”) defines a “guest” as “a nonresident, over and above the occupancy limit set for the resident’s space under the terms of the rental agreement or by park rules, of a mobile home park who stays at the home of a person with constructive possession of the home with the consent of the resident for one or more nights and not more than thirty days in any twelve month period.” A.R.S. § 33-1409(12). The Act allows a park to charge a “guest fee” for “a guest who does not stay for more than a total of fourteen days in any calendar month.” A.R.S. § 33-1414(A)(5). Most parks’ rental agreements provide that a “guest” may stay for 14 days each month, and not for more than 30 days in a 12-month period. If a person stays with a tenant for more than 30 days in a year and has not been park-approved, he is an “unauthorized occupant.”
A park can do a few things to strengthen its case that an occupant is “unauthorized” and not a mere “guest.” First, the park must ensure that its rental documentation is in order. The rental agreement should identify by name all parties eligible to live on the space and should prohibit residency by anyone not specifically named in the lease unless approved in writing. It should also say that any guest present for more than 30 days in a 12-month period must be approved as a resident or vacate. The park’s rules should specifically provide that tenants are responsible for the conduct of their guests, and that after 30 days in a 12-month period, guests must either be approved as occupants or vacate. The rental documents in the MHCA Blue Book cover these areas.
Second, as soon as it learns that an unauthorized person is living with a tenant, a park should begin documenting how often the unauthorized person is seen at the space. Documentation should include a written log with dates and times, and, more importantly, dated photographs. One park was able to prevail in one of these cases where the park manager woke up at 4:45 A.M. for 30 days straight and took photographs of the unauthorized occupant’s car parked in the tenant’s driveway with a copy of the day’s newspaper showing the date. Unfortunately this is difficult when a crafty unauthorized occupant parks his car in a nearby neighborhood and enters the park on foot. In that situation the park would be wise to photograph the car in the adjacent neighborhood every day with a copy of the day’s newspaper (ownership of the vehicle could be proved through motor vehicle records) and log when the unauthorized occupant is seen at the tenant’s space or around the park.
Third, as soon as the park is convinced that the person staying with the tenant is an unauthorized occupant and not merely a guest, the park should take action. It should stop accepting the tenant’s rent. If the park accepts rent from the tenant knowing that an unauthorized occupant is living with him, the park may inadvertently accept the unauthorized occupant and waive its ability to evict. The park should also deliver a 14/30 notice to the tenant, terminating the tenant’s rental agreement. The 14/30 notice should state that the tenant has permitted someone to move into his home without the landlord’s approval in violation of the tenant’s rental agreement and/or the park rules and regulations. Then, if the unauthorized occupant does not vacate within 30 days, and the park can prove that he has been staying with the tenant for more than 14 days in a month or more than 30 days in a 12-month period, then the park should forward the case to its attorney to file an eviction. In the period leading up to the eviction the park should continue documenting the unauthorized occupant’s presence with written logs and photographs.
Often an unauthorized occupant is hiding a criminal record, cannot meet the park’s age requirements (in age 55+ parks), or knows that he will be unacceptable to management for some other reason. To some extent a park is responsible for ensuring a safe living environment for its tenants. If the park takes no action when strangers move in, it could potentially be liable for injuries the strangers cause. Yet, if a park tries to evict a tenant for an unauthorized occupant and it does not have sufficient, strong proof that the unauthorized occupant is not just a “guest,” the park may lose in court and could be forced to pay the tenant’s attorneys’ fees. If faced with this situation, be sure that your rental documentation is in order; document, document document; consult with an attorney if necessary; and take action.
Nonsmokers are increasingly advocating for the right to breathe smoke-free air. Many landlords have decided that prohibiting smoking improves the overall environment of the community. Smokers are being treated more and more like second-class citizens when it comes to their habit, and there can be no doubt that second hand smoke is repellant to many people and actually causes health problems to some.
It is legal for a landlord to prohibit smoking in landlord owned rental dwellings and common areas. Indeed, under ARS § 36-601.01 (A) (9) of The Smoke-Free Arizona Act that became effective in 2006, landlords were required to make their common areas smoke-free zones and to prohibit smoking there.
Prohibiting Smoking in Common Areas
As pointed out above, landlords are required to make common areas nonsmoking. Common areas in parks should be posted with non-smoking signs and the rules should state that they are non-smoking areas.
Prohibiting Smoking in Park Owned Homes
It is legal for a landlord to prohibit smoking in landlord owned rental dwellings. In addition to the health benefits of reducing exposure to second-hand smoke, restricting smoking can decrease the risk of accidental fires and may even reduce fire insurance premiums. Landlords also may see a significant reduction in maintenance and turnover costs. Cleaning and refurbishing a smoker’s unit can require additional time and effort to repaint and to replace carpets and drapes. By prohibiting smoking in a unit, landlords can minimize or eliminate these expenses altogether.
Landlords have the right to set limits on how a tenant may use rental property. A “no-smoking” term is similar to a “no pets” restriction in the lease - another way for a landlord to protect his or her property. Landlords with currently occupied park owned home rentals, however may have a problem in trying to impose a smoking ban during the term of an existing lease since such a term would constitute a significant modification to a smoker’s rental agreement. But the lease can be non-renewed at the end of its term and a new lease can contain such a provision.
For a park owned home it is advisable to put the no smoking requirement in the rental agreement and not just rely on the rules and regulations
Tenant Owned Homes
A no smoking rule would be all but impossible to enforce against tenants smoking in their own homes. Under the Mobile Home Parks Landlord Tenant Act the landlord has no right of access to enter a tenant’s home when it is a tenant owned unit. Nevertheless a park could adopt as part of its rules and regulations a requirement that tenants not smoke anywhere in the community including their own homes. But about the only way a violation could be proven is if other residents, especially neighbors could smell the smoke and were bothered by it enough to complain.
Scope of No Smoking Restrictions
The rule should include smoking of all organic materials, including marijuana and medical marijuana, and should not just be limited to tobacco products.
Use of these does not constitute smoking in the technical sense because nothing is burned and no smoke is given off. An E-cigarette is a battery-powered device which simulates tobacco smoking. It may use a heating element that vaporizes a liquid. Some solutions contain a mixture of nicotine and flavorings, while others release a flavored vapor without nicotine. They often are designed to simulate cigarettes or cigars, in their use and/or appearance.
Any rule that does not cover them as well is sure to generate unhappiness on the part of almost everyone. For that reason as well as the fact that the health risks to bystanders when they are used is so far unknown justifies including them in the no smoking rule.
Park landlords can amend their rules by giving a 30 day notice. While an amendment cannot change a condition of tenancy if it works a “substantial modification”, it is unlikely a no smoking rule would rise to that level, especially in view of The Smoke-Free Arizona Act. The suggested rule below is limited to common and public areas of the park. No smoking rules for park owned home rentals should be added to their leases, and landlords need to decide whether to even try to ban smoking in tenant owned homes.
No Smoking Rule
For purposes of this Rule, the term “smoking” means inhaling, exhaling, breathing, or carrying any lighted cigar, cigarette, or other tobacco product or similar lighted product in any manner or in any form. “Product” means any organic product including marijuana (including “medical marijuana”). “Smoking” also includes the use of “E-cigarettes” and similar devices that mimic normal smoking by the use of battery powered heating elements that create flavored vapor.
All inside and outside public and common areas of this Community have been designated as a NO SMOKING living environment. Tenants and members of Tenants’ household shall not smoke anywhere in the public and common areas, the adjoining grounds of any public or common facility, or other parts of the rental Community, nor shall a Tenant permit any guests or visitors under his or her control to do so.
RENTAL FORMS NECESSARY IN PARKS
Sometimes we assume people in this industry have the basic knowledge of what the law requires. But it is always a mistake to assume anything. We are seeing this more and more with parks operating without using the necessary forms, some of which the law requires. So this is a “back to basics” article on what minimal forms a park needs to use in dealing with its tenants.
Mobile Home Space Rentals
(a) Required Forms. The law requires all park landlords to use certain forms in the rental of spaces for tenant owned mobile homes.
Rental Agreement– All new tenants must have a written rental agreement. All tenants (new and old) whose rental agreements expire or who don’t have written rental agreements who request one must have a written rental agreement. The agreement may be for any period of time, but if the parties cannot agree, it will be for one year.
Rental Agreement (Four-Year)– The law gives the tenant (but not the landlord) the right to demand a four-year lease. If a tenant demands one, the landlord is required to complete it and send it to the tenant.
Statements of Policy– All parks must have statements of policy. The statements must have expiration dates. There are eight areas that must be addressed by the statements.
Rules and Regulations– These are required by law to promote the tenant’s well being, to protect the landlord’s property, to preserve or upgrade the quality of the park, and to fairly distribute the park’s amenities.
Rent Increase History Disclosure Statement (Annual Posting)– The law requires the park to post a disclosure of rent increases over a three calendar year period. It must be posted throughout the year.
Rent Increase History Disclosure Statement (Initial Tenancies Only)– The law requires the park to provide a prospective tenant about to enter into an initial rental agreement a written statement that shows rent increases for the preceding three calendar years for base rents.
Acknowledgement of Receipt– The law requires this be attached to the rental agreement and be signed by the tenant to ensure he has received the items shown on it.
Additional required Items- The landlord must post in a conspicuous place a copy of the current park charged utility rates. Disclosure of the owner, manager and statutory agent of the park must be made. Before entering into a rental agreement, the landlord must provide to the prospective tenant a summary of the Arizona mobile home parks residential landlord and tenant act. When the act changes, updated summaries must be made available to all tenants by the following November.
Assessor’s Card– Must be completed by every tenant. It is used by the County to assess homes in the park for tax purposes.
(b) Strongly Recommended Items. While not strictly required by the law, there are other forms that as a practical matter must be used.
Application for Residency– The information in this form is very important to enable the Park to screen applicants. Use this form for all types of rentals.
Crime Free Addendum to Rental Agreement– This form is based on the forms developed for use in crime free programs being sponsored by police departments throughout Arizona.
Age 55 Community Survey Form– Use this to survey for proof of age of approved residents of spaces in age 55 parks. This is necessary to comply with government criteria for age 55 parks and must be completed every two years.
Rent Increase Notice – Give this when rent is being increased. It must be given at least 90 days before the effective date of the increase and cannot be effective before the expiration of current rental agreements.
Termination Notice Forms– to terminate a tenancy for cause a proper form of termination notice must first be given. For space rentals that is a seven-day notice (rent), 10/20 and 14/30 notices (rule violations) and an immediate notice (criminal conduct).
Park Owned Home Rentals
(a) Required Forms. There are fewer required forms for park owned home rentals.
Move-In/Move-Out Form – The landlord and tenant must complete the form during a joint walk through of the home when it is rented. The “move-in” columns get completed at that time. When the tenant vacates, the landlord must notify the tenant of the time the move-out inspection will take place. The “move-out” part of the form is then completed. This serves as the basis for refunding security deposits.
Agreement for Acceptance of Partial Rent Payment – This form must be used if the tenant is making a partial rent payment if the park wants to preserve the right to evict him.
(b) Strongly Recommended Items. While not strictly required by the law, there are other forms that as a practical matter must be used.
Rental Agreement – All tenants should have written rental agreements.
Rules and Regulations– These are optional for park owned home rentals but parks should make whatever modifications are needed to reflect a park owned home rental and then use its basic rules.
Crime Free Addendum to Rental Agreement– This form is based on the forms developed for use in crime free programs being sponsored by police departments throughout Arizona.
Termination Notice Forms– to terminate a tenancy for cause a proper form of termination notice must first be given. For park owned home rentals that is a five-day notice (rent), five and ten day notices (rule violations) and an immediate notice (criminal conduct).
Long Term Rv Space Rentals
(a) Required Forms.
Rules and Regulations– The law requires these. The basic park rules should be able to be used for the most part.
Additional required Items- The park must post in a conspicuous place a copy of the current park charged utility rates and any administrative fees charged. Disclosure of the owner, manager and statutory agent of the park must be made. Before entering into a rental agreement, the park must provide to the prospective tenant a copy of the Arizona recreational vehicle long-term rental space act. The park shall also make available to all tenants a current copy of the Arizona recreational vehicle long-term space act.
(b) Strongly Recommended Items. While not strictly required by the law, there are other forms that as a practical matter must be used.
Rental Agreement– The law gives either the landlord or the tenant the right to require the other to enter into a written rental agreement. The term is whatever the parties agree to. If they can’t agree, the duration will be the same as the most recent rental agreement, but not to exceed one year. Note that a landlord cannot be forced to enter into an initial rental agreement for more than 179 days.
Crime Free Addendum to Rental Agreement– This form is based on the forms developed for use in crime free programs being sponsored by police departments throughout Arizona.
Rent Increase Notice– Give this when rent is being increased. It must be given at least 60 days before the effective date of the increase and cannot be effective before the expiration of current rental agreements.
Termination Notice Forms– to terminate a tenancy for cause a proper form of termination notice must first be given. For space rentals that is a five-day notice (rent), 10/20 and 14/30 notices (rule violations) and an immediate notice (criminal conduct).
These are the bare bones that parks need to have to operate. There are a myriad of other forms that will be needed from time to time. MHCA published forms books with all of these forms. The Blue Book for space rental forms; the Green Book for park owned home rental forms; and the Orange Book for RV space rental forms.
Once a park completes drafting forms they should be reviewed by its attorney
WORKCAMPERS AND WORKAMPERS
This is a tradition that seems to be unique to RV Resorts and Parks and to campgrounds in National and State Parks. It is a form of RV camping involving singles, couples or families who work part-time or full-time. It combines part-time or full-time paid or volunteer work with RV camping. Volunteer camp hosts are often called “WorkCampers” while paid camp hosts are called “Workampers”.
Volunteer workers usually trade work for a free campsite. Because of minimum wage restrictions set by the Fair Labor Standards Act (FLSA), volunteer positions are generally limited to government-run campgrounds.
Paid Workamping jobs can be up to a full 40 hours per week, but most require less. Often couples can split the work further reducing the hours expected of each partner and often enabling them to work together. Paid positions are usually at RV Resorts and Parks.
Paid workers are usually responsible for all the duties expected of volunteer hosts, but can also be required to clean bathrooms, pick up trash, and perform light maintenance.
The FLSA is also known as the federal minimum wage law. An employer covered by the FLSA, is generally required to pay to each employee a minimum wage not less than $7.25 an hour. A park is a covered employer if the community grosses over $500,000 annually.
Arizona has its own minimum wage requirement. States are free to set a minimum wage which is higher than that required by the FLSA. Arizona’s minimum wage is $7.80 as of this writing (November 2013). The Arizona minimum wage is linked to a consumer price index. As a result it can be increased each year, on January 1.
The Arizona Minimum Wage Act generally applies to all employers except small businesses that are not subject to the FLSA and which have less than $500,000 in gross annual revenue.
If applicable, the minimum wage must be paid for all hours worked. When paying Workampers, the minimum wage must be paid if the RV Resort or Park is a covered employer.
Under the FLSA an employer may credit the "reasonable cost" of meals and lodging that are furnished for the benefit of the employee and are accepted voluntarily by the employee and without coercion. But unlike other state and federal statutes, the Arizona Minimum Wage Act defines “wage” to include only “monetary compensation.” Credit for the value of lodging and other items is not allowed when computing an individual’s entitlement to receive minimum wages under the Arizona law.
A volunteer who works without any express or implied compensation agreement is not an employee under the Arizona Minimum Wage Act. This may include an individual who volunteers his services for charitable reasons that are offered freely and without pressure or coercion from an employer.
Generally, paid Workampers must be eligible for employment in the United States and in Arizona would need to be cleared through E-Verify. Canadians and other foreign nationals will typically need a temporary work visa that is difficult to obtain.
Employers generally must provide workers compensation for their employees. Workers compensation pays for medical expenses from on-the-job accidents and work-related illnesses. If in doubt, Parks should check with their Workers Compensation carrier for its definition of an "employee."
A Workers Compensation policy will generally pay medical benefits, disability income benefits, rehabilitation benefits, and death benefits. They also will typically provide basic coverage for accident and illness, as well as coverage for legal fees for lawsuits filed by employees for job-related injuries.
Do not try and treat these as independent contractors in an effort to evade these responsibilities. Normally there is no way a Workamper can satisfy the independent contractor criteria.
GAS LINE ENCROACHMENTS
Gas line systems in many areas of Arizona including a number of manufactured housing communities have gotten to be 50 or more years old. Over time, records of where they are have gotten lost, and homes have been placed in close proximity to where the lines are located. This is even more likely to happen in parks where there are no clearly defined lot lines and set back and other local restrictions result in replacement homes being situated differently from homes that have been removed.
In 1984 APS, which had been the natural gas utility in central Arizona sold its gas business to Southwest gas. This followed the purchase of the natural gas business in 1979 in southern Arizona from Tucson Gas and Electric. My suspicion is that as a result of these acquisitions the records Southwest Gas has of old systems are often incomplete or missing.
In the late 1980's the federal government and the states started intensifying their regulation of the safety of natural gas lines. Basically the federal government looks to the states to do the regulation of local lines. In Arizona regulation is up to the Office of Pipeline Safety of the Corporation Commission.
That Office has published regulations that Southwest Gas and other gas utility systems in Arizona must comply with. Even if the regulations are implemented after old systems have been created, they still apply and must be complied with since they are for public safety purposes. You can find the regulations at this link: http://www.azsos.gov/public_services/Title_14/14-05.pdf. Pipeline safety starts at page 23.
Federal and state laws require that gas systems comply with safety regulations. Here is what the regulations say beginning at pages 23-24:
Operators of an intrastate pipeline transporting LNG, hazardous liquid, natural gas or other gas will not construct any part of a hazardous liquid, LNG, natural gas or other gas pipeline system under a building. For building encroachments over a pipeline system, the operator may require the property owner to remove the building from over the pipeline or reimburse the operator the cost associated with relocating the pipeline system. The encroachment shall be resolved within 180 days of discovery, or the operator shall discontinue service to the pipeline system. When the encroachment cannot be resolved within the 180 days the operator shall submit to the Office of Pipeline Safety within 90 days of discovery a written plan to resolve the encroachment. The Office of Pipeline Safety may then extend the 180-day requirement in order to allow the rate- payer and the operator to implement the written plan to resolve the encroachment.
In the definitions section at the start of page 23 of the regulations the following terms are defined:
“Building” means any structure intended for supporting or sheltering any occupancy.
“Structure” means that which is built or constructed, an edifice or building of any kind or any piece of work artificially built or composed of parts joined together in some definite manner.
So not only can the gas company cut off service if it cannot fix the problem; it must do so.
I find that Southwest Gas is usually quite cooperative in these situations but they have no choice but to comply with the pipeline safety regulations one way or the other.
Parks learning that they have or may have encroachments that violate these regulations should promptly meet with a utility company representative and come up with a plan to satisfy the problems. There are a variety of ways this can be done including moving structures; relocating rights of way in the park; and moving/replacing existing gas lines.
Purchasers of parks need to ensure they are getting the best and most up to date records of underground utility systems in the community that are available.
It apparently has become fairly common for some parks with manufactured home dealer’s licenses to pay "referral fees" to tenants who refer their friends to the park sales office when those friends wind up buying homes in the park. But there are ramifications under Arizona dealer licensing laws.
The Fire, Building & Life Safety Department licenses and regulates MH dealers. In its sales handbook under the Q & A section is the following:
3. Can I pay referral fees to someone who refers a purchaser or potential purchaser to my dealership?
ANSWER: The statutes and rules governing the Department do not address referral fees; however, a person cannot act in the capacity of a salesperson without being properly licensed, pursuant to A.R.S. § 41-2194 (3). This includes quoting prices, soliciting or negotiating a sale.
Late in 2013 a park received a notification from the Department demanding that the payment of referral fees to tenants be discontinued immediately. It was the Department’s belief that offering to pay someone a referral fee (based on a sale taking place) constitutes aiding and abetting an unlicensed salesperson.
Salesperson is defined under ARS §41-2142 (31) as:
. . .any person who, for a salary, commission or compensation of any kind, is employed by or acts on behalf of any dealer or broker of manufactured homes, mobile homes or factory-built buildings to sell, exchange, buy, offer or attempt to negotiate or act as an agent for the sale or exchange of an interest in a manufactured home, mobile home or factory-built building.
To receive compensation based on a sale taking place, the person would have to be properly licensed as a salesperson under a dealer’s license. In this case the Department believed that referral fees were commissions and to receive one, the recipient must hold a salesperson's license. ARS 41-2186 (4) says it is grounds for disciplinary action against a dealer's license when he aids or abets an unlicensed person with intent to evade licensing laws.
After this notification was received by our client, we researched the issue and presented the results of our research to the Department with the request that it reconsider. It was our opinion that as long as the person making the referral is a tenant of the park where the home will be sold; does not act in any way on behalf of the dealer in the sale; and is paid only on closing for having made the referral, the transaction does not fall within the definition of "salesperson" under the licensing laws and the money paid does not constitute a commission.
In our analysis we reviewed not only dealer licensing statutes but the “spif” statute as well. The Mobile Home Parks Residential Landlord and Tenant Act prohibits the payment of “spifs” (landlords and dealers paying one another compensation for the placement of homes in parks).
The “spif” statute however makes an exception for payments to tenants or prospective tenants. A.R.S. § 33-1417(C)(2) specifically allows for the payment of “Money or other benefits paid directly to a tenant or prospective tenant by a landlord when fully disclosed to the tenant in writing.” One who violates the “spif” statute is liable for three times the amount of money damages suffered by the person harmed. See A.R.S. §33-1417(D).
Thus in our view A.R.S. §33-1417(C)(2) allows the payment of referral fees to tenants and/or prospective tenants where those fees are disclosed in writing. That statute, though it appears in the Mobile Home Parks Residential Landlord and Tenant Act (and not in the provisions regarding dealer licensing), does not state that a tenant receiving payment for a referral must be licensed as a broker, salesperson, or dealer.
On January 2, 2014 the Department advised that "...the referral program is fine as offered to tenants of mobile home parks as an incentive for Parks to fill empty spaces or unoccupied homes."
This should not be construed as a carte blanch for parks to start paying commissions to unlicensed persons. No such fee should even be considered unless the person making the referral is a tenant of the park; that person plays absolutely no role in negotiating any of the terms of the transaction or in getting the transaction closed; and as long as the tenant making the referral is not engaged in this as an ongoing business. In other words, limit it to tenants referring true friends or acquaintances only once or at the most very infrequently.
I don't like referral fees very much because some folks will call a commission a referral fee to avoid the hassles of dealer licensing laws. But I understand that true referral fees are part of this business nationally. However parks licensed as dealers must be very careful in paying them to avoid being disciplined by the Department for unlawfully paying commissions to unlicensed persons. And referral fees can only be paid by park landlords to bona fide tenants of the park which has the dealership office and in which the home will be sold to avoid violating not only dealer licensing laws but also the spif statute in the Mobile Home Parks Residential Landlord and Tenant Act.
With a small staff the Department endeavors to fairly enforce the dealer licensing laws and to prevent unlicensed and unregulated people from engaging in manufactured home sales. I have been around long enough to remember the days when that business was largely unregulated and a lot of consumers got hurt by shysters in the business. I fully supported the licensing laws when they were enacted and I support them now. Debra Blake and Donna Grant with the Department do a good job in enforcing them fairly and correctly and the entire industry should support that effort.
THE RIGHT LEGAL DOCUMENT FOR THE RIGHT SITUATION
By: Melissa A. Parham
We often see parks using inappropriate rental forms and legal notices. I recently saw a park using a mobile home space rental lease for what should have been a short-term RV rental agreement. The park also accepted a year’s worth of rent from the tenant though the lease was drafted for a month-to-month tenancy. This may sound innocuous, but it caused the park problems. By using the wrong form the park may have inadvertently turned what should have been a short-term RV space tenancy into a year’s lease governed by the Mobile Home Parks Residential Landlord and Tenant Act (the “MHP Act”).
This made it more difficult to evict the tenant or change the terms of his tenancy. The tenant had been verbally abusing management. Had the short-term RV space rental laws applied, the park could have simply terminated the tenancy for the verbal abuse. Technically the park would not even have been required to give the tenant a notice (but do not try that; for short-term RV violations not involving non-payment we recommend giving the 10-Day Termination Notice in the MHCA Orange Book). Instead, since the park may have inadvertently selected the MHP Act, the safest route for the park was to deliver a 14/30 Termination Notice to the tenant and hope that he moved out so that the park would not have to attempt to explain its poor documentation in court.
Mobile home park managers have a tough job. Apartment managers only have to contend with one set of landlord-tenant laws. Depending on what types of rentals a park offers, park managers may have to contend with as many as four sets of landlord-tenant laws. Each set of laws necessitates particular rental documentation, and different types of termination notices are required to terminate a tenancy depending on the situation.
Confusingly, the landlord-tenant act that applies depends not only on whether the tenant is renting the space or the home, but also on what the tenant will place on the space. Is it a mobile home? Is it a park model? Is it an RV? Is it a travel trailer?
The Mobile Home Parks Residential Landlord and Tenant Act governs the rental of a space upon which the tenant places and resides in a mobile home in a mobile home park. It does not apply to the rental of a park-owned home. It does not apply to the rental of a space for a travel trailer, an RV, or a park model. These are the most common notices appropriate for a mobile home space rental:
MHP ACT (Mobile Home Space Rental)
Non-payment of rent
Violation of Lease/Rules & Regs.
City code violation (health/safety) (i.e. speeding, broken windows, no functioning plumbing, etc.)
Crime in park
Immediate (Material & Irreparable) Notice (probably)
A tenant under the MHP Act has what we like to call a “perpetual lease.” The park cannot simply tell the tenant that his residency is terminated at the end of his lease. Instead, the tenancy may only be terminated for “good cause” (like the reasons listed above). Also, under the MHP Act the duration of a tenant’s written rental agreement can be any length, but if the parties cannot agree, a one-year term is required. Also, a tenant can demand (in writing) a four-year lease. On expiration of the initial lease term, tenancy is month-to-month unless the parties agree to a new term. If the parties disagree on the renewal term then the renewed rental agreement is for one year.
The Residential Landlord and Tenant Act (RLTA) governs the rental of residential dwellings. This includes park-owned mobile homes. The RLTA does not apply to the rental of any space or pad that does not contain a landlord-owned dwelling structure. In other words, it does not apply to mobile home spaces, RV spaces, etc. These are the most common notices appropriate for park-owned homes:
Residential Act (Park-Owned Homes)
Non-payment of rent
Violation of Rules & Regs.
City code violation (health/safety) (i.e. speeding, broken windows, no functioning plumbing, etc.)
Crime in park
Immediate (Material & Irreparable) Notice (probably)
Unlike a tenancy under the MHP Act, a tenancy under the RLTA can be terminated without good cause with 30 days’ notice before the expiration of the lease. A lease under the RLTA can be for any term, and if the agreement sets no definite term, generally the tenancy is month-to-month.
The Recreational Vehicle Long-Term Rental Space Act (RVRSA)governs the rental of an RV space where the community has three or more RV spaces and the space is rented to the same tenant for more than 180 consecutive days. It does not apply to the rental of RV spaces for less than 180 consecutive days. Park models are, under the law, treated as RVs and, when rented for more than 180 consecutive days, are governed by this Act.
RVRSA (Long-Term RV/Long-Term Park Model Space Rental)
Non-payment of rent
Violation of Rules & Regs.
City code violation (health/safety) (i.e. speeding, broken windows, no functioning plumbing, etc.)
Crime in park
Immediate (Material & Irreparable) Notice (probably)
Under the RVRSA a tenant may not demand any particular term for the rental agreement. If the parties cannot agree on the term for a renewal lease, the term is the same as the term of the expiring agreement. Accordingly, if an RVRSA tenant with a one-year lease refuses to stay on as a month-to-month tenant, he must be given another one-year lease. If a month-to-month RVRSA tenant demands a one-year lease, the park is not required to give him a one-year lease and can keep him as a month-to-month tenant.
RV space rentals can be non-renewed without cause unless the unit is a park model in which case, like mobile home space rentals, the tenant has a perpetual lease requiring good cause to terminate/non-renew. Other long term RV space rentals can be non-renewed without cause with a 90-day notice.
The General Landlord-Tenant Laws govern RV space rentals of 180 consecutive days and less. These laws are the most beneficial to landlords, giving landlords maximum flexibility in dealing with tenants.
Under the general laws when a tenant does not pay rent, no termination notice is required. Many parks give 5-day notices. A park should at least give the tenant a demand for possession of the space before filing for eviction. Technically, under the general laws no notice is required to terminate for violation of the park’s rules and regulations or to terminate for a health and safety violation. Nevertheless, it is wise to provide the tenant with a 10-Day Notice in these circumstances and most judges expect that such notice will be given. Under the general laws, a tenant has no right to cure violations. He may not pay and stay after receiving a termination notice for non-payment, and he may not cure any other type of violation and stay as a tenant.
The term of a lease under the general laws may be any term (though it must be under 180 days to fall under the general laws and not the RVRSA). Accepting rent for over 180 days in advance can change this type of tenancy into a long-term RV tenancy.
Use appropriate documents! When a park uses the wrong lease for the type of property it is renting to a tenant, it may inadvertently select an inappropriate set of laws to govern the tenancy. Some eviction judges have found that a landlord and tenant can cause a long-term or short-term RV tenancy to fall under the MHP Act simply because the MHP Act was cited in the lease. Again, the MHP Act is much less landlord-friendly than the laws governing short-term RV rentals.
If the wrong type of notice is given, it may be ineffective. For example, using a 5-day non-payment notice on a mobile home space (which requires a 7-day Notice) will not provide the tenant with sufficient time to cure the violation, and will thwart an attempted eviction. Using a 7-Day Notice on a space that houses a park model (which is treated as an RV), while not fatal to an eviction, could cause confusion (since a 5-Day Notice is appropriate).
If in doubt about what type of rental documentation to use or what notice to give, contact your attorney to avoid making a costly mistake.
WHEN IS A CAREGIVER ALLOWED, AND WHY DO I NEED AN ADDENDUM?
By: Melissa A. Parham
I am often asked under what circumstances a mobile home park tenant may have a live-in caregiver, and whether an individual who has already moved in with a tenant constitutes a “caregiver.”
In summary, when a tenant can demonstrate a medical need for a live-in caregiver, fair housing laws require the park to waive any rule prohibiting the tenant from having the caregiver live with him—for example, occupancy limits, or, in age 55 parks, age restrictions. But, Arizona laws make clear that a caregiver does not become a tenant, must comply with park rules, and when the condition giving rise to his or her need ends (for example, the tenant recovers or dies), the caregiver can be required to move.
We strongly recommend that parks require tenants who have properly requested to have a live-in caregiver to sign an addendum to their rental agreements spelling out the caregiver’s limited rights. A form for that purpose is available in the MHCA Bluebook.
Who is entitled to have a live-in caregiver? To be entitled to a live-in caregiver, a tenant must be “disabled.” A person is “disabled” if he or she has a sensory, mental, or physical condition that “substantially limits” one or more “major life activities” (like walking, seeing, hearing, working, etc.).
What is a live-in caregiver? A live-in caregiver is a person who resides with a person who is disabled, and who is: (1) essential to the care and well-being of the disabled person; (2) not obligated to support the disabled person; and (3) would not be living in the unit except to provide the necessary supportive services to the disabled person. The caregiver is an occupant of the unit, but is NOT considered a tenant. Accordingly, the caregiver does not have to meet income qualifications and is not liable for paying rent. A park may—and should—still run a criminal background check on any appropriately requested caregiver. And once the need for the caregiver ends (for example, the tenants dies, recovers, or moves out), the caregiver must leave.
Since the caregiver is not a tenant, the caregiver is not permitted to use park facilities (like the swimming pool or clubhouse). The caregiver must comply with park rules. If a tenant’s caregiver is caught using park facilities or breaking park rules, the park should deliver the appropriate notice to the tenant regarding the caregiver’s conduct (for example, a 14/30 Termination Notice if the caregiver is using park facilities, or a 10/20 Termination Notice if the tenant is speeding through the park’s streets). We have heard complaints from parks regarding “caregivers” who had loud parties after their disabled ward went to bed, and about “caregivers” who were dealing drugs out of the disabled tenant’s home. If a caregiver commits a crime in the park, an immediate eviction against the tenant is probably appropriate. Caregivers are not exempt from the park rules or the law.
How is the caregiver requested? A disabled tenant requests to have a live-in caregiver by making a reasonable accommodation request. The MHCA Blue Book has a specific form for this purpose, though you cannot require a tenant to use your particular form.
Through the MHCA form or other means (i.e. a letter from the tenant’s doctor, other medical professional, or qualified party), the park may verify: (1) the existence of the disability (if not readily apparent); (2) the need for the accommodation (if not readily apparent); and (3) that the caregiver is qualified to provide the supportive services that the tenant needs because of the disability.
It is insufficient for the tenant to merely present a letter that states that the caregiver would be “nice” or “helpful.” If the disability and need for the caregiver are obvious, you should not request verification or use the form.
A park is not required to allow a live-in caregiver who the tenant refuses to identify. The park is permitted to run a criminal background check on anyone who will live there, including caregivers. Additionally, a tenant should obtain approval of a live-in caregiver before the caregiver moves in.
Where a tenant’s requested live-in caregiver cannot pass the park’s criminal background check, the park should give the tenant the opportunity to select a different caregiver.
Caregiver Addendum. A park should always have a tenant complete a caregiver addendum when the tenant has properly requested to have a live-in caregiver and the caregiver has passed the park’s criminal background check. The Addendum makes it crystal clear that the live-in caregiver is not a tenant of the park and does not possess any of the rights that a tenant possesses. Should it ever be necessary (for example, the tenant dies and the caregiver refuses to move out), the Addendum can be used to prove that the caregiver was never a tenant and only lived in the unit to provide medical care to the tenant.
A park does not want to be left in the position of having to prove that a caregiver who refuses to move out—about whom the park has no documentation—has not somehow become a tenant. Finally, a park may not charge any fee for a live-in caregiver.
LIABILITY AND BUSINESS ENTITIES
As of April 2011 there were 1,225,452 licensed attorneys in the United States. Some may think that is too many. But one clear consequence of so many lawyers is that society has become far more litigious. There are some good aspects of this such as increasing product safety. But there are many undeniably bad consequences. First and foremost is that lawsuits are filed at the drop of a hat and lawyers are constantly finding new ways to impose liability on businesses for misfortunes suffered by their clients.
Businesses in particular are often victimized by litigation. Even the most minor mistake can result in the filing of a lawsuit seeking major damages against the company. It is more important than ever for businesses and their owners to try and protect themselves from liability arising out of their operations.
The most important thing a business owner can do is make sure the company is covered by comprehensive liability insurance including umbrella policies when basic coverage is not adequate. In my view it is almost impossible to have too much liability insurance. The more coverage one has, generally, the cheaper it becomes.
Liability insurance is designed to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he is sued for claims that come within the coverage of the insurance policy. In general, damage caused intentionally as well as contract liability is not covered under liability insurance policies. When a claim is made, the insurance company has the duty to defend the insured.
Another way to protect the owners of a business from liability arising out of its operation is to create a business entity to operate it. A business entity is a commercial institution that is formed and administered under commercial law to engage in business activities. There are many types of business entities including corporations, partnerships, and limited liability companies.
A sole proprietorship is a business consisting of a single owner, not in a separately recognized business form. This is not a separate entity and the individual operating the business is personally liable for any damages others may sustain in dealing with the business. Most would agree that this is generally not a good way to conduct business.
A general partnership is a partnership in which all the partners are jointly and individually liable for the debts and obligations of the partnership. It is typically created by agreement rather than being created by a public filing. Once again there is unlimited personal liability of all the general partners for damages others may be caused in dealing with it. This too is generally regarded as not being the best way to do business.
A limited partnership is a partnership where at least one partner has unlimited liability and one or more partners have limited liability. Often the general partner will be an LLC or corporation which has limited liability and if set up this way, the limited partnership may be a good business entity. But if an individual is the general partner, his personal liability is unlimited.
A corporation is a separate legal entity that has been incorporated in a state under a registration process established under state law. Corporations have legal rights and liabilities that are distinct from their employees and shareholders. In addition to being recognized as a separate legal entity, registered corporations have limited liability, are owned by shareholders who can transfer their shares to others, and are controlled by a board of directors elected or appointed by the shareholders. Shareholders are normally not liable for damages caused by the corporation to others and this is a popular form of business entity.
A limited liability company (LLC) is a flexible entity that blends elements of partnership and corporate structures. An LLC is not a corporation but it does generally provide limited liability to its owners. LLC’s are comparatively easy to form and have become by far the most popular form of business entity in recent years, especially for small and medium size businesses.
There are tax consequences to the form of business entity selected. For federal tax purposes, the IRS has separate entity classification rules. Under the tax rules, an entity may be classified as a corporation, a partnership or disregarded entity. A corporation may be either an S type corporation or a C corporation. A disregarded entity has one owner that is not recognized for tax purposes as an entity separate from its owner. Disregarded entities include single-member LLCs.
A disregarded entity’s tax status does not affect its status under state law. For example, for federal tax purposes, a sole-member LLC (SMLLC) is disregarded, so that all its assets and liabilities are treated as owned by its single member. But under state law, an SMLLC can contract in its own name and its owner is generally still not personally liable for the debts and obligations of the entity.
Most lenders prefer properties to be owned by a Single Asset Entity (SAE). An SAE is usually a LLC that owns only one commercial or multi-family property. In the past it was common to see S type corporations formed to own a single property, although the LLC is now far more common. The reason why commercial mortgage lenders prefer SAE's is because if the borrower files a personal bankrupty the commercial mortgage lender is not "stayed" (ordered to refrain) from commencing or completing its foreclosure. In addition, liability for obligations of unrelated business activities does not attach to the property held by the SAE.
Business entities are formed under state law and there are record keeping requirements imposed by the state. Corporations must file annual reports with the Arizona Corporation Commission. Corporations and LLC’s must have statutory agents upon whom lawsuits can be served. The required public records must be kept up to date.
Failure to keep the public records up to date can result in “administrative dissolution” of the entity. For example forgetting to file a corporation’s annual report or the replace a statutory agent who dies or resigns can trigger an administrative dissolution. The tax and liability consequences of this can be very bad though usually the law permits a reinstatement within a reasonable time after the administrative dissolution.
It would be a very good idea for the owner of any business entity to periodically check on the status of its public filings. This is fairly simple for most entities. Simply go to the Arizona Corporation Commission website at http://www.azcc.gov/, click on “Find a corporation/ LLC/ statutory agent”and then complete the business entity information.
It is always unpleasant to get to the end of a refinancing process on a park and when the lender asks for a Certificate of Good Standing on the business, to find out that the company has been administratively dissolved due to some oversight.
Creation of business entities is not terribly complicated but a lawyer should be used since there are some technicalities involved. Legal fees should not exceed a few hundred dollars, though additional expenses for such things as filing fees and publication charges will also be necessary. Equally important is the need to consult with a CPA or other financial advisor as to the best tax and other financial aspects of the entity.
LEASES AND PURCHASE OPTIONS
I gave a presentation at the Tucson Conference on this subject in October 2013. It was set for a Friday afternoon and there was a competing presentation. Suffice to say that I was speaking to a virtually empty room.
My purpose was to dispel some of the inaccuracies and misleading impressions received by many attendees of a couple of presentations on this subject at the June Phoenix Conference. Obviously this was not served, hence this article. I also wrote on this subject in the Summer 2012 edition of this publication but many did not pay attention or even read the article.
The classic “lease purchase” agreement as understood in this industry is when a tenant signs a lease of a park owned home that includes an “option” to buy the home for a pre-set nominal price (like $10) at the end of the lease term. The tenant pays money up front for the purchase of the option that is non-refundable. During the course of the lease the tenant pays rent on the combined home/lot with a portion being applied to the ultimate purchase of the home. Sometimes this will actually be explained in the lease.
Often the rent for the home/lot will be higher than rent paid by other park home renters who do not have such an option. Whether disclosed or not, the excess in reality is being applied to the purchase of the home.
“Lease purchase” agreements have always been popular for a variety of reasons—all of them wrong:
The belief that the landlord can hold the title until the home is paid for and that this is somehow an advantage.
The belief that by not selling homes, landlords do not need to have licenses to engage in that activity.
In recent years the belief that such transactions enable landlords to avoid licensing as loan originators under the SAFE Act and can also avoid complying with other laws applicable to persons financing homes.
Disguised Credit Transactions
“Lease purchase” agreements of the sort described above almost always constitute “disguised credit transactions”. Under the federal Truth in Lending Act (TILA), if the tenant under a “lease purchase” agreement obtains title to the home from the landlord for either nothing or for a nominal price, the agreement constitutes a disguised credit transaction, not a true lease and purchase arrangement.
There are serious penalties under federal and state laws, and civil liability as well for using “lease purchase” agreements to evade the requirements of those laws if they are determined to be disguised credit transactions.
1. Arizona Dealer Licensing Laws. A section of these laws states: “A lease or rental agreement by which the user acquired ownership of the unit with or without additional remuneration is considered a sale under this chapter.” ARS §41-2142 (9). In effect, landlords engaging in the sort of lease purchase agreements described above are engaged in sales. They must be licensed and the monies received attributable to the purchase of the home must be handled in accord with trust and escrow requirements of the dealer licensing laws.
2. Title and Registration Laws. The MVD code defines “owner” as including someone under this circumstance: “If a vehicle is the subject of an agreement for the conditional sale or lease with the right of purchase on performance of the conditions stated in the agreement and with an immediate right of possession vested in the conditional vendee or lessee, the conditional vendee or lessee.” ARS § 28-101 (40). The code goes on to require manufactured homes to be registered and titled in the name of the “owner”. It also contains a provision invalidating interests of parties holding them under such agreements when the registration laws have not been complied with against the claims of other creditors of the “owner”. ARS § 28-2131.
3. Tax Implications. If the payments on the option contract are excessively high, or above fair market rent, the IRS may treat it as an installment sale, in which case it becomes a sale instead of a lease. This also applies for a large advance payment for the option.
4. Equitable Conversion. Tenants who default on a “lease purchase” agreement can challenge its legal meaning. They may defend an eviction action claiming to have an “equitable interest” in the home. In effect, this is a claim that the “lease purchase” is not a true landlord-tenant relationship, but rather a vendor-vendee relationship. The court may very well agree and re-characterize the transaction as an installment sale agreement. This in turn would require the landlord repossess the home, not evict the tenant.
5. Tenant Bankruptcy Implications. A tenant in bankruptcy can make the same argument. Bankruptcy courts can declare these to be sales, not leases meaning the tenant is found to own the home. The debt owed to the landlord for the purchase of the home could be characterized as an unsecured debt and discharged if the “lease purchase” agreement does not document it as a secured loan under commercial law. That is highly unlikely in such an agreement.
6. Landlord Tenant Law. The rental of a dwelling is subject the Arizona Residential Landlord and Tenant Act. Under that, the landlord is responsible for maintaining the home. While some of this responsibility can be shifted to the tenant by the lease, the law requires the landlord to kept the home fit and habitable, in compliance with applicable codes, and to keep HVAC and other utility systems safe and in good working order. That responsibility cannot be shifted to the tenant. ARS §33-1324.
Implementing regulations were released a couple of years ago by the federal government and are being reworked and broadened now. Comments released with the current regulations included this passage: “… the fact that the seller holds title to the property until the contract has been paid in full is the practical equivalent of a lien for purposes of the SAFE Act and its purposes and is comparable to the status of a mortgage in a state that follows title theory under mortgage law.”
In other words it is probable that the government will consider “lease purchase” agreements as being a seller-financing device. Since the SAFE Act covers loans secured against consumer dwellings including manufactured homes, use of these agreements to evade SAFE Act coverage is likely to fail. Moreover engaging in transactions subject to the SAFE Act without complying with it exposes the violator to major government imposed financial penalties.
A small part of this law deals with the federal Consumer Leasing Act (CLA) that applies to the leasing of personal property used primarily for family or household purchases. Obviously a manufactured home lease satisfies that criteria.
The CLA and its implementing regulations (called Reg. M) exclude leases that do not have an option to purchase the property at the end of the lease term. So a simple lease or rental of a park owned home not involving a purchase option is not subject to this law.
But if a lease involving an option to purchase that is not a disguised credit transaction subject to TILA is entered into, the CLA and Reg. M would apply.
As an example, a lease with an option to buy the home at its fair market value when the option to purchase is exercised would probably not constitute a disguised credit transaction since the final price is the fair market value, not a nominal sum. So the CLA, not TILA would apply. But the requirements of both are similar.
Note: If the price when the option is exercised in the above example is financed by the landlord and secured against the home, at that point the SAFE Act and TILA would need to be complied with. But if it is either payable in cash or with a promissory note not secured against the home (an unsecured note), under current interpretations of the law, the transaction would not be covered by them though many observers believe that future regulations will cover such transactions as well.
Park Mortgage Documents
Many parks are refinancing their mortgage loans and others are subject to older loans. Newer versions of Fannie Mae financing documents have a restriction in them requiring that the Borrower:
…does not engage in the retail sale or financing of Manufactured Homes and does not rent Manufactured Homes under Leases which provide that upon payment of the stipulated rent or a nominal charge, Borrower shall convey title to the Manufactured Home to the lessee.
Violating such a restriction would be a loan default and could result in the loan being called due. While manufactured home sales and leasing might be able to be done by an entity separate from the Borrower under these loan documents, the intention of Fannie Mae to restrict “lease purchase” agreements is clear.
This is a hugely complicated situation. But if there is one lesson to be learned from this article it is this.
Do not use a “lease purchase” agreement of the sort described in the beginning of this article. Be sure any lease or addendum on a park owned home does not provide for title to the home to be transferred to the tenant at the end of the lease term for nothing or for a nominal sum.
Always remember the term “disguised credit transaction”. If you are caught engaged in one you could be in a lot of trouble.
CLOSING PARKS DUE TO CHANGE IN LAND USE
When the real estate economy in Arizona moves into one of its periodic recovery/boom periods as seems to be happening now, developers start looking for land that has potential for development into more productive uses. Older mobile home parks in areas that have become more developed than when the park was first opened often become the target of redevelopment.
When this happened in the mid 1980’s, the Mobile Home Parks Residential Landlord and Tenant Act was revised to create a procedure for closing parks but protecting tenants. Under these statutes a number of things became required:
1. Statements of Policy. The requirement for these first appeared. One of the things they are required to disclose is the period of time before any change of use is expected. ARS §33-1436 (B) (2).
2. Pre-termination Notice. ARS §33-1476 (H) was added requiring parks to notify tenants that a change of use was planned. The notice was also required to advise that the park intended to evict tenants when this happened, but that they would first get a 180 day notice of termination of rental agreement.
3. Termination Notice. ARS §33-1476.01 (A) was added requiring the park to notify all tenants and the Fire, Building and Life Safety Department in writing at least 180 days prior to the effective date of the termination of their rental agreements due to a change in use. In addition, ARS §33-1476 (B) (3) includes “change in use of land” as one of the reasons for which a tenancy can be terminated.
4. Mobile Home Relocation Fund. ARS §§33-1476.01, 1476.02, and 1476.03 were added. This created a fund administered by the State to provide the money to tenants forced to relocate due to a change of use to help with relocation expenses.
(a) Money for the fund comes from yearly tax assessments on tenant owned mobile homes. Additional money comes from landlords who are closing parks. When tenants move homes and receive money from the fund, landlords are required to partially reimburse it. NOTE: The obligation to reimburse applies only when a home is relocated due to a change in use of the land.
(b) The Fund is required to pay eligible tenants for actual expenses for relocating homes within a 50-mile radius of the vacated park subject to maximum limits. This includes the cost of taking down, moving, and setting the home up at a new location.
(c) Tenants moving into the park after a Pre-Termination Notice has been sent out are not eligible for relocation benefits.
(d) If the landlord relocates the tenant at the park’s expense, the tenant is not eligible for relocation benefits.
Since 1987, the relocation fund provisions have been changed several times.
1. Option to Abandon Home. ARS §33-1476.01 was changed to permit eligible tenants to collect a cash payment of 25% of their relocation benefit from the fund by abandoning the home in the park instead of moving it, provided the park receives a valid, free and clear title. The change also requires that taxes on the home be current.
2. Ground Set Homes. ARS §33-1476.01(C)(3) was added allowing payment of up to an extra $2500 relocation benefit when the home being moved is a ground set home.
The following benefits are available under the Relocation Fund statutes to tenants:
1. Relocations. Actual expenses up to $5,000 for a singlewide and $10,000 for a multi-section home. This includes take down, moving, and set up costs, provided the home is moved to a new location within a 50 mile radius. At the discretion of the Department, up to $2500 is available if the home is a ground set unit.
2. Abandonments. 25% cash payment from the fund where a tenant abandons a home in a park involved in a change in use. The tenant must be eligible to relocate the home. If he chooses not to, he can get the 25% cash payment provided he surrenders a valid, signed and notarized title together with lien releases and proof of payment of all property taxes on the home. This 25% benefit does not apply to the extra $2500 available when ground set homes are involved.
If there is a change in use of the park, the landlord must reimburse the fund $500 for each singlewide and $800 for each multi-section home moved for which benefits were paid. This reimbursement doubles if the change in use happened before the time declared in the parks statements of policy.
Forced relocations due to changes in use are extremely traumatic to tenants. To be successful the process needs to be handled with sensitivity by knowledgeable people experienced in these matters.
Tenants should receive the initial pre-termination notice as soon as the plans for change in use become set in concrete. The actual termination (180 Day) notice must go out no later than six months prior to the planned closing date, and should specify a closure date a minimum 180 days after receipt.
The true closing date, in reality should be at least an extra three months beyond the date specified to cover eviction time if needed. Actually evictions that are appealed are taking as much as seven months so it would be safer to give the first notice 13 months before the actual closing date if possible. Evictions would be necessary to remove tenants who refuse to move after getting the 180-day termination notice.
You can prove receipt by sending them Certified Mail at least five days in advance. I recommend each tenant have the notice sent to him by Certified Mail. Also send copies by regular mail and hand them out as well.
Once the first notice goes out, under ARS §33-1476.01(K), tenants thereafter buying homes in the park are not eligible for relocation fund benefits. To ensure innocent people do not get victimized, signs should be posted at all entrances in English and Spanish advising that the park is being closed.
Working with tenants to ensure they are able to relocate is important to avoid evictions and other unpleasantries. At a minimum I recommend these steps:
Contact the Fire, Building and Life Safety Department. Tell them the pre-termination notice is about to go out, when the park will be closing and that the formal 180 day termination notices will go out at least 180 days before the effective date. Find out what they would like you to do, and how they want to process relocation requests.
Schedule a tenant meeting. You should try to have a Department representative there. Also see if you can get Susan Brenton, Executive Director of MHCA there. Contact her at (480) 345-4202. You should also have Neal Haney, MHCA President there. He also manages many parks around the State. Call him at (480) 649-3531. Other local park operators should be invited. The MHCA folks can identify likely candidates.
Create a “hot line” phone number for residents with questions to call. This will hopefully let you kill rumors before they gain strength.
Be aware that tenants must continue to pay rent while living there and, at least early on, must continue to maintain their homes and spaces in compliance with park rules and regulations. Until closure, it remains a mobile home park and as landlord you remain responsible for ensuring it continues to operate in accordance with applicable laws and park rules.
You should also retain a knowledgeable consultant to assist in the closure. He should have assisted in the closure of several parks in recent years and be familiar with these procedures.
Finally get a lawyer who has been through the process before and knows the relocation procedures and how the fund statutes work to assist and handle any evictions that may be necessary. If the legal work is defective, the whole closure may be frustrated.
REPOSSESSION OF MANUFACTURED HOMES
We find ourselves doing more and more of manufactured home repossessions for two reasons. First, many parks over the years have been financing homes they acquire and resell. Second, banks and other commercial lenders have a hard time finding lawyers who know something about this unique kind of personal property and the quirks of manufactured home repossession.
For many years I would not represent commercial lenders since they occasionally were at odds with parks over how much rent they owed when they repossessed homes. But in recent years we have changed our policy provided the lender signs a retainer agreement recognizing the obligation to pay space rent to the park and agreeing that the principles set forth on the Abandonment page of this website will control.
When the borrower abandons a home, repossession is fairly simple. Arizona law allows the lender to simply take possession of the collateral if it can do so without a breach of the peace. The practice is for the lender to go in, change the locks, notify the park of the repossession, and post the home with repossession notices. An affidavit of repossession is then filed with the MVD.
The law also requires that if the home is simply going to be taken back, the borrower be notified of the lender's intent to retain the home and release the debt. The borrower can then object and force the lender to auction the home off, in which case the borrower would become liable for any deficiency. The lender can retain the home and release the debt without selling the home only if less than 60% of the original price has been paid.
Repossessions get more complex when the borrower does not abandon the home but only stops making loan payments.
If he also stops paying space rent he can be evicted and when the home is vacated the lender can repossess as above. But if he keeps paying space rent but not home payments, the lender is forced to repossess by judicial means.
This involves filing a lawsuit, normally in Superior Court, for "Replevin". Essentially the suit asks the court to find that the loan is in default and order the borrower to surrender possession to the lender. The Maricopa County filing fee for this suit is $309 and the borrower's answer fee is well over $200, and these are just the court fees.
Whether the borrower disputes the case or not, the legal fees will be in the thousands because Superior Court litigation is expensive. At the end of the day, if the borrower really has stopped paying, the court will rule against him. After the court renders its judgment, the lender can have a Writ of Special Execution issued commanding the Sheriff to remove the borrower from the home and give possession to the lender.
Although the borrower buys a little extra time by forcing the lender to sue, he also gets stuck with a judgment against him that includes a whole lot of attorney’s fees and court costs. The entire process may take three months, a small amount of time considering the extra grief and expense ultimately borne by the borrower.
It is possible to get a "Prejudgment Replevin" which is a court order removing the borrower from the home immediately when the suit is filed. I do not do this for manufactured homes since (1) an expensive bond must be obtained before the prejudgment replevin will be granted; and (2) the borrower's furniture and possessions are still in the home and are a huge problem for the lender to deal with.
Prejudgment replevins are fine when cars or furniture or jewelry are involved, but they don't make much sense to me when we are dealing with someone's home. It is always better to have the borrower remove his own stuff than for the lender to have to deal with it.
MHP NON-CONFORMING USES
On July 19, 2013 the Arizona Court of Appeals decided a case that has been pending for a couple of years involving an attempt by the City of Benson to enforce new setback requirements in its zoning ordinance against an older park where the homes on the spaces did not conform to the new requirements. The Court ruled in favor of the park.
The case began when the City of Benson notified mobile home park operators that it would begin applying new zoning restrictions as homes were replaced. This meant that current setback requirements would then need to be met. In 2010 the City denied Stagecoach Mobile Home Park’s application for a permit to install a new and larger home on one of its spaces. The reason was violation of the current setback requirements. The space had previously been considered grandfathered in as a “nonconforming use “.
The issue in the lawsuit that followed was whether the space needs to be brought into conformity when an old home that was "grandfathered in" is replaced. The City argued that only the older home and the individual space are grandfathered in. The park argued that the entire park is grandfathered in and new homes replacing older ones continued to be grandfathered in.
Technically these are called "non conforming uses".
The park won the case at the trial court but the Court of Appeals reversed and sent it back for more hearings. The Supreme Court reversed the Court of Appeals, returned the case to that Court, and directed it to decide whether the entire park or just individual spaces were entitled to the non-conforming use.
This is an important issue in the industry and MHCA had our firm file an amicus brief with the Court of Appeals. Mark Zinman and I prepared the brief. It supplemented extensive briefs filed by the attorneys for the park.
On July 19, 2013 the Court issued its Opinion ruling in favor of the park and MHCA. It even referred to our brief in its Opinion, stating at page 8:
We agree with Stagecoach that the protected use is the mobile-home park rather than the individual spaces. Inherent in the statutory definition of a mobile-home park is its character as a parcel of land containing multiple mobile-home spaces for rent. See A.R.S. § 33-1409(15), (16). And, as the amicus curiae, Manufactured Housing Communities of Arizona, points out in its brief, statutes governing changes of use in the mobile-home context treat the fundamental “use” as the entire park rather than the individual spaces. See § 33-1409(5) (“‘Change in use’ means either . . . [a] change in the use of land from the rental of mobile home spaces in a mobile home park to some other use[, or t]he redevelopment of the mobile home park.”); see also A.R.S. §§ 33-1476(H) (park owner intending to change use of portion of park must notify all tenants in park); 33-1476.01(A) (same). These statutes demonstrate the legislature’s intent that when mobile-home spaces are part of a mobile-home park, rather than qualified individual “uses,” the park should be treated as a unified use.
This is a very important decision for this industry and especially for older parks since it will give some relief against municipalities trying to enforce enhanced zoning requirements that have the effect of rendering spaces un-rentable. There are many older mobile home parks in places such as Mesa, Chandler, Tucson and other cities and towns across the state that have been the subject of enforcement of new order zoning restrictions.
Since this is a published Opinion, it has value as binding legal precedent. It will be a tool for parks to use in resisting efforts by local governments to force them to comply with newer setback requirements as homes are replaced in the future.
Read the full Opinion on my website. http://www.michaelparhamlaw.citymax.com/index.html. There is a link to it on the home page.
HANDICAP ASSISTIVE ANIMALS
Fair housing laws require landlords to make exception to normal community rules and policies when necessary to enable a resident to reside there provided the exception is not unreasonable. These are called “reasonable accommodations”.
One of the most common forms of reasonable accommodations requested these days is for an animal to be approved to reside with the resident. This is also one of the most abused areas of this law since it is commonly used by non-disabled people to get their pets approved despite rules forbidding the particular pet.
To begin with, fair housing laws require approval of “assistive animals” if they aid a disabled resident in some manner in living in the community. “Assistive animal” is a broad term.
HUD has recently published guidelines on animals in housing communities discussing assistive animals in the following terms.
An “assistive animal” is not a pet. It is an animal that works, provides assistance, or performs tasks for the benefit of a person with a disability, or provides emotional support that alleviates one or more identified symptoms or effects of a person's disability.
“Assistive animals” perform many disability-related functions, including guiding individuals who are blind or have low vision, alerting individuals who are deaf or hard of hearing to sounds, providing protection or rescue assistance, pulling a wheelchair, fetching items, alerting persons to impending seizures, or providing emotional support to persons with disabilities who have a disability-related need for such support.
For purposes of reasonable accommodation requests, fair housing laws do not require an “assistive animal” to be individually trained or certified. While dogs are the most common type of assistance animal, other animals can also be assistance animals.
A landlord may not deny a reasonable accommodation request because he is uncertain whether the person seeking the accommodation has a disability or a disability- related need for the animal. They may ask individuals who have disabilities that are not readily apparent or known to the provider to submit reliable documentation of a disability and their disability-related need for an “assistive animal”.
If the disability is readily apparent or known but the disability-related need for the “assistive animal” is not, the landlord may ask the individual to provide documentation of the disability related need for the animal. For example, the housing provider may ask persons who are seeking a reasonable accommodation for an animal that provides emotional support to provide documentation from a physician, psychiatrist, social worker, or other mental health professional that the animal provides emotional support that alleviates one or more of the identified symptoms or effects of an existing disability. Such documentation is sufficient if it establishes that an individual has a disability and that the animal in question will provide some type of disability-related assistance or emotional support.
However, a housing provider may not ask a tenant or applicant to provide documentation showing the disability or disability-related need for an assistance animal if the disability or disability-related need is readily apparent or already known to the provider. For example, persons who are blind or have low vision may not be asked to provide documentation of their disability or their disability-related need for a guide dog.
A landlord also may not ask an applicant or tenant to provide access to medical records or medical providers or provide detailed or extensive information or documentation of a person's physical or mental impairments. Like all reasonable accommodation requests, the determination of whether a person has a disability-related need for an “assistive animal” involves an individualized assessment of the needs of the resident on whose behalf the request is being made.
Service Animals Distinguished
The Americans with Disabilities Act (ADA) also has a requirement that operators public accommodations also make reasonable accommodations for persons with disabilities to use their facilities. Like residential housing (that is generally not covered by the ADA) one of the most common requests is that people be allowed to bring animals with them when using the public accommodation.
When the abuses of the requests for animals got so pervasive and extreme, the government issued new regulations sharply limiting the kinds of animals that disabled people may bring into public accommodations like stores, restaurants and theaters.
Therevised ADA regulations define "service animal" narrowly as any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability.
The revised regulations specify that "the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for the purposes of this definition." Thus, trained dogs are the only species of animal that may qualify as service animals under the ADA (there is a separate provision regarding trained miniature horses), and emotional support animals are expressly precluded from qualifying as service animals under the ADA.
Unfortunately the ADA and its regulations do not apply to residential communities. Fair housing laws still require the use of the broader category of “assistive animal” in considering resident reasonable accommodation requests involving animals claimed as necessary for an individual with a disability to reside there.
UNUSUAL ABANDONMENT SITUATIONS
Mobile homes frequently get abandoned. Aging homes and aging homeowners combined with a rotten economy contribute to folks just giving up and walking away from their homes. Normally abandonment is easy to spot. The home is vacated when a tenant moves out; rent stops coming in; maintenance on the home and rental space stops getting done. It’s pretty clear the home is abandoned and the park needs to give an abandonment notice to the lienholder and perhaps start procedures leading to a landlord lien sale.
But occasionally there is a question whether a home is really abandoned, and out of this uncertainty, managers often fail to do anything hoping someone will fix the problem. Most of the time that is like waiting for Santa Claus or the Tooth Fairy. No one is going to fix the problem and the Park is eventually going to be forced to act.
Note: I use the term “abandonment” in a slightly different sense than it is used in other legal contexts. We limit our use of landlord lien sale procedures to situations where the home is vacant and rent is not being paid, regardless of whether the situation arose by voluntary act of the tenant or not. The laws governing landlord lien sales do not actually call for the premises to be abandoned, but if the home is occupied, a landlord lien sale would be inappropriate. That is because once title was obtained it would not be possible to gain actual possession of the home without first evicting the occupants.
Moreover, if a lienholder is involved, ARS § 33-1478 (A) requires the home to actually be abandoned before the lienholder becomes liable for rent. This interpretation of the term “abandonment” is supported by the Court of Appeals decision in Gulf Homes v. Bear, 123 Ariz. 378 (App. 1979). In that case the Court focused solely on the fact that the home was vacant and rent was delinquent in concluding it was abandoned for purposes of determining lienholder liability for rent.
Here are a few of the sometimes confusing situations.
Home is vacant, rent is not paid, but home is actively listed for sale. If the criteria set forth above are satisfied, the fact that the owner of the home is trying to sell it does not mean, in my view, that it is not abandoned. If the lienholder is the one listing it after taking possession back, then clearly the owner has abandoned it. Treat the home as abandoned whether it has a “for sale” sign in the window or is listed with a dealer unless someone is paying rent or you have actually agreed that it can stay in the Park without rent being paid.
Tenant was evicted and forced to leave the home. The effect of the eviction judgment is that the tenant is required to remove his possessions including the home. But several provisions of the MHP LTA say he must first pay what is owed the park before the home can leave. The fact that the tenant left after being evicted but could not take the home does not mean that it wasn’t abandoned. The abandonment may have been involuntary but it is still abandoned. Note that the law allows the tenant to pay what is due and remove the home at any time while legal title is still in his name, so even after the procedures for a landlord lien sale are begun, the tenant can reclaim and remove the home by paying what is owed forcing the sale to be canceled.
Tenant dies. The law allows a surviving co-tenant or the next of kin of a sole tenant who dies to take over the home. But often no one is interested in the home. After the family members finish looting it any valuable belongings, the home is often just left in the Park, uncared for and without any space rent coming in. In this case, treat it as abandoned. If people tell you it’s "in probate" but you have not received any probate papers, assume that is not true. Most estates of tenants in MHC's do not need to be probated and this is a common lie told by family members to get the Park to do nothing. Sometimes they tell this lie to get time to try and sell the home and sometimes they lie just because they want to. If a tenant dies and rent stops coming in assume the home is abandoned regardless of what you are told about court probates until you see real court paperwork.
Tenant is disabled and institutionalized. While involuntary, this too amounts to an abandonment if the home is empty and there is no rent being paid.
Tenant keeps saying he has not abandoned the home. Talk is cheap. If the home is vacant and rent is not getting paid, for purposes of going through a landlord lien sale, treat the home as abandoned.
Do not hesitate to act if you believe a home is abandoned. When the home is vacant and no one is paying rent, it us usually best to assume it is abandoned and to start a landlord lien sale process. If someone later takes over and starts paying rent, the sale can always be canceled since it takes at least 72 days from the day the process is initiated until it is concluded.
Every month you put off doing something is another month the home will site empty in the Park and that no rent revenue will be generated on that space.
SEXUAL ORIENTATION AND GENDER IDENTITY DISCRIMINATION IN THE CITY OF PHOENIX
The City of Phoenix added “sexual orientation” and “gender identity or expression” to the groups of protected classes under its fair housing, employment and public accommodations anti-discrimination ordinances. The laws were enacted on February 26, 2013 and will be effective March 26, 2013
This is significant in the fair housing area since the City of Phoenix holds “substantial equivalency” status with the federal government and investigated housing discrimination complaints filed with both HUD and the City under fair housing laws.
The amendments to the ordinance define “sexual orientation” as “an enduring pattern of emotional, romantic, or sexual attractions to men, women, or both sexes as well as the genders that accompany them and shall include discrimination based upon the identification, perception, or status of an individual’s same-sex, opposite sex, or bi-sexual orientation.”
“‘Gender identity or expression’ means an individual’s self-identification as male, female, or something in between, and shall include an individual’s appearance, mannerisms, or other characteristics only insofar as they relate to gender with or without regard to the individual’s designated sex at birth.”
Interestingly, violation of anti discrimination laws with respect to employment discrimination and discrimination in public accommodations can in extreme cases be prosecuted as class one misdemeanors under the revisions. But fair housing violations have not been criminalized and the current system of imposing fines and injunctive relief remains unchanged in fair housing cases.
There could be claims in the future that the ordinance violates the free exercise of religion clause of the First Amendment to the U.S. Constitution since so many religions have strong doctrines condemning non-heterosexual practices. It is conceivable that landlords could claim that being forced to rent to gay or lesbian or transgendered people would violate their deeply held religions beliefs.
This has been a subject of extensive litigation in Alaska and other places which have laws prohibiting discrimination on account of marital status. Landlords have attacked such laws as requiring them to violate their religious beliefs. These attacks have been uniformly unsuccessful so far. I do not expect this defense to be any more successful when the issue is sexual orientation or gender identity discrimination.
I have been saying for years that it is stupid to discriminate on these grounds. Now, in the City of Phoenix at least, it is unlawful.
Note: In the City of Tucson which has no separate fair housing ordinance but includes housing in its general anti discrimination law, these kinds of discrimination have been unlawful for years.
OBAMACARE AND SMALL EMPLOYERS
The Affordable Care Act (commonly called “Obamacare”) does not absolutely require employers to offer insurance coverage to their employees, but imposes penalties on those who fail to insure their employees in certain circumstances. These penalties become effective January 1, 2014.
However, there is an exemption from the duty to insure or pay penalties for “small employers”. “Small employers” are commonly thought to be those with less than 50 employees.
The IRSwill be enforcing this portion of Obamacare and on December 28, 2012 it issued regulations designed to clarify among other things how the determination is made whether one is a “small employer”. You can read the regulations at 78 Federal Register page 218, or www.gpo.gov/fdsys/pkg/FR-2013-01-02/pdf/2012-31269.pdf . The regulation is bewildering.
Generally an employer is not a “small employer” for a calendar year if he employed at least 50 full-time employees in the preceding calendar year. All employers in the same “controlled group” are considered one employer. That could mean that park operators with several parks owned by separate LLC’s or other entities could be considered a single employer even though managers and staff are separately employed by those entities.
For employers that are that are close to this threshold, a number of detailed rules apply and such employers must calculate at least annually whether they are subject to the penalties.
In making the calculation, an employee is considered full-time for a calendar month if the he worked an average of 30 hours or more each week of that month. Alternatively, an employer may elect to treat 130 hours worked in a month as the equivalent of 30 hours per week.
Secondly, employees who do not qualify as full-time are still considered in calculating the 50 full-time employee threshold by determining full-time equivalencies (“FTEs”). The hours of service for these employees each calendar month (not to exceed 120 per month per part time employee) in the preceding calendar year are added together and then divided by 120. The result is the number of FTEs.
Third, the full-time employees and FTEs for each calendar month in the preceding calendar year are added together and divided by 12. If the result is less than 50, then the employer is a “small employer” for the current year.
The 2013 calculations will determine whether an employer is exempt from the Obamacare requirement to provide qualifying health care or face penalties in 2014. So employers who are close need to pay attention to the size of their payrolls in 2013.
It may be possible to stay under the 50 employee threshold by farming certain work out to independent contractors. But this can be tricky. The government has strict criteria for determining whether someone is really an independent contractor and does not simply accept the employer’s word that he is. This criteria includes the employer’s level of control over the worker, the permanency of the relationship, and how the worker is paid.
If someone who in the real world is an employee starts being treated as an independent contractor, the odds are that he will still be characterized as an employee for purposes of Obamacare (and everything else like workers compensation, tax withholding, and unemployment and social security withholdings). However some functions like landscaping, and some maintenance and accounting functions could possibly be contracted out to minimize in house staff levels.
Small employers need to begin planning now on documenting their exemption from Obamacare and to strategize how to qualify for the exemption if that is their intent. Time is of the essence since the employment data for 2013 will determine 2014 coverage requirements.
Parks occasionally get documents from an outfit named SESAC demanding payment for the use of music. It and two other organizations (ASCAP and BMI) occasionally contact mobile home and RV Parks around the country.
This has to do with copyright law as it pertains to the right to commercially use music. A copyright is property owned by a person or group of people including books, records, movies, computer software and music. Music and movies are like all personal property – when you want to borrow it from someone you must ask permission.
All public performances of music and movies, even most non-profit ones, must be licensed (with a few exceptions, such as performances in the course of a religious service at a place of worship, or face-to-face teaching in non-profit education institutions). Music and movies are the property of the people who create them.
This is the requirement by Title 17 of the US Code, also known as the U.S. Copyright Law. There are three congressionally mandated music licensing companies (BMI, ASCAP and SESAC) which have been established to ensure that songwriters and music publishers are properly compensated when their songs are performed in public.
Each of these organizations has compiled a large catalog of music and protects the rights of the writers and publishers by collecting licensing fees from businesses using that music. Almost all public or commercial use of protected music requires a license, extending even to use of music on hold on your telephone.
These three organizations can (and occasionally do) file suit against businesses using music without being licensed for copyright infringement. SESAC is the smallest of these three organizations, but may also be the most aggressive.
If you are not engaged in the commercial use of music; if the park does not conduct or sponsor programs using music in community facilities, it is doubtful that any license is required. In that case you can just ignore this correspondence if you receive it. But if you do have such events you should check with the national Association of RV Parks and Campgrounds (ARVC) since they have developed special rates for licensing fees with some of these organizations. Here is a link to its website. http://www.arvc.org/pressDetail.aspx?cid=1&id=267. I don’t know if any national manufactured housing organizations have done anything similar.
Parks that play music in public or at public events should get licenses to do so. ASCAP and BMI have most of the music rights but SESAC is the most aggressive. To be safe, get licenses from all three.
If a park chooses to do nothing but then receives a warning letter from one of these organizations requesting a fee, be aware that the organization will continue to keep track of the business and insist on payment. Failure to respond to such a demand letter creates a risk of litigation. It would not be wise to ignore such letters.
MVD CONTRACTORS HANDLING MH ABANDONMENTS
Some MVD contractors have been discovered improperly encouraging parks to disregard landlord lien sale procedures and instead get bonded titles on abandoned homes by offering to get the titles issued quicker and cheaper. The contractor charges a lower fee but the park gets a title with no legal basis and could be liable for damages for wrongfully doing so.
When a home is abandoned the park needs to dispose of it. The MVD has developed a landlord lien sale procedure to do so.
When a home is vacated, unpaid rent begins to accrue. A combination of statutes along with some Arizonacase law has the effect of recognizing a landlord lien on the home securing payment of rent. A landlord lien is a possessory lien meaning it is valid only when the landlord has possession of the mobile home. Of course since the home is in the park, the landlord has possession.
To enforce the landlord's rights under this lien, Arizonastatutes create certain procedures that must be followed. These involve giving notices to anyone with an ownership interest in the home; treating them as tenants; giving certain notices to lienholders even if they have disappeared or are simply unresponsive; getting the home inspected; and allowing at least 60 days to run before it is actually sold after giving the first notices. The process involves a public sale of the home.
At the sale the landlord bids in rent due and anyone else there may also bid. The home is sold to the high bidder, the sales proceeds are applied to the rent due, with the balance being sent to the old owner of the home if he can be found, or to the State.
Normally the next step is the filing of an affidavit with the MVD showing strict compliance with the statutory procedures for enforcing the landlord lien and filing proof that each step was properly completed. A title is then issued.
Sometimes a VIN cannot be found and a new AZ Special Serial Number must be affixed. When that happens the MVD requires that the final title issued be a bonded title -- one backed up by a three year bond to cover any claims made later that the home was improperly transferred.
But the landlord lien sale procedures still must be followed to enforce the landlord lien which is the basis of the park's claim of a legal right to dispose of the home. Bonded titles are authorized by ARS § 28-2057 that states in part:
A. If the department is not satisfied as to the ownership of the vehicle or is not satisfied that there are no undisclosed security interests in the vehicle, the department may register a vehicle but shall either:
1. Withhold issuance of a certificate of title until the applicant presents documents reasonably sufficient to satisfy the department as to the applicant's ownership of the vehicle and that there are no undisclosed security interests in the vehicle.
2. As a condition of issuing a certificate of title, require the applicant to file a bond with the department as prescribed in subsection B of this section.
B. The department shall prescribe the form of the bond required by subsection A of this section. . . . The bond shall be . . . conditioned to indemnify any prior owner and lienholder and any subsequent purchaser . . . against any expense, loss or damage, including reasonable attorney fees, by reason of the issuance of the certificate of title of the vehicle or on account of any defect in or undisclosed security interest on the right, title and interest of the applicant in and to the vehicle.
C. An interested person has a right of action to recover on the bond for any breach of its condition. The aggregate liability of the surety to all persons shall not exceed the amount of the bond.
Unfortunately the MVD has been issuing bonded titles transferring mobile homes to parks that are not complying with landlord lien sale requirements. Just because the MVD issues the title does not mean the park has lawfully obtained ownership of the unit. In fact the requirement of the bond it a clear statement by the MVD that it is not satisfied the park has the legal right to the home and it requires the bond to protect against future claims the title is not lawful.
Some MVD third party contractors are suggesting that parks apply for bonded titles on abandoned homes to avoid the hassle and expense of a landlord lien sale. They offer to do the title work fast and cheap compared with the expense of the landlord lien sale.
The problem is that while it will get a certificate of title, the park has no legal right to that title since it did not legally follow the procedures to enforce its landlord lien. If the former owner comes back later and makes a claim, the bonding company will pay him the value of the home and sue the park for the amount it paid.
A park getting a bonded title without having a proper legal claim of ownership (such as having completed a landlord lien sale process) could be liable for a wide range of additional damages for wrongful taking of a tenant's home as well as for whatever was inside the home at the time.
The third party contractor which put the park in that position will probably not be around when this happens. If it is, it can be brought into any bonding company or owner lawsuit as a third party defendant.
Claims of this sort are not unheard of, and a park taking the easy way and getting a bonded title without establishing its legal right to do so with a properly conducted landlord lien sale is going to feel mighty uncomfortable when such a claim is made against it.
MEDICAL MARIJUANA—LATE 2012 UPDATE
Proposition 203 was approved by the voters two years ago, authorizing cultivation, use and sale of “medical marijuana” in Arizona. Since then the State has set up a process for issuing user ID cards and licensing dispensaries to sell the stuff. But a lot of related developments have also taken place casting grave doubt on just how effective the law is going to be.
My primary concern has been that everyone acknowledges that this is just the first step in a plan to make marijuana a completely legal drug. A number of medical providers and others have been advertising themselves as the place for people to go to get certifications of need for marijuana that will be used to get the State to issue the medical marijuana card.
I wrote on this in 2011 when there were a lot of uncertainties about how this was going to affect manufactured home communities. This article is an update.
The Proposition. Proposition 203 says that possession and use of marijuana by one holding a permit from the Department of Health Services is a defense to a prosecution for a drug offense under Arizona law so long as the possession and use is consistent with the requirements of the Proposition. It also allows caregivers of cardholders to possess marijuana and provide it to the person they are caring for so long as they have a caregivers card and comply with the Proposition’s requirements.
The proposition prohibits landlords from refusing to rent to someone because he is a cardholder. It also prohibits an employer from hiring someone because he is a cardholder. It does not however say that a landlord or employer must allow use on his premises. The Proposition specifically states that a property owner cannot be required to allow marijuana use on his private property.
Federal Law. The Controlled Substances Act makes it a federal felony to possess, sell or use any amount of marijuana. This federal law is not affected by the Arizona law (Proposition 203). The U.S. Supreme Court has ruled in a case involving a similar medical marijuana law in California that the Federal law continues to apply despite the contradictory state law.
Crime Free Addendum. Paragraph 1 of the standard Crime Free Addendum makes any violation of the federal Controlled Substances Act an eviction offense. That includes possession and use of marijuana—even “medical marijuana” by an Arizona medical marijuana cardholder.
Fair Housing Laws. These laws require landlords to make exceptions to their rules when reasonable to do so as a “reasonable accommodation” to the handicap of a resident. HUD which enforces fair housing laws has received a memorandum from its General Counsel advising that such an accommodation requested by a cardholder is not reasonable since it requires a landlord to permit commission of a federal felony on the premises despite the state law permitting it.
So there does not appear to be a fair housing requirement that a landlord permit possession or use of marijuana on the premises.
Recent Cases Two recent cases have dealt with use of marijuana in compliance with state laws.
1. 9th Circuit Decision.
James v. City of Costa Mesa is a new 9th Circuit Court of Appeals decision. The plaintiffs alleged that two cities, by interfering with their access to the medical marijuana they use to manage their impairments, effectively prevented them from accessing public services in violation of the ADA. The federal district court's denial of the plaintiffs' application for preliminary injunctive relief was affirmed in this decision by the 9th Circuit.
Where doctor-recommended marijuana use is permitted by state law, but prohibited by federal law, it continued to be an illegal use of drugs for purposes of the ADA, and therefore the plaintiffs' federally prohibited medical marijuana use brought them within the ADA’s illegal-drug exclusion.
This exemplifies once again that despite state laws purporting to legitimize marijuana use by approved state card holders, it remains a felony under federal law and the federal law controls.
2. Maricopa County Superior Court.
A recent Superior Court decision in MaricopaCountyreaffirms my view that marijuana continues to be illegal under federal law despite the state law in effect legalizing it for state issued cardholders. Since federal law supersedes state law when they are in conflict, my view has been that landlords should continue to enforce bans against it even for card holders.
The case involved a contract dispute where a lender was suing a marijuana dispensary licensed under the state medical marijuana law. The court threw the suit out, holding that the loan was for an illegal purpose under federal law despite the fact that it was lawful under state law. The court reviewed the federal law and then stated:
The explicitly stated purpose of these loan agreements was to finance the sale anddistribution of marijuana. This was in clear violation of the laws of the United States. As such,this contract is void and unenforceable. This Court recognizes the harsh result of this ruling. Although Plaintiffs did not plead any equitable right to recovery such as unjust enrichment, or restitution, this Court considered whether such relief may be available to these Plaintiffs. Equitable relief is not available when recovery at law is forbidden because the contract is void as against public policy. Landi v. Arkules, 172 Ariz.126, 136, 835 P.2d 458, 468; DOBBS ONREMEDIES § 13.5, at 994-47. The rule is that a contract whose formation or performance is illegal is, subject to several exceptions, void and unenforceable. But this is not all, for one who enters into such a contract is not only denied enforcement of his bargain, he is also denied restitution for any benefits he has conferred under the contract.
This decision does not set precedent but it is persuasive.
Essentially, as far as this Court is concerned marijuana including "medical marijuana" remains illegal in Arizonaunder federal law despite the state medical marijuana law. See: http://www.courtminutes.maricopa.gov/docs/Civil/012012/m5069105.pdf
Conclusion. It remains my view that parks should continue to prohibit all marijuana use in their communities just as they do any other illegal drug use, even by approved card holders. People cannot be discriminated against just because they have a card, but they can be prohibited from possession and use of the stuff in the park
A cardholder caught violating this prohibition should be treated no differently than a non cardholder.
FIREARMS AND FIREWORKS IN PARKS
Arizonalaw permits both the open and concealed carrying of firearms and, subject to many restrictions, the open use of fireworks. Both of these things can create safety hazards in densely populated communities with flammable structures like manufactured housing communities.
Although the law permits individuals to exercise these rights, it does not obligate private property owners to permit firearms or fireworks in their communities. The Second Amendment and its Arizonacounterpart prohibits the government from restricting individuals in their right to keep and bear arms, but as it says, it applies to the government, not to private property owners.
Many park operators have chosen to restrict these things in their communities, and it may not be a bad idea to do so, depending on the nature of the park’s tenants and its location. The MHCA Blue Book in its sample rules sets forth an example of a rule doing so which reads as follows:
FIREARMS may not be worn in the park or openly displayed except by sworn law enforcement personnel at any time except as provided below (restrictions not applicable to sworn law enforcement personnel).
Tenants, tenant’s guests and visitors:
A. May carry a firearm in personal vehicles and may store a firearm in a locked vehicle while inthe park, as long as any such firearm is not visible from outside the vehicle.
B. May have a firearm within the mobile home.
C. May carry a firearm between vehicles andthe mobile home in a box, holster or other device that does not display the firearm to others.
D. Except when transporting a firearm directly between a vehicle and the homemay not carry a firearm in a public or common area of the park.
E. No firearms are permitted in the leasing office at any time.
F. May not brandish or display a firearm in any common or public area of the property.
G. May not threaten other residents, occupants, visitors or staff with a firearm, whether the firearm is displayed or not.
H. May not discharge a firearm anywhere in the park for any reason at all.
I. Not leave a firearm in an unlocked vehicle at the property.
J. Not leave a firearm in a locked vehicle if the firearm is visible from outside the vehicle.
Violation of any of the above firearms restrictions by any resident, visitor or guest shall constitute a material and irreparable breach and shall be cause for immediate termination of tenancy.
FIREWORKSof all kinds including sparklers are prohibited in the park. Igniting any kind of fireworks in the Park including lighting a sparkler by any resident, visitor or guest shall constitute a material and irreparable breach and shall be cause for immediate termination of tenancy
Parks choosing to do this need to remember to first give a 30 day notice of rule change. Depending on the park, it might be a good idea to first discuss it with the homeowners’ association and maybe to hold a park meeting
The purpose of an employee handbook is to orient new employees and provide answers to the most frequently asked employee questions. Besides informing new employees about company policy, a good handbook emphasizes the at-will nature of the employment and the employer’s disciplinary and termination rights. Most importantly, it is a declaration of the employer’s rights and expectations.
Employers are not legally required to have handbooks. But many employers choose to have them so the rules of the employer are recorded, the benefit information is clear to employees, and a variety of other information is maintained in one central document.
There are both advantages and disadvantages to an employee handbook. Some of the advantages are that an employer’s workplace requirements are clear to all employees; there will be better communication between them; both employers’ and employees’ rights will be clear; and the workplace rules will be the same for all similarly-situated employees.
But there can be disadvantages, especially for out of date or poorly drafted handbooks. Some of these are that an employer may mistakenly grant more rights than required by law; badly drafted language can create confusion; and requirements that are not followed by the employer may cause him to lose credibility or even give rise to legal action in some circumstances.
An employee handbook should be regularly updated so that it reflects changes in the law. It should be regularly distributed to all employees both upon starting with an employer and when it is revised. The employer should have each employee sign a receipt when he receives a copy. It is advisable to have a provision in the receipt stating that the employee understands that the manual is for information only, and does not create an employment contract between the parties.
Here are some of the topics a handbook should cover:
Employment at will. This is important and the at-will employment language should maintain the ability of the employer to fire at will. The language of an employee handbook should be clear so that it will not be interpreted as an employment contract. All at-will employment disclaimers and any language regarding probationary employee status should be prominently identified.
Non-discrimination. Handbooks should address both Equal Employment Opportunity (EEO) and anti-discrimination policies. A complaint procedure should state that complaints of discrimination and harassment will be investigated. Language should be included to prohibit discrimination and harassment based on race, sex, color, religion, national origin, disability and age.
Employment classifications. The handbook for wage and hour purposes should distinguish between exempt employees and those who are non exempt and entitled to overtime pay and other benefits. It should include a Fair Labor Standards Act (FLSA) Safe Harbor provision that preserves an employee’s exempt status in the event that any improper pay deductions are made. Overtime authorization requirements need to be addressed for non-exempt employees.
Working hours, pay practices and attendancerequirements should be addressed.
Other things that an employer may want to address include leaves of absence, performance appraisals, standards of conduct, alcohol and drugs, and an electronics communications policy.
Most large manufactured housing communities will already have employee handbooks prepared and updated by their Human Relations Departments. But small operators and Mom and Pop parks often have not even thought about it. Recently some park insurance carriers have begun insisting that even small parks have employee handbooks to help limit liability exposure to employees.
A short and easy to understand employee handbook tailored to the unique requirements of a small manufactured housing community is a worthwhile idea and can be prepared without a great deal of expense. I recommend that every park with one or more employee prepare an employee handbook and once prepared, keep it current.
LEASES WITH PURCHASE OPTIONS
Several nationally recognized people in the Manufactured Home Community and mobile/manufactured sales business have recently been promoting leasing park owned homes and also signing an option for the tenant to purchase the home at a pre determined price at the end of the lease term as a way to avoid new federal laws and regulations covering mobile/manufactured home financing.
The Too Good to be True Rule says that if something sounds too good to be true it probably is. In my view that is the case with lease and purchase option arrangements.
These arrangement when used in the past have usually included an extra amount of "rent" each month that is applied against a purchase price and by the end of the lease term the price has been reduced so low that the payoff amount when the purchase option is exercised is little or nothing.
These kinds of transactions have always been defined as sales in dealer licensing and state mobile home titling laws in Arizona. They are also included under the new federal laws and regulations as financing transactions and are covered by them. Not only that; they can also be considered "disguised credit transactions". If a park engages in this it runs the risk it will be determined to be a disguised credit transaction. The consequences are potentially devastating.
The Court could order the return of all interest paid, and even create an interest rate to base refunds on if none is set forth in the lease or option documents. It is possible that the park could be unable to get the home back after a payment default or be paid what the value of the home was. Moreover, regulations yet to be issued by the new federal Consumer Finance Protection Bureau (CFPB) could penalize parties engaging in disguised credit transactions beyond this.
It is possible that a lease with an option to purchase can be put together in such a way as not to constitute a disguised credit transaction. But such a device would be unlikely to satisfy the desires of the park. Essentially there would need to be a mobile home lease with conventional terms and rent close to market rent for a comparable home with no purchase option. At the time the lease is signed a separate option to purchase would also be signed under which the tenant acquires the right to buy the home at the end of the term of the lease for a pre determined price. That price cannot be zero or just a nominal sum. It must be substantial or the transaction will likely qualify as a "disguised credit transaction".
If more than five of these are done in a year, Regulation M of the Federal Reserve Board (issued under the federal Consumer Leasing Act) comes into play and requires the lease have disclosures similar to federal Truth in Lending Act (TILA) disclosures in sales transactions.
I don't like leases with purchase options because I think people believe they are something they are not--a way to finance MH sales without having to worry about the SAFE Act or other new laws referred to above. They are not and once people realize just how limited a proper use of them is they usually disregard the idea.
And of course I have not even mentioned the increased liability and other financial exposure the landlord has when renting the home itself instead of just renting spaces.
Finally, a number of parks are refinancing their mortgage loans and most others are subject to current loans. The newest versions of Fannie Mae financing documents have a restriction in them that provides that the Borrower:
…does not engage in the retail sale or financing of Manufactured Homes and does not rent Manufactured Homes under Leases which provide that upon payment of the stipulated rent or a nominal charge, Borrower shall convey title to the Manufactured Home to the lessee.
Violating such a restriction would be a loan default and could result in the loan being accelerated. While MH sales and leasing might be able to be done by an entity separate from the Borrower under the loan documents, the intention of even this agency of the federal government (Fannie Mae) to restrict this activity is pretty clear. Moreover such activity by a related entity may also be restricted by the loan documents.
DRAINAGE IN PARKS
A recurring claim in Administrative Law Judge Complaints filed by tenants involves drainage problems in parks. Typically an older home will begin getting rain water run-off flowing under it. The tenant may not react to the problem with run-off because it rains so infrequently and because the damage is so slow to show itself.
But in these cases there comes a time when cabinets and doors won’t close and the home has sunk so far into the muddy ground under in that it becomes impossible to live in. Once forced to deal with the problem, human nature is to look for someone else to blame and in a park that is the landlord.
Not only tenants but their insurance companies and contractors are quick to blame the landlord for problems resulting from water run-off. After all, the tenant owns only the manufactured home on the space while the landlord owns all the land in the park. People are quick to conclude that since the landlord owns the land, water running on the land causing damage to the tenant’s home must be the responsibility of the landlord.
I have seen many of these situations over the years when tenants file ALJ Complaints against their landlords seeking an order that the park pay to fix the problem and to repair all damage to the home resulting from the water run-off.
In my experience most of these situations are the responsibility of the tenant, not the landlord.
The MHPLandlord Tenant Act divides responsibility for maintenance in parks. ARS § 33-1434 generally requires landlords to maintain the entire park and to keep it in compliance with applicable codes. But ARS § 33-1451 imposes this same responsibility on tenants for their rental spaces. Putting these two statutes together, tenants are responsible for maintaining their spaces and landlords are responsible for maintaining the rest of the park.
When a manufactured home water damage claim is made, the first thing to figure out is what the cause of the water damage was. If the cause originates on the tenant’s space, the likelihood is that it is the tenant’s responsibility. Here are some common causes of water damage that are the tenant’s responsibility:
Skirting has been removed or damaged allowing water to get under the home; skirting was improperly installed on the home allowing water to run down the side and under the skirting winding up under the home.
The lot was not properly graded when the home was installed and does not slope away from the home; the home was installed too low on the lot allowing water from adjacent areas to flow towards and under it.
Though the home was properly set up and the lot was properly graded, subsequent changes on the lot have altered the drainage pattern. For example a concrete patio or driveway or HVAC pad was installed blocking the original drainage plan and diverting water under the home; a tree may have matured pushing up the ground around it diverting water toward the home.
The water damage is actually caused by plumbing leaks in the home itself or sewer blockages under it resulting in water accumulating beneath the home.
Sometimes, however the landlord is responsible. Here are a few examples.
A neighboring tenant is allowed to set up a home on a nearby lot too high or in such a manner as to divert excessive water elsewhere and change the original drainage plan of the park; a neighboring tenant’s tree pushes the ground level up or a neighbor installs concrete or a storage shed diverting water onto another tenant’s lot.
Common areas are regraded or changed over the years so as to redirect water flows in the park.
Storm drains or dry wells become clogged or simply stop working; retention basins no longer hold the run-off originally planned because their grading was changed or more water than originally planned is being diverted into them.
Streets are repaved in such a way as to no longer carry the run-off they were originally designed to carry.
When parks are first planned and built, there is a drainage plan that is designed into them. The grading of the park and the location of such things as storm drains, dry wells and retention basins are included in the overall plans. When individual lots are rented and home go in, they are required to be placed in such a way that water will not be diverted onto neighboring lots but instead must flow along planned drainage channels.
Landlords must be careful to ensure that nothing happens in the park to disrupt the drainage plan. Any changes in the plan whether deliberate or simply over time can throw water onto tenant lots where it can get under their homes.
These things often show up suddenly since it rains so infrequently in Arizona, and when it finally does rain, it is often a deluge. All of a sudden after years of no large rains, a downpour can result in large runoffs. It the park or the tenant’s lot in no longer equipped to dispose of the run-off it was designed for the result can be a flood under a tenant’s home causing a lot of damage.
Tenants and landlords both have a difficult time understanding that water flowing from other areas and winding up under the tenant’s home is the responsibility of the tenant. But that is the case if the tenant has done something on his lot diverting water under his home or has failed to maintain features of the home designed to keep water out.
Once in a while both the landlord and the tenant have properly maintained the park and the space, but water still gets under the home. This can happen when a rain is so heavy as to overwhelm the drainage plan in the park and defeat the preventive features designed in the tenant’s home set up. This is an act of God and generally the landlord is not responsible. That is one of the reasons that tenants should have homeowner insurance protecting against such perils.
SELLING ANDFINANCING HOMES IN YOUR COMMUNITY
1. ArizonaEscrow Law. This new law goes into effect July 1, 2012. It requires all new home sales and all used home sales over $50,000 involving a broker or dealer to close through a third party escrow. Used home sales under $50,000 must close through third party escrow if the buyer requests it.
An exception to third party escrow closings exists for Manufactured Home Community dealerships provided they register with the Fire, Building & Life Safety Department and post a $100,000 bond (the existing $25,000 bonds posted for the current license count towards this). This exception applies to NEW homes only and then only if they will be located in the park following sale. MHC dealerships selling used homes must close through third party escrows if the price is over $50,000 and for sales under $50,000 if the buyer requests it.
All Pioneer Title and Stewart Title offices in Arizona are supposed to be willing to handle these and the escrow fees will start about $70 (though that sounds awfully low to me). Sample escrow instructions they will be using were handed out to attendees at the May 2012 MHCA Conference. Also handed out was a standard form to get buyers to make an election whether to use escrow for under $50,000 used home sales.
2. SAFE Act. Arizona state law, effective mid August 2012 creates a "de minimus" exception to the requirement that loan originators get Mortgage Loan Originator licenses if involved in five or fewer financing transactions per year. But there is no de minimus exception under the federal SAFE Act. The new federal Consumer Finance Protection Bureau (CFPB) is supposedly drawing up regulations to further implement the SAFE Act that will be out in around a year. In addition a bill modifying the SAFE Act is floating around Congress that would relax the federal requirement (though it is unlikely to get enacted). As of now we are not aware of federal enforcement efforts targeting MHC's and have been led to believe the state law is not going to target MHC's for the time being.
So parks financing five or fewer mobile home loans per year are in Limbo with a state exemption apparently giving them some cover and the federal requirement apparently still in effect. But parks financing more than five per year should be working through a licensed mortgage loan originator now.
3. Dodd Frank Act. This umbrella law amends and requires the new CFPB to draw up new regulations expanding the reach of the federal Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA) which is similar to TILA but applies to certain lease transactions. This law imposes new requirements with respect to consumer lending and generally includes MH financing.
Prohibited Steering Incentives. The Act generally prohibits “mortgage originators” of “residential mortgage loans” from being paid compensation that varies based on the terms of the loan, other than the principal amount of the loans. The Act also requires the government to issue regulations to prohibit mortgage originators from (among other things):
♦ steering any consumer to a mortgage loan that the consumer lacks a reasonable ability to repay;
♦ abusive or unfair lending practices that promote disparities based on race, ethnicity, gender or age;
♦ mischaracterizing the credit history of a consumer or the loans available to the consumer;
♦ if unable to offer a less expensive loan, discouraging the consumer from seeking a mortgage loan from another provider.
Ability to Repay. No creditor may make a residential mortgage loan unless he makes a reasonable and good faith determination based on verified and documented information that the consumer has a reasonable ability to repay the loan, including all applicable taxes, insurance, and assessments. These TILA amendments include requirements with respect to what documentation and factors need to be considered.
Foreclosure Defenses. TILA will now allow a consumer in defending a foreclosure or collection action to raise a violation of the anti-steering and ability to repay rules as a defense.
Increased Liability Under TILA. Liability under TILA for actions involving a consumer lease is increased from $1,000 to $2,000, and the civil liability ceiling for any class action brought under TILA is increased from $500,000 to $1,000,000. The TILA statute of limitations for civil liability also is extended from one year to three years for violations of the TILA high-cost mortgage provisions, the anti-steering prohibitions, the ability to repay requirement, and certain of the other new TILA rules added by the Mortgage Act.
High Cost Mortgage Provisions. The APR triggers that will bring loans under the high-cost provisions are lowered. For a first mortgage on the consumer’s principal dwelling, the APR trigger will be 6.5% over the “average prime offer rate” (8.5% if the dwelling is personal property and the transaction is for less than $50,000). High-cost mortgages (regardless of their term to maturity) may not provide for balloon payments that are more than twice as large as the average of earlier scheduled payments, except when payments are adjusted to the seasonal or irregular income of the consumer.
4. Leases with Purchase Options as Devices to Evade These Laws. I have written a separate article on this subject. Suffice to say that I believe the idea of using these to evade coverage of these laws will usually violate the “Too Good to be True Rule”.
MHCA Handbook. MHCA has published a new handbook covering park dealership home sales. This is in a binder format so it can be periodically updated. I expect it will be frequently updated as these laws and regulations evolve. Parks getting it should be sure to subscribe to the updates as well.
WHAT IS THE TEST FOR DETERMINING A FAIR HOUSING VIOLATION
The Fair Housing Act makes it unlawful “[t]o refuse to sell or rent after the making of a bona fide offer . . . or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” 42 U.S.C. §3604(a). Elsewhere it prohibits discrimination on account of handicap.
Clearly this law makes intentional discrimination on account of protected status (“disparate treatment”) unlawful.
But how about treatment of people that is not intended to discriminate but that has the effect of treating protected classes less favorably than others? This is called “disparate impact”. Examples in the residential rental business are low occupancy limits which impacts families with children and zero tolerance crime free programs which have a more pronounced impact on certain racial minorities and people with certain emotional and mental disabilities.
If a landlord adopts a “facially neutral” rule that is not intended to discriminate against protected classes but nevertheless has that effect, does it violate fair housing laws? In other words, is “disparate impact” a proper test for determining if a fair housing violation has been committed by a landlord in enforcing such a rule?
In 1993 HUD put out a memorandum to its field offices saying that as far as it was concerned, “disparate impact” is a valid test of a fair housing violation. Both it, the Arizona Attorney General and the City of Phoenixhave adopted and enforced that position since then.
The newly created (thanks to Dodd-Frank) Consumer Financial Protection Bureau joined by HUD and the Department of Justice recently declared that “disparate impact” claims are viable under the fair housing laws. Late last year while a case challenging this position was pending before the Supreme Court, HUD issued a proposed “disparate impact” rule.
The U.S. Supreme Court has taken two “disparate impact” cases under the Fair Housing Act (“FHA”) in recent years, but has never decided whether disparate impact claims are cognizable or what standard should be applied to such claims. See Town of Huntington, N.Y.v. HuntingtonBranch, N.A.A.C.P., 488 U.S.15, 18 (1988) and City of Cuyahoga Falls, Ohiov. Buckeye Cmty. HopeFound., 538 U.S.188, 199-200 (2003). However when the briefs filed with the Court indicated how weak the “disparate impact” argument in one case became moot, and the government abandoned those arguments in the other one to avoid losing on the issue.
To date the Supreme Court has not decided whether “disparate impact” claims are cognizable under fair housing laws. Thus, the issue has remained unresolved and ripe for review for over two decades.
“Disparate impact” has been recognized as a proper test of whether other anti-discrimination laws such as the Age Discrimination in Employment Act of 1967 (“ADEA”), and the Americans with Disabilities Act of 1990 (“ADA”). The ADAand the ADEA by their express language each prohibit the “effect” or “impact” of certain actions by using the term “affect” when describing unlawful actions.
But the federal Fair Housing Act (“FHA”) does not contain comparable language regarding “effect” or the “affect” of certain actions. “Discriminatory housing practice” is defined in the FHA as “an act that is unlawful under section 3604, 3605, 3606, or 3617 of this title.” 42 U.S.C. §3602(f ). None of those sections include language addressing discriminatory effect.
Congress’s action in failing to amend the FHA to include “disparate impact” claims when it amended The Civil Rights Act of 1991 to specifically include claims for discriminatory effect would seem to demonstrate Congress’s intent to exclude such claims under the FHA. If Congress had intended the FHA to apply to disparate impact claims, it would have amended the FHA at that time to specifically include claims for discriminatory effect.
Just recently another case presenting this issue was before the Supreme Court and once again the government abandoned it before the issue could be decided. After the withdrawal of Magner v. Gallagher, Case No. 10-1032 it was unclear when the Court would get another but the issues raised in the Petition for Certiorari in yet another case, Mount Holly v. Mount Holly Gardens Citizens in Action, Inc. filed June 11, 2012, are similar to those presented in Magner.
All of the federal Courts of Appeal have adopted variations of “disparate impact” as a test of a fair housing violation. For nearly 25 years I have believed that is wrong and that this is not a proper test under the FHA but I have nevertheless advised landlords to assume it is applicable and avoid rules and policies having a “disparate impact”.
A Petition for Certiorari is merely a request that the Supreme Court accept a case for review. The Court is not obligated to take the case and about 99% of all such requests are denied. But the Court has accepted cases presenting this issue several times over the years and I am hopeful that it will take this one and that the government does not play any more tricks to avoid a clear ruling on this issue.
EARLY PAYMENT PENALTIES ON NEW LOANS FINANCING PARKS
Fannie Mae is financing MHC's and multihousing properties. The current (June 2012) interest rates are quite low compared to the past and are near or a bit below 5%. But there is a tradeoff for those low interest rates and it is a real pitfall for MHC operators.
Essentially if the borrower wants to prepay the loan, he must pay a "prepayment premium." Fannie Mae is writing 30 year loans that run at least for ten years with a balloon payment then being due. Others can run the full 30 years That means the prepayment premium is due if the borrower wants to pay such a loan at any time before the 10 or 30 year period is up or (as is usually the case) before a lesser specified "Yield Maintenance Period" expires.
The prepayment premium under these loans during the specified period is the GREATER of 1% or a "Yield Maintenance" amount calculated under a complex formula, if prepayment occurs during the "Yield Maintenance Period."
The formula calculates the present value over the remaining Yield Maintenance Period of the difference between the mortgage note rate and the yield on a specific U.S. Treasury security. The Treasury security, selected at the time of rate lock and specified in the loan documents and matures shortly after the expiration of the Yield Maintenance Period. In theory, the investor in a loan with Yield Maintenance is made whole because it can take the payoff balance plus the prepayment premium and reinvest it in the Treasury security for the same return.
The good news here is that because of the prepayment protection it provides to investors, and because it has become an industry standard, Yield Maintenance enables borrowers to obtain low interest rates.
But the bad news is that Yield Maintenance makes future refinancing to capture a low rate unattractive or a future sale of the park difficult and expensive during the Yield Maintenance Period, because the lower the rate in the marketplace, the higher the prepayment premium.
In taking out one of these loans be sure you understand the calculations involved and also what the Yield Maintenance Period is. My experience is that some park owners are taking these loans out not fully understanding the prepayment features and the effects of the Yield Maintenance requirement. They are going to be in for a big surprise when they decide to sell the park before the end of the loan term and find that they must cough up a ton of money to cover the Yield Maintenance requirement in order to pre pay the existing loan early.
RIGHTS OF FIRST REFUSAL TO BUY MOBILE HOMES
Many parks really hate to see mobile homes being pulled out because empty spaces look bad. Many other parks hate to see them leave because they are of a size that is no longer available and nothing on the market today will fit on the space without violating setback requirements.
On the other hand, some parks are thrilled to see older homes leave because it gives them the opportunity to get new homes into the park and freshen and modernize the appearance of the place.
To minimize the risk of having homes leave, a number of parks include a provision in their rental agreements entitled "Right of First Refusal". What this says is that if the home is to be sold to someone who intends to move it out of the park, the tenant must give the landlord a 72 hour opportunity to match the purchase offer and if the landlord elects to do so, the home must be sold to the park. The price is the same as what the outside seller offered the tenant. If the landlord does not agree to buy the unit for that price within 72 hours the tenant is free to sell it at or above that price to the third party. But if he decides to sell it cheaper he must again give the park a chance to match the lower offer.
The standard right of first refusal does not apply if the home is to be sold to someone intending to become a tenant and keep the home in the park. The reason for that is to avoid situations where it could be used by a landlord to prevent protected minorities from moving in and violating fair housing laws.
Rights of first refusal create a "win-win" situation for both landlords and tenants.
Advantages for Landlords. This is a way for a landlord to ensure that move-outs are kept to a minimum. The park winds up purchasing the home, fixes it up and resells it on site. That gets a new rent paying tenant in more quickly and avoids the lot being vacant.
Advantages for Tenants. The tenant will lose nothing by selling it to the park at the third party price. If the home was sold through a dealer or broker, the landlord will pay the same price that the third party buyer would have that will include the dealer or broker's commission. So the dealer or broker does not get hurt. Of course the third party buyer will be disappointed but the dealer or broker gets a chance to sell him another home somewhere and make a second commission. In many parks with these first refusal rights, tenants will come into the office and tell the manager they are going to list the home for sale but before doing so will ask if the park has any interest in buying it. Many parks will negotiate a sale right then. This gets the tenant a good price and he is able to get the home sold much more quickly.
Rights of first refusal are a good thing to include in rental agreements. But a park including them needs to be able to explain to suspicious tenants that there is no way they can be hurt by them since they are guaranteed the price they want.
Legality. Sometimes it is claimed these rights are "illegal". In my view that is wrong. The MHP LTA at ARS § 33-1413 (C) states: "The rental agreement may include conditions not prohibited by this chapter or other rule of law governing the rights and obligations of the parties." There isn't anything anywhere else that prevents or restricts these so they are valid.
Problems. Most problems result from misunderstandings or shyster dealers or both.
1. Tenants may forget about the right and list and sell the home without offering the park the chance to buy it. Once the home sells and the deal closes there is nothing that can be done to undo it. But in doing this the tenant is in violation of his rental agreement and can be sued for breach of contract and subjected to a judgment for damages incurred by the landlord as a result of the home selling and leaving the park. Those damages could be significant. Once in awhile a tenant will phony up an offer for more that was really offered and present that to the park. That is fraud and a tenant doing that could be sued for damages and maybe even prosecuted for fraud.
2. Dealers may tell tenants to ignore the right--that it means nothing. They are wrong and are opening the tenant to liability for breach of contract damages.
3. When the right is violated and the home sells, the park must allow it to be removed. The buyer and now owner of the home was not a party to the rental agreement that created the right. So while the buyer gets to remove the home the now ex-tenant can be sued for selling the home in violation of it. There can be instances where the buyer knew about the right and may have encouraged the tenant to breach it. In those rare cases where buyer complicity can be proven, it may be possible to go to court, force the home to be sold to the park, and stop removal of the home.
4. Sometimes a dealer encourages tenants to list and sell homes that will be removed, and there are a few dealers that buy the homes themselves and pull them out. A dealer or anyone else buying a home for removal knowing about the right of first refusal can also be sued for damages for bringing about a tenant's breach of contract. Recently a few dealers have been sued by parks that obtained temporary restraining orders preventing the homes from leaving. There are one or two sleazy dealers that engage in this kind of conduct and once in awhile a park will decide it has had enough and will sue to stop it. The key here is to be able to prove the dealer knew about the right when the dealer will lie and deny any such knowledge.
Stopping Homes Sold in Breach of the Right from Leaving. The law gets tricky when it comes to parks going after buyers or even tenants removing homes where a first refusal right is being violated. The question is whether the park where the home is located can prevent it from being moved, even when the buyer induced the tenant/seller to breach the right of first refusal in the lease. In my opinion the better view is that it cannot. Other lawyers will disagree with me.
Several provisions in the MHP LTA guarantee the right of the owner of the home to remove it whenever he wants, so long as all current obligations are paid, even if the removal takes place before a current lease term expires.
ARS § 33-1452 (E) says: "A person who owns or operates a mobile home park shall not . . . 3. Deny any resident of a mobile home park the right to sell the resident's mobile home at a price of the resident's own choosing during the term of the tenant's rental agreement . . ."
ARS § 33-1451 (B) says: "The landlord shall not interfere with the removal of a mobile home for any reason other than nonpayment of monies due as of the date of removal even if the term of the rental agreement has not expired."
ARS § 33-1481 (C) says: "A mobile home that is subject to a judgment for forcible detainer may not be removed from its space until the provisions of section 33-1451, subsection B have been satisfied."
ARS § 33-1485.01 (B) says: "The landlord shall not interfere with the removal of a mobile home for any reason other than nonpayment of monies due as of the date of removal even if the term of the rental agreement has not expired."
So it seems to me that as long as rent is current, the owner of the home, including a buyer participating in a seller's breach of a first refusal right can remove the home. That is not to say that the first refusal right is not valid--I believe it is. But the remedy for a breach is a suit for damages, not self help by blocking the home from leaving.
ARS § 33-1413 (C) says: "The rental agreement may include conditions not prohibited by this chapter or other rule of law governing the rights and obligations of the parties." That means, in my view, that the first refusal right can not be construed to prevent the buyer from removing the home since so many other parts of the MHP LTA guarantee that right. The tenant is obligated to comply with it, but if he refuses to do so, the only remedy in my view is a suit for damages.
Park owners need to realize that they do not own tenant homes. As much as they would like the home to stay, it is the tenant's home and ultimately the tenant's decision what to do with it, including whether to remove it or sell it to someone else who will remove it even if that action constitutes a breach of the tenant's contract.
FINANCING AND REFINANCING APARTMENTS AND MOBILE HOME PARKS
Interest rates on secured commercial loans have been low for a number of years now but borrowing has been difficult since loan approval standards have been so high. Recently however, money seems to have been loosening up. In addition, for this and other reasons parks seem to have begun selling again. Add the fact that some older loans made to underwrite the purchase of parks are now coming due, and the result is an increase in the number of new transactions involving the financing or refinancing of parks.
Typically such a transaction will be put together by a mortgage broker specializing in placement of commercial real estate loans. The broker will locate a Lender willing to make the loan in an amount and on terms acceptable to the Borrower. A Commitment Letter is signed setting forth the material terms of the loan.
After this the Lender’s law firm will prepare a series of legal documents required by the Lender to finalize the loan. These will usually include a Note, a Deed of Trust, some form of Personal Guarantee, an Environmental Indemnity Agreement, UCC Financing Forms, and miscellaneous other documents depending on the unique aspects of the transaction.
The Lender will almost always require that the community be owned by a Special Purpose Entity (SPE) that will also be the Borrower. The loan documents will prohibit the SPE from owning any other assets and from participating in any business other than running the community. The reason for this is to prohibit the property from being affected by the insolvency or bankruptcy of any other business in which the Borrower’s owners are engaged.
An escrow is opened with a local title company to organize the documents, prepare the necessary title insurance, and at the end to close the transaction. In a refinancing, this involves clearing the old loan off the records and ensuring it is paid. In a purchase transaction, the title company also handles the details of the sale and prepares the conveyancing documents and ensures they are properly recorded at closing to transfer ownership.
Mobile home parks and apartment communities are unique and it is important that the title company and escrow officer handling the transaction be familiar with and experienced in closing these kinds of escrows.
The Lender is often an out of state bank, but even a local bank will have certain requirements for having the Borrower provide an opinion of local counsel that the loan documents are effective to create and secure the loan the parties have agreed to, that the Borrower is properly organized and in good standing in Arizona, and that all the formalities have been observed necessary to make the loan binding on it.
Included in the Lender requirements will be an obligation for the Borrower to make certain representations and warranties about its existence, its authority to enter into the loan transaction, and the nature of the collateral for the loan—the apartment community or mobile home park. Mobile home parks especially are unique business properties and most attorneys are not familiar with them. Things like the distinction between HUD and pre-HUD homes and certain maintenance and lease obligations unique to mobile home parks are important to know in reviewing these transactions but often attorneys will not appreciate them.
It is important that the attorney providing the opinion of Borrower’s counsel be experienced in the laws a[pplicable to the kind of community involved and financing aspects unique to such communities.
Our firm often acts as local counsel for Borrowers in providing opinions for financing and refinancing transactions. We are experienced in such transactions involving manufactured housing and multifamily community acquisitions and refinancing. We have on occasion participated in elaborate multi-state collateralization programs involving multiple such properties. This work involves substantial due diligence, review of the complex underlying documentation with financial institutions, and the preparation and delivery of complex legal opinions.
We help borrowers negotiate and document real estate secured loans and related transactions, usually involving loans for single properties. The transactions we handle usually involve middle-market, single property secured loans but we have participated in a few involving large-scale, multiple property/multi-state credit facilities.
In conjunction with this we also set up Special Purpose Entities to act as bankruptcy remote borrowers, normally an LLC.
This is not really a pitch for business. But it is important to ensure that whoever you choose to provide an opinion of Borrower’s counsel for a new loan or refinancing involving an apartment community or mobile home park knows the industry.
In addition, do not allow yourself to get overcharged. Some firms charge what I consider to be wildly excessive fees for these opinion letters. A few years ago I heard of one prominent firm asking for a fee equal to one-half percent of the amount of the loan for the opinion. While an opinion letter is going to cost several thousand dollars because it takes a lot of time to review everything and while there is some degree of risk on the attorney rendering it if he makes a mistake, that is not an excuse to gouge a client for an exorbitant fee.
PROBATE FREE TRANSFER OF MOBILE HOMES
When tenants die, their heirs are often left with the problem of getting the mobile home transferred into their names. This can be complicated since there often is no Will; if there is one, it usually is not placed in a court probate meaning that there is no official personal representative; and if there is no Will, the closest next of kin frequently cannot be identified and if they can be, they often have no interest in the home.
A new law allows an owner of a "vehicle" to fill out a form entitled "Beneficiary Designation" that identifies the "vehicle" and identifies the person selected to inherit it upon the owner's death. It can be found on the ADOT web site under MVD Forms, under “B” as Form 96-0561.
The new law is ARS § 28-2055. Subsection B states: “At the request of the owner and on payment of a fee prescribed by the department by rule, the certificate of title may contain, by attachment, a transfer on death provision where the owner may designate a beneficiary of the title.”
While mobile homes are not typically considered "vehicles", this law seems to apply anyway since ARS § 28-2063 which covers titling of mobile homes says in subsection C: "A mobile home is subject to all applicable provisions of this title, except those relating to registration." One of those provisions is the beneficiary designation statute, ARS § 28-2055.
To take advantage of this, the owner of the home needs to complete the form, sign and have it notarized (it is worthless if not notarized), and attach it to the original certificate of title and either let the beneficiary hold it or put it somewhere the beneficiary will find it. The form can be completed on line and then printed out. Tenants can also use this forms for their Arizona registered motor vehicles.
Smart tenants will give their park landlord a copy of the title and the form with a note identifying where it is being kept so that in the event of their death, the manager can contact the heir and tell him where to find the title and beneficiary form. Age 55+ parks especially should publicize the existence of this procedure among their single residents and encourage them to complete the forms and provide the park office with copies.
Note--this form can only be used when the home is owned by a single person. If two or more people are shown on the title as owners it cannot be used. When one of them dies the survivor can often get the home placed in his or her sole name by visiting the MVD and showing them a Death Certificate. Then when the title is reissued in the survivor's name, the survivor can execute the Beneficiary Designation.
EMPLOYEE OR INDEPENDENT CONTRACTOR
Recently I received a call from a park about a maintenance man who was laid off and was now applying for unemployment benefits. The park was surprised since it had been carrying this person as an “independent contractor”. It was even more surprised and concerned after talking to me.
Often it is not clear who is an independent contractor and who should be classified as an employee. The IRS advises taxpayers to look at three aspects of the employment arrangement: financial control, behavioral control, and relationship between the parties. While independent contractors typically work for a number of different organizations throughout the year, there are some retain independent contractor status even though they work for the same organization for the entire year.
As an example, I am an independent contractor since I have my own office, work on my own schedule, provide my own tools, pay my own bills, and have many clients.
Generally independent contractors retain control over their schedule and number of hours worked, jobs accepted, and performance of their job. Further, they often have a major investment in equipment and provide all of their supplies, insurance, repairs, and other expenses related to their business.
Independent contractors often perform a special service that is not in the normal course of business of the employer as opposed to regular employees who usually work at the schedule set by the employer and who are directly supervised by the employer.
Independent contractors are responsible for their own self-employment tax, which consists of both halves of the FICA tax amount. An employee only pays the employee portion of this. Self-employment taxes are not withheld from the earnings of independent contractors. Independent contractors are also required to declare and pay estimated earnings taxes (including income and self employment tax) to the IRSand the Arizona Department of Revenue.
This can create a major problem when contractors run into financial difficulty and put off making the required estimated tax payments. There is something called the 100% penalty that basically allows the government to collect all taxes that should have been withheld from someone treated as an independent contractor but really an employee. Technically this can be assessed and collected even when the so-called independent contractor does make his self employment and income tax payments.
There are several entitlement programs available for employees but not independent contractors. Examples include worker's compensation and unemployment insurance. However, independent contractors are allowed to make much larger Individual Retirement Account contributions than employees.
If someone treated as an independent contractor applies for benefits under such a program, the government will probably look into whether he really was an independent contractor under the criteria mentioned above. If it finds that in reality the worker was an employee and not an independent contractor, it will declare him eligible for benefits and then will pursue the employer for the taxes or premiums that it should have been paying into the program if it had treated the worker as an employee in the first place. There could be penalties and interest added onto this, and it could also trigger a referral to other government agencies that will start looking into the matter.
The employer of an independent contractor is generally not liable for the wrongful acts or omissions of an independent contractor, because the control and supervision found in an employer-employee relationship is lacking. However liability can be imposed if the so-called independent contractor is found in reality to be an employee.
Too many people think treating employees as independent contractors is an easy way to avoid the liability, expense and hassle of setting them up as employees. While that may be true, the fact is that the government wants people treated as employees with employers withholding and sending in their taxes. In order to avoid this responsibility, an employer needs to be absolutely certain that a worker will qualify as an independent contractor under government enforced criteria.
My advice usually is that if there is uncertainty that a worker will qualify as an independent contractor, treat him as an employee. The consequences of making a mistake are just too serious to take the risk of an improper classification.
SEWER AND TRASH CHARGE FURLOUGHS IN MESA REPEALED
SEE 4/7/12 2012 BLOG POST FOR MORE INFO ON MESA UTILITY FURLOUGHS
Parks that charge the local utility's single family residential service rate when they separately charge for utilities (the statutory ceiling they can charge) must also honor rate furloughs when they are part of the provider's rate structure. That means that if a tenant is away for a period of time and requests that his charges be suspended, the park must do so if the utility provider would. Of course this can be determined by reviewing the rate tariffs published by the various providers.
The City of Mesa historically has allowed utility furloughs for customers requesting them for sewer and trash charges and parks have been required to do so as well.
But last summer (June 2011) the Mesa City Council repealed its furlough program for sewer and trash. Therefore it no longer appears necessary in the City of Mesa to honor utility suspension charge requests from residents leaving for the summer or on other extended absences for these utilities.
Tenants may try to cancel service while away and then start service anew on return. The City of Mesa requires water service to be cancelled when sewer and trash is cancelled by a utility customer.
But the MHP landlord tenant act at ARS § 33-1409 defines “rent” in such a way as to include utility charges. Tenants cannot cancel rent while gone and can’t cancel part of rent (utilities) either. The difference now is that the part of rent constituting sewer and trash is no longer at zero under a furlough program in the City of Mesa, but is now at the normal rate. In the past tenants weren’t canceling the sewer and trash component of rent; they were just taking advantage of a program that reduced the sewer and trash component to zero. That program no longer exists.
Parks in other areas that have allowed furloughs would be well advised to check on the status of furlough provisions in their rate structures.
ALLOWING DISABLED CHILDREN IN AGE 55 COMMUNITIES
I have been getting more and more calls from Age 55+ Parks asking whether there are circumstances when they must allow children to live there. For a very narrow range of cases, the answer is “yes”.
Normally, the law allows qualified Age 55+ Communities to exclude children from living there and to restrict what they can do when visiting. This is the principal reason residential communities elect Age 55+ status—the desire to create a retirement community where people can live free of being exposed to children. Age 55+ Parks will adopt age restrictions in their Statements of Policy requiring at least one resident per household to be over 55, and all other household members to be some other age that is over 18 years. It is this latter age that fulfills the purpose of the Age 55+ status. The second age prohibits children from living there.
These age restrictions are part of the community’s policies and regulations.
Fair housing laws also contain a number of provisions dealing with “handicap discrimination”. Essentially they prevent housing providers from discrimination on account of a “handicap” of a renter, a person in the renter’s household, or a person associated with the renter. These laws also state that “discrimination” includes a refusal to make reasonable accommodations in rules and policies where such an accommodation is necessary to afford a person the equal opportunity to use the premises.
So what happens in an Age55+ Park when a tenant or an applicant asks the landlord to make an exception to its age restrictions to allow a disabled child to live in the tenant’s household? The law on this question is pretty settled and perhaps best explained in a 2002 Arizona Court of Appeals case.
In Canady v. Prescott Canyon Estates Homeowners Association, 204 Ariz. 91, 60 P.3d 231 (2002) the Court was faced with a situation where an Age 55+ HOA refused to make an exception to its age restrictions imposing a minimum limit of 35 for residence despite being requested to do so. The request was made by the parents of a severely developmentally disabled child for him to be able to live with them. The HOA denied the request since it violated the age restrictions it had developed to qualify for Age 55+ status.
The child as a member of the proposed property owner’s household was covered by these laws since members of the household qualify for coverage. The important question here was whether age restrictions adopted to qualify for age 55+ status under one section of fair housing laws needed to be waived to comply with the reasonable accommodation provisions of another portion of those same laws.
The Court concluded that they did need to be waived.
First, the Court found that fair housing laws impose an affirmative duty to reasonably accommodate disabled persons. To reasonably accommodate a disabled person, an individual or group may have to make an affirmative change in an otherwise valid policy. So a reasonable accommodation may involve "changing some rule that is generally applicable so as to make its burden less onerous on the handicapped individual." That would include waiving an age 35 requirement to permit a disabled child to live with his family.
Second, allowing the child to live with his parents in a home in the community would not indicate that the HOA had failed to publish and adhere to policies and procedures that demonstrate the intent that it be an Age 55+ housing community for older persons. By enabling the child to live with his parents in order to avoid violating the Fair Housing Acts, the HOA would not be abandoning its purpose for the community but, rather, would be acceding to compliance with other portions of federal and state laws. Such a "concession" to the law could hardly be interpreted as an intent to relinquish its status as "housing for older persons."
Finally, the Court addressed the HOA’s argument that allowing the child to live with his parents would open their community to a "flood" of other persons younger than the age of thirty-five desiring to live there. It stated that reasonable accommodations vary depending on the facts of each case. What is reasonable in a particular circumstance is a "fact-intensive, case-specific determination."
Fair housing laws allow the housing provider to consider each request individually and to grant only those requests that are reasonable. Only a narrow group of persons would be entitled to the limited exception to the age restrictions required by young persons who are disabled and whose disability requires housing with a person who is older than fifty-five years of age. Given this, it is hardly likely that a “flood” of underage residents will appear.
So the upshot is that if an otherwise qualified tenant or applicant asks for an age restriction waiver to allow a genuinely disabled family member or dependent to reside with him, it is likely the landlord will need to agree. Likewise, if an occupancy limit would also be violated, that too would normally need to be waived.
If there is legitimate doubt that the underage person is really disabled or dependent on the tenant, reasonable evidence of that fact can be requested. But once provided, the exception normally must be made.
The information contained on this site is not legal advice and does not create an attorney-client relationship with the user. Landlord-tenant and fair housing laws are always changing and are subject to interpretation. You should always consult an attorney before taking any action.
This is an attempt to collect a debt. Any information obtained will be used for that purpose.