SEE NEW 2013 BLOG BEGINNING 1/1/13
All views expressed in this blog are mine alone and do not necessarily represent those of any client or other organization. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation.
Copyright (c) 2012 by Michael A. Parham. All rights reserved
December 26, 2012
Winter 2012/13 Newsletter. Here is a link to our newest newsletter: http://wzplegal.com/wp-content/uploads/2012/12/winter-2012-and-2013-MZ-Rev..pdf
December 23, 2012
Bonded Titles. On December 21, 2012 I learned the MVD had issued a directive stopping the issuance of bonded titles for mobile/manufactured homes. I learned of this when we tried to put three bonded title applications through. These were on homes that landlord lien sales had been conducted on but for which bonded titles were necessary due to problems with VIN numbers missing from them.
I have been criticizong certain third party MVD contractors for months for recommending bonded titles when landlord lien sales were called for. Parks go along with this since the contractor can do the bonded title right away and it is cheaper than a landlord lien sale. The contractors are motivated since they can do the paperwork and charge for it. The fact that it may be illegal does not seem to bother a lot of people. I wrote about this in a post on this blog on June 8.
Not all of the contractors have been doing this, but a number of them have.
Anyway the MVD apparently figured this out and stopped ALL bonded titles for mobile/manufactured homes. Typically of government overreactions they threw the baby out with the bathwater.
I wrote a letter to the Director of the MVD protesting this and it can be viewed here: http://www.michaelparhamlaw.citymax.com/multimedia.html
December 19, 2012
Dangers of Doing Business On Line. Once something hits the Internet, it is like being set in concrete. Even if you try to delete it, it continues to exist on servers around the world and in the computers of the many people who looked at it when it was posted. You can, for example do a Google search for "cached memory" of recently changed websites and see what they said before the change. Our firm changed its website several months ago and canceled the old one. We are using a new host. Yet many Internet searches involving us still bring up the old website.
The moral of this? Be careful what you post. Understand that once you hit the "send" or "upload" button it goes out to the whole world and can not be taken back.
Websites. Even after being changed the original version can be viewed by a diligent investigator. Think about what you are putting up on your website before doing so. Be sure the content is accurate, presents the image you want out there, and is written or otherwise presented in a favorable manner. Accuracy is important. If the website for an MHC, for example exaggerates the amenities or makes claims that are not true, those inaccuracies can be used against the park in subsequent litigation. However presenting true facts in a fovorable light is okay. Just don't cross the line into presenting false claims as fact.
Social Media. Facebook, Linked In and similar sites allow you to describe yourself or your community or business. Be sure the descriptions are accurate. I have seen employees get in trouble with employers over exaggerated descriptions of their job responsibilities. Be sure they are accurate. Also when you change jobs, be sure to immediately update any personal pages on social media sites to show your departure from your former employer. This is not only important to the former employer, but future employers checking you out on line will see that you are publicly claiming to still be employed which they will know is false.
E-Mail. There is no bigger cause of trouble for people than intemperate, defamatory, and false e-mails. Once an e-mail goes out it cannot be taken back. I never cease to be amazed at what people say in their e-mails thinking they are private. An e-mail stays in the e-mail provider's servers forever. It can stay in the memory of the recipient's computer forever. Anjd even though intended to be private, the recipient can forward it to others who can also forward it until the whole world has read it.
E-mails can be subpoened in lawsuits and there are court rules requiring preservation of all e-mails once litigation becomes likely. E-mails can be obtained in criminal investigations. Destruction of e-mails when the person doing so knows they are or may be relevant to legal proceedings can result in court sanctions and in certain circumstances can be a crime.
E-mails between lawyer and client are protected by lawyer-client privilege and cannot be compelled to be revealed--normally. But if a lawyer includes non clients on the distribution list for the e-mail or if the client forwards the lawyer's e-mail on to someone else, the privilege can be lost.
I have seen e-mail threads where people were saying horrible defamatory things that they would never want known in public that get forwarded to others. Some of these e-mail threads can later be used to prove unlawful conspiracies or criminal conduct.
Think before you hit the send button. If you are angry do not send that e-mail. Save it as a "Draft" and come back to it later and see if it really says what you want it to when you have calmed down.
Finally, G-Mail has a setting called "Enable Undo Send" that lets you change your mind after hitting the send button and to cancel the e-mail before it goes out. You can set it to give you as much as 30 seconds before the e-mail actiually goes out. That is one reason I use G-Mail. I can change my mind at the last minute. In addition if I see that I am accidentally sending an e-mail to the wrong person after hitting the send button I can cancel it.
December 16, 2012
Incompetent "Aggressive" Lawyers. How many times have you seen the word "aggressive" used in lawyer advertising? Apparently advertising experts have found that this appeals to the public and that people want their lawyers to be "aggressive".
When we redesigned our firm website a few months ago we did some search engine optimization (SEO) which is a process to try and get people looking for certain characteristics to find your business when doing on line searches. It is commonly accepted in the SEO field that "aggressive" is a key word people use when searching for lawyers. So that word snuck into our website at carefully planned places. When we discovered it lurking there we deleted it.
Why? Because I loath "aggressive" lawyers. "Aggressive" lawyers in my view substitute bullying and intimidation for competence. I find that in general the more "aggressive" a lawyer is the stupider or less competent he is.
In recent months I have had park managers receive letters from "aggressive" lawyers threating lawsuits, punitive damages, and all sorts of other terrible things if the park does not give into their demands. Almost always the letter recites an incorrect version of the relevant facts, but more importantly reflects a profound ignorance of the laws affecting MHC's. I get angry when I see these letters so I do not respond right away, being a believer in reflecting on what I am saying before responding.
But my response generally is that the lawyer is wrong and needs to do more research and will be held accountable if he takes action based on flawed facts or a misunderstanding of the law. Often the lawyer becomes less aggressive and asks me to explain where he is wrong on the facts or the law. This is a typical lawyer game--exchange letters or e-mails explaining positions and debating the merits of a dispute, and running up big legal fees for both clients.
I decided some time back not to play this game. My normal response now is to tell the lawyer I am not in the business of providing a free education for him; that I teach seminars on this but he would need to pay to attend; and that he is on his own to determine the correct facts and law but he damned well better do so before rushing to the courthouse.
Normally the "aggressive" lawyer becomes less aggressive unless he is profoundly stupid, and comes to his senses.
December 14, 2012
A New Type of Park Model? Age 55 parks are sometimes criticized as geriatric wards with nothing but doddering old people living there. While that is often an unfair stereotype, in some communities it tends to ring true. There are parks where people over 55 moved in 25 or so years ago and they are now in their 80's. Many are frail and in poor health. Adding to this, many are neglected or ignored by their families. This creates problems for neighbors and landlords as these people get older and less able to fend for themselves. MHC's are residential communities, not nursing homes, and are not equipped to deal with the needs of dependent, sick, elderly residents.
Technology might be adding to the problems of park landlords. Something called the MedCottage is beginning to come on the market. This ranges in size from 288 to 605 square feet. Here is how its distributor describes it:
The MEDCottage is a modular building which provides round-the-clock monitoring in a freestanding unit dependant on a caregiver's house. The MEDCottage efficiently combines sleeping, bathing, cooking, and living area in a 12 foot by 24 foot area. A senior or disabled family member can gain some privacy and independence in a setting where state-of-the-art technology is available to monitor the occupant when needed.
The thing sort of looks like a park model and certainly fits the size limits with many under 400 square feet. Here is a picture of what it looks like:
Maybe there is a business opportunity here for parks to set these things up for families wanting to let their infirm elderly members live outside of a nursing home. But it is disturbing to imagine RV parks getting these things in on the sly and evolving into new age nursing homes.
They are not being marketed that way--yet. At present they are being marketed for people to put in their back yards for immediate family members.
Read more about them here: http://medcottage.com/index.php
December 8, 2012
City of Benson Amicus Brief. This involves a case appealed to the Arizona Court of Appeals. MHCA had me file an Amicus Curiae (friend of the Court) brief explaining why we believed it was necessary to grandfather older MHC's in when local governments change zoning laws so that older parks in compliance before are no longer in compliance. I did so late last year. The case was decided last March.
The decision said the case should not have been in court in the first place since there were additional administrative remedies available. It remanded the case so the Board of Adjustment in Benson could consider the issues including whether single spaces or the entire park constitutes the non conforming use when a zoning ordinance is materially changed.
The park petitioned the Arizona Supreme Court for review of the Court of Appeals decision. To my amazement the Supreme Court accepted the case (most such petitions are denied). It will be argued on January 15, 2013 and probably decided by the end of March.
This indicates that the Supreme Court thinks the issue of “grandfathering” prior uses when land restrictions are changed by local governments is an issue of state wide importance. Clearly the case presents issues of private property rights versus government’s rights to impose land use restrictions.
While there is no guarantee we will like the final outcome, this case should go a long way to settling these issues in MHP’s that have been a plague on the industry for many years.
Successful Multi Property Refinancing Completed. A client recently completed a complex set of transactions refinancing multiple residential communities it owns with an aggregate loan amount over $110 Million Dollars. This was an elaborate multi-property collateralization package involving substantial due diligence, review of the complex underlying documentation with financial institutions, and the preparation and delivery of complex legal opinions. We were able to complete our reviews and preparation of borrower counsel opinion letters in a short time-frame to enable closing before the end of 2012.
We represent borrowers in many transactions each year in which they finance or refinance apartment communities and manufactured housing communities. Our work involves review of loan documentation, assistance in completing borrower due diligence requirements, and preparation of opinion letters of borrower’s counsel on the enforceability of the loan documents and the standing of the borrower to enter into the transaction. We pride ourselves in the reasonableness of the fees we charge for this work.
This transaction is one of the largest we have handled in recent years.
December 1, 2012
Removing Homes From Parks. I just created a new page--Removing Homes From MHC's. It appears in the left margin. In it I try to cover the complex rules that apply when homes are about to be pulled out of parks. I also talk about some of the abuses going on in this area and what to do about them. A cottage industry has sprung up of some dealers buying homes, encouraging tenants to violate leases, and then trying to extort exorbitant deals to resell the home to the park. This is often illegal under spif laws and can expose those dealers to serious legal liability.
Employee Handbooks. Our firm can prepare simple employee handbooks tailored to parks at a reasonable cost. Many parks are being required by their insurance carriers to have these and a properly drafted one is always a good idea.
November 24, 2012
Personal Property in Park Owned Homes. Sometimes a resident's personal property is found in a home owned by the park. The home may have been acquired in a landlord lien sale after being abandoned. It may have been given to the landlord when a tenant moved out. It may have been bought by the park. Or it may be a park owned rental that the tenant has vacated. Whatever it is, it has stuff in it that the park does not own.
The law says that the park does not have any sort of lien on the household possessions of a tenant. So even when it is a home acquired in a landlord lien sale, buying the home does not mean that the purchaser has bought the contents of the home.
Nothing in the MHP Landlord Tenant Act addresses what to do with this stuff. However a section of the Residential Act does talk about what to do with a tenant's possessions found in a rental dwelling after the tenant vacates. This directly applies when stuff is found in a rental home that has been vacated. In other situations it is a good idea to follow the statutory procedures anyway since there is nothing else that covers them.
The statute is ARS § 33-1370 and says that when possessions are found in an abandoned unit, the landlord should send a notice of abandonment of possessions by certified mail to the tenant's last known address and post a copy on the door to the unit. After that time is up he can retake possession of the unit.
At that point a second notice is mailed and posted advising of what was found on the premises and where the landlord will be keeping it. After ten days the landlord may sell the personal property. Our suggestion is to notice this out as a public auction with a notice of sale in a newspaper and then hold an auction. The park would bid in its costs associated with doing all of this and if no other bids are received, the landlord will be deemed the buyer and can then ged rid of the stuff.
The tenant should always be given access to remove his medical records and drugs, immigration and work papers, financial records, and tools of his trade. My suggestion is that he be allowed to take anything he wants before the stuff is sold.
Never sell sensitive financial or medical records of a tenant. Landlords need to inventory the contents of the unit before selling them. Any medical or financial records like tax returns, any prescription drugs, passports, immigration documents, and anything else that could be used for financial or identity theft should be set aside and held in a secure place for a year after the sale, and then destroyed (not just thrown out but destroyed).
For park owned rentals, landlords should take advantage of ARS § 33-1314 (F) and include in the rental agreement a provision designating a contact person for the landlord to request removal of personal property of an abandoning tenant. It can also permit summary disposition of items not removed after that time.
November 22, 2012
Thanksgiving 2012. Today is Thanksgiving. We have much to be thankful for. Christmas is coming and Obamacare is around the corner. In that spirit here is a timely Christmas Carol I recently happened upon:
you better not cough
you better not sneeze
you better not catch a fatal disease,
owebamacare is comin to town
Their makin a list
to kill all the old
children will cry cause their futures been sold,
owebamacare is coming to town
they'll tell you you are healthy
they'll tell you you're alright
they'll put you out to pasture and they're gonna say good night
you better not cough
you better not sneeze
you better not catch a fatal disease,
owebamacare is coming to TOOOOOOOOOOWNNNNNNNN
November 17, 2012
SAFE Act. The re-election of President Obama seals the fate on the SAFE Act. It is going to remain on the books and in all likelihood is not going to be changed at the federal level to mitigate the effects on the MHC industry. Parks with inventories of homes they would like to sell are either (a) going to need to get a third party to finance them; (b) sell only for cash; (c) sell and seller-finance under current exemptions in State law and hope that is a valid defense to a federal SAFE Act violation claim; (d) get their own MLO license before seller-financing; or (e) have a licensed MLO handle the placement of the seller carryback financing.
The other alternative, and one a lot of parks are now taking advantage of, is to simply rent the homes and not sell them.
In the upcoming Arizona legislative session, I hope that the State MLO law will be changed to strengthen the current seller financing exemption from licensing of five per year. I am also hopeful that the requirement that licensed MLO's be employed by mortgage bankers or brokers can be relaxed to enable chattel (MH) MLO's to be licensed to manufactured home dealers.
Manufactured Home Rentals. Those parks electing to start renting homes out should check an any restrictions in the mortgage loan documents covering the park if the park is subject to a mortgage. The newer the mortgage, the more likely it contains restrictions on the park owner engaging in the rental (and often sale) of homes in the community. Often, separate entities with common ownership are okay, but if the park does the business itself in disregard of such a restriction, it could constitute a loan default and trigger the mortgage being called and becoming all due and payable with a bunch of pre-payment penalties tacked on.
Election Law Case. We won another case. The Arizona Supreme Court released its Opinion in Kennedy v. Lodge II holding that a Superior Court Judge in one of the 13 Counties where they are still elected cannot run as a write in candidate after being knocked off the ballot as a Democrat for inadequacies in his voter petitions. We also prevailed in that case with a Supreme Court Opinion in Kennedy v. Lodge I. http://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2012/CV120221APEL.doc.pdf This is pretty esoteric stuff. But Scott Williams is one of the leading attorneys in the State in election law and Mark Zinman and recently, Melissa Parham have been quite good here as well. Here is a link to the Supreme Court Opinion. http://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2012/CV120277APEL.pdf
Rent Control. It looks like there may be a push in the Legislature this coming session to get some form of rent control enacted. Rent control means the government has to approve in some manner the amount of rent that a private landlord can charge his tenants. Places like Florida, New York and parts of Californis have variations of rent control and there was a serious effort to impose rent control over MHC's in Arizona about 15 years ago.
Millions of Dollars have been spent in legal fees fighting rent control ordinances in California over the past 30 years. I would hate to see Arizona fall into this trap but it is a possibility. Park owners need to keep track of this situation and support the owners' association (MHCA) in its efforts to fight any effort to impose rent control beginning in January.
November 10, 2012
Marine Corps Birthday; Veterans Day. Today, November 10 is the 237th anniversary of the founding of the Marine Corps in Philadelphia. The following day is Veterans Day. Remember them both, and especially remember the returning disabled veterans.
I was forced to cover the eviction of a recently discharged Army veteran who has just completed two tours in Iraq, and her boyfriend, an eight year Army veteran with combat experience. Neither was able to find work and both were bitter about the fact that no one seemed to give a damn about them. This was reminescent of what the country went through in the latter stages of the Viet Nam War some 40 to 45 years ago.
I hope that in the country's apparent zeal to put Iraq and Afghanistan into the past that we don't simply forget about the veterans who fought there and all too often came back injured. But I fear we are heading down that path and that would be a true disgrace.
Office Move. We are moving our offices over this weekend to another suite in the same building. Our computers, faxes and phone lines may be down for all or portions of the weekend, including Monday, while we get it done. Our address and phone numbers will not change and hopefully we will be ready to go again on Tuesday.
Holidays. This is what we used to call Christmas and New Year's. The season is fast approaching
Many MHC managers won't refer evictions over the Holidays, experiencing a sense of generosity with their employers' money that they would not feel if it was their own. Thinking they are "helping" the tenant they let him live there rent free during the Thanksgiving period and the month of December. That lets the tenant spend his money on Christmas presents and gives the manager the warm glow of generosity--with someone else's money.
As I have ranted for years the real fact is that this is a terrible disservice since the money is now gone, the tenant is another month in the hole and may be so far in that he cannot dig out. It might just guarantee the eviction that the manager in his spirit of misbegotten generosity was trying to avoid.
Not that it seems to make much difference any more since some courts will not process evictions over the Holidays and the Constables have announced in many areas that they will not enforce eviction judgments during the Holidays.
Of course that is just another example of the government being generous with other peoples' money. I'm used to that but I still don't like seeing MHC managers emulating the government.
Smart managers will promptly serve December non payment of rent termination notices and get the cases in for eviction promptly so the tenant can start dealing with the problem while he still has the ability to do so.
November 3, 2012
Refinancing of MHC's. There has been an increase in refinancing of parks the last few months.
Interest rates were higher in years past than they are now. Many loans made to finance the acquisition of parks 10 or more years ago are coming due. For these and other reasons a number pf park owners are taking out loans to replace earlier ones that need to be paid off. And, of course, when parks are sold, most buyers need to borrow money to finance the purchase.
Loan interest rates are good. But in reviewing the proposed loan there are a number of things to watch for, some of which are unique to MHC's. Among these are penalties and restrictions for an early payoff on the loan. Part of the price for the current low interest rates is a virtual impossibility of pre-paying the loan without paying all of the interest that would accrue during the remaining term as a sort of pre-payment penalty.
Other things to watch for are restrictions on leases over one year; restrictions on accepting pre-paid rent; restrictions on owning homes; restrictions on park owner home rentals; restrictions on operating a park owned mobile home dealership; restrictions on the number of pre HUD homes allowed in the community; provisions relieving the lender from the duty to maintain the park if it should seize rents; and a variety of other hidden provisions that hurt or impair the ability of the park operator to do business. Many of these restrictions are not intentional but instead result from a lack of understanding by lenders of how MHC's work.
It is important to have your loan documents reviewed by legal counsel that understands MHC's.
Death of Tenant. More and more problems are being experienced when a resident dies. In an MHC the resident owns the home and the landlord has no right to go into it absent a written consent from the tenant. But when the tenant dies the park suddenly finds itself dragged into the problems of disposing of the home and its contents.
First, the family of the tenant may come in asking to be let into the home. The landlord does not have the ability to grant or deny access since it does not own the home and does not have any right of access. A landlord presented with such a request should simply say there is nothing it can do and not get involved. This is especially the case when there are factions of the tenant's family feuding with one another.
Second, the main reason family members often want to get into the home is to grab things of value to either sell them or keep them. Once the initial visit is concluded and the valuable items are removed, the home and its remaining contents are often abandoned. But since the landlord has no ownership interest in the home and no right to grant or withhold access, it is not responsible for what happens.
Third, however, the landlord does have a duty to ensure to the best of its ability that law breaking does not occur on the premises. If it comes to the landlord's attention that someone is breaking into the home of a dead tenant (or any other tenant for that matter) the police should be immediately called. But if a family member with a key is going in, that usually does not consittute a crime. Nevertheless if there is doubt as to the lawful entitlement of those going into the home to do so, call the police.
Fourth, a family member can obtain and complete an Affidavit of Heirship 30 or more days after death if the dead tenant's estate is small. These forms can be obtained from the Superior Court. http://www.superiorcourt.maricopa.gov/SuperiorCourt/Self-ServiceCenter/Forms/ProbateCases/prob_pbse1.asp Completion of such an Affidavit by a family member properly completed entitles that person to take possession of the property of the deceased. Parks presented with these should make a copy for their file in case other family members later claim the park was responsible for allowing unauthorized people to loot the home.
Fifth, the MVD has a special Affidavit of heirship available for motor vehicles and mobile homes. http://mvd.azdot.gov/mvd/formsandpub/viewPDF.asp lngProductKey=1178&lngFormInfoKey=1178 This can be completed by the family member entitled to inherit and presented to the MVD 30 or more days after death if the tenant's estate was small. If the home is free and clear and taxes are current the MVD will issue a new title to the family member. If there is a lien, the family member will need to contact the lender and either make arrangements to pay or assume the loan or to get a lien release if the loan was already paid.
Sixth, many of these homes wind up being abandoned. Family members taking homes over need to pay space rent while they dispose of the home and often they don't pay or stor paying after a few months. In this case treat the home as abandoned and initiate a landlord lien sale so the home does not sit there indefinitely with noone paying rent on the space.
October 27, 2012
Repair of Electric Pedestals Damaged by Tenant Use. Sometimes a tenant makes upgrades to his home that increases the workload on the electric outlets provided by the landlord. Landlords presumably have notified tenants of the type, size and power ratings of the electric connections provided by the park as required by ARS § 33-1434 (A) (6). But when increased demands are the result of tenant modifications and upgrades in the home, the demand may exceed the capacity of the outlet. If the tenant does not make arrangements to have the outlet upgraded (at his expense) the result may be damage to or destruction of the outlet.
The question then arises. Whose responsibility is it to make the several thousand dollars in repairs to the outlet. There are a couple of statutes that bear on this question.
ARS § 33-1451 states in relevant part:
A. A tenant of a mobile home space shall exercise diligence to maintain that part of the premises which he has rented in as good condition as when he took possession and shall. . .
4. Not deliberately or negligently destroy, deface, damage, impair or remove any part of the premises or knowingly permit any person to do so.
ARS § 41-2155 states in relevant part:
E. Notwithstanding any other provision of this section, the owner of a manufactured home or mobile home located in a park subject to title 33, chapter 11 is responsible for the maintenance of utility connections from any outlets furnished by the landlord pursuant to section 33-1434 to the unit, except that the landlord is responsible for the maintenance of connections for any distance greater than twenty-five feet to the point at which the utility connections are the property of the providing utility company if the outlet is located outside the lot line of the owner's unit and is more than twenty-five feet from the unit. A local enforcement agency that determines that local code requirements are not being met or that maintenance or safety activities are needed for utility connections may not require anyone except the responsible party to perform or pay for such activities.
Putting these two provisions together, the landlord is required to provide utility outlets for tenant use. The tenant plugs into them. But if the tenant negligently damages or destroys them, he is responsible for fixing them. The tenant is always responsible for the connection running from the home to the outlet unless the outlet as more than 25 feet from the home and not on the space. And the tenant is responsible for damage to the landlord's outlet if he causes it.
Park Mailbox Use. A common issue I see is parks using mailboxes to deliver communications to tenants. Sometimes park newsletters, rent statements, utility bills and the like will be stuck in the park mailbox. Sometimes the park tenant association is allowed to do so. The problem here is that these mailboxes are provided for use by the Postal Service in delivering the mail. Because of this a number of federal laws and Postal regulations come into play.
18 USC 1725, a part of the federal criminal code, states:
Whoever knowingly and willfully deposits any mailable matter such as statements of accounts, circulars, sale bills, or other like matter, on which no postage has been paid, in any letter box established, approved, or accepted by the Postal Service for the receipt or delivery of mail matter on any mail route with intent to avoid payment of lawful postage thereon, shall for each such offense be fined under this titleIn addition
This means that even though the park paid for the mailboxes and maintains them, the federal government controls their use and prohibits any mail not bearing the correct postage from being put in them. The U.S. Supreme Court has upheld this in USPS v. Council of Greenburg Civic Associations, 435 U.S. 114 (1981) and stated:
When a letterbox is designated an "authorized depository" of the mail by the Postal Service, it becomes an essential part of the nationwide system for the delivery and receipt of mail. In effect, the postal customer, although he pays for the physical components of the "authorized depository," agrees to abide by the Postal Service's regulations in exchange for the Postal Service agreeing to deliver and pick up his mail.
The moral of this story is not to use mailboxes for private communications with tenants unless they are posted and mailed to them.
October 24, 2012
Happy Halloween. http://www.jibjab.com/view/OBZwP7u6QQ5jy1txfiCV
Tax Video. http://www.youtube.com/watch?v=MqoGORXAv2o
October 20, 2012
MHCA Tucson Conference. I was there yesterday. My presentations focused on the SAFE Act and other new federal legislation making it difficult if not impossible for MHC's to finance homes. It is frustrating to have to tell a group of small business people that a profitable line of work that actually benefits consumers (selling and financing mobile homes to lower income purchasers) has been rendered virtually impossible to conduct lawfully by mindless government regulation. But that is largely the case.
Loans to finance mobile homes are going to be considered high risk loans and subject to restrictions imposed by the Dodd Frank Bill. In addition people involved in making them are subject to Mortgage Loan Originator licensing requirements of the SAFE Act.. Unless exempted from these laws, the practical effect is to shut down this sort of financing since as a practical matter it is impossible for parks to comply. Infrequent lenders not engaged in this business on a regular basis might be exempt but even that is not certain.
One way to effectively avoid all of this is to rent, not sell these homes (but not renting under lease/option arrangements). But that places parks in a business they never wanted to be in--rental of dwellings, not just the rental of lots the dwellings are on. Rentals also raise issues under park mortgage documents that restrict park owners from doing this, and impose responsibilities on landlords for maintaining homes, not all of which can be shifted to tenants.
A bill is pending in Congress to reduce the impact of this federal regulation on chattel lenders (e.g., people loaning money on manufactured homes). It won't go anywhere this session but next year, depending on election results it might get enacted.
Park Owned Home Rentals. Parks deciding to get into the home rental business should get the MHCA Green Book. This includes an explanation of how the landlord tenant laws covering this type of rental work, and also contains the forms necessary to get into this business. Contact MHCA at (480) 345-4202 or (800) 351-3350 for more information.
October 17, 2012
Hoarders. This is becoming a real problem and there is even a TV show about it that is featured on our Facebook page. Hoarding is apparently some sort of psychological disorder involving a conpulsion to acquire stuff and an inability to throw any of it away.
In more and more rental properties, landlords are finding tenants storing huge volumes of junk they have acquired in the dwelling unit. This causes health and safety problems and when a tenant moves out, the landlord is usually left with a huge mess of stored junk and trash to dispose of.
Residential landlords including MHC's renting park owned homes have the ability to enter the dwelling on 48 hours notice to inspect it. If a tenant is suspected of hoarding, a residential landlord should give the 48 hour notice and then go in and look around. If quantities of junk are discovered, a termination notice, either a 5 or 10 day notice should be given. This enables an eviction action to be filed if the mess isn't cleaned up within the notice period time.
MHC's and RV Parks renting spaces have a more difficult time. The law says those landlords have no right to enter the tenant's home unless agreed to by the tenant in writing. Yet the health and safety concerns are the same, and landlords often inherit the mess when homes are abandoned. Parks need to keep an eye on what is being stored outdoors by their tenants. Hoarders usually acquire junk that is too big to get inside the home. It often winds up being stored outside. Park rules normally prohibit this and when this kind of junk starts accumulating on the space the landlord should give the tenant a 14/30 notice, or in cases involving health and safety concerns, a 10/20 notice. If the mess is not cleaned up within those time frames the case should be referred for eviction.
Local code enforcement agencies often spot hoarding when inspecting properties and seeing junk being kept on the space. They will cite the landlord for permitting this. To protect against this, landlords need to enforce their rules and put a stop to outside storage by tenants.
Judge and Lawyer Training. Melissa and I participated in a training class for Judges and lawyers on MHC and eviction law that was broadcast State wide and had Judges watching all over Arizona. One point I repeatedly stressed was that managers are required to have at least six hours training every two years, beginning six months after being hired. I also explained the sanctions for not having attended the required training classes.
I told the Judges that trained park managers know more about MHC law than most Judges so they should pay attention to them. But I also pointed out that about half the managers in the State ignore the requirement and suggested they be on the lookout for ignorant managers and to ask if they had received the necessary training if they don't seem to know what they are doing.
October 11, 2012
MHC Manager Training. I have gotten a lot of calls recently asking when I will be doing another MHCA Manager training Class. I am tentatively scheduled to do one in Glendale on January 25, 2013. To register or for further information contact MHCA at 480-345-4202 or 800-351-3350. The schedule for the rest of the year is still being worked out but it looks like this will be the only one in the Phoenix area this year.
Judge and Lawyer Training. I will be doing a class for judges and lawyers co-sponsored by the Arizona Supreme Court and the State Bar on Monday, October 15. Here is a flyer. http://materials.legalspan.com/azbar/20120917-314499-181711/evictions.pdf
Partial Payment Agreements. The Residential LTA that applies to apartment rentals, has a provision saying that if a landlord accepts any rent after the tenant commits a default, including accepting a partial payment, the landlord gives up the right to evict over the default unless a partial payment agreement setting upo a plan to pay the balance due and preserving the right to evict if the promise is not kep is signed. A similar statute was repealed from the MHP LTA in 1987 meaning partial payment agreements are not necessary. Nevertheless it is a good idea to have one signed even though not required so that everyone knows what the deal is, and so it can be shown to a judge if an eviction is later filed. A sample agreement is in the MHCA Blue Book.
MH Financing. I keep getting pushback from parks financing homes who believe they simply cannot comply with new SAFE Act and Dodd Frank requirements but need to continue selling and financing homes to stay in business. The only possible relief I can describe is the Arizona SAFE Act de minimus exclusion of five or fewer financed sales per year, and even that is questionable under the federal law. I hate these laws but I simply cannot recommend "loopholes" I do not believe will work. Thing like most lease with option agreements, rent to owns, or rent the home at a high price and then agree after a period of time to give it to the renter are all "disguised credit transactions" and ultimately will get people in trouble. The only true safe harbor at present seems to be straight out park owned home rentals and these come with a universe of problems all their own.
October 6, 2012
New Firm Website. Here is a shot of our new website. We are very pleased with it and it gives a high profile to our MHC work. Take a look at it. http://wzplegal.com/
Crime Free Programs. I was at a meeting of Crime Free Program coordinators from around the State and, with three other attorneys, made a presentation on new laws affecting the program. I was pleased to see the program is being reinvigorated in cities and towns around the State. Apache Junction especially is targeting MHC's since there are so many there. My main regret is that the Sheriffs' Departments around the State do not seem to be on board when it comes to unincorporated areas.
Wackos. This was the week from Hell for dealing with wackos. There was a full moon on September 30, the second one that month and thus a "Blue Moon". This must have brought the Crazies out.
The wackos included a criminal "grieving" over the loss of his Mom and wanting to get her treasured possessions back, instead advertising a fire sale of Mom's stuff on Craigs List and intending to strip and sell everything of value in the home; a woman demanding that a park fix the electrical problems in her home because the park had fixed unrelated problems in a neighbor's pedestal; a tenant harassing a sales agent because she learned the home had been sold to her for more than the seller had paid; a tenant barricading himself inside his home and painting pentagrams on it for God only knows what reason; the woman who barricaded herself inside her dead mother's home resulting in the Peoria Police simply leaving despite her threats of gunfire, actually being charged with a crime; and a small cable company simply walking away from the obligation to provide service in a park and abandoning all its equipment there.
I guess there are weeks like that but they are sure tough to deal with.
October 3. 2012
New Firm Newsletter. A new one is out. Read it here. http:// http://wzplegal.com/wp-content/uploads/2012/09/NEWSLETTER-late-summer-2012-MAP-Revised.pdf
October 2, 2012
The Hogs Ate Him. When I was a kid living in the South, if someone asked you where a person was and you didn't know and couldn't care less, you might have said, "He went to s**t, and the hogs ate him." This came to mind when I ran across this story today: http://usnews.nbcnews.com/_news/2012/10/01/14173510-70-year-old-oregon-farmer-eaten-by-his-hogs?lite
This strikes close to home since that farmer was't that much older than I am. I will be keeping my distance from the hogs in the future.
October 1, 2012
Judges Training. It looks like the problems have been worked out and this is back on. It will be held October 15 in Phoenix and broadcast statewide for Justices of the Peace.
Tucson Conference. This is set for Friday, October 19 in Tucson. See the Seminars page for details. I will be conducting classes in selling park homes, the SAFE Act and other new laws affecting sales, and a new You Be the Judge session. In addition there will be a You Stump the Lawyer session where paople can ask me anything involving MHC law and see just how much (or how little) I really know.
Other Training. I have been getting calls lately about when my next regular manager training class is scheduled. I will not be doing any more this year. I will be doing some in 2013. I usually do a couple in the early part of the year. Watch the Seminars Page after January 1 for details. And I will post a Blog entry when the schedule is firmed up.
September 26, 2012
Rent Increase Notices. Today is the last day to get MH Space 90 day rent increase notices in the mail for them to be effective January 1, 2013.
Unlicensed Dealers Raiding Parks. Many parks are having problems with tenants selling homes to people or firms that then threaten to remove the homes unless the park pays a premium, or that simply removes them. Often these parks have rights of first refusal that the selling tenants have ignored.
I have written previously over the right of the park to sue the tenant for damages for breach of contract for failing to honor the right of first refusal. I have also written about the possibility of legal action against a dealer or other buyer who knows about the right of first refusal (if there is one) and who encourages the seller to ignore it. And I have written about the need for the right of first refusal to be included in a rental agreement signed by the tenant to be enforceable.
Dealer licensing laws require persons buying mobile homes for the purpose of resale to be licensed with the FBLS Department. I have become aware of some firms engaged in buying and reselling mobile homes in these circumstances that do not have dealer licenses. If you become aware of any such firms raiding parks for homes that do not have appropriate licenses, call the licensing section at the FBLS Department.
You can check on a person's license status here: http://www.dfbls.az.gov/licensing/search.aspx
You can call the FBLS Department at this number: (602) 364 -1003.
Do not expect the Department to get into your squabble over the right of first refusal being ignored. That is not the Department's business. It's concern is whether people acting as mobile home dealers are appropriately licensed.
September 22, 2012
Links to Other Sites. I just put links up to other sites of interest (hopefully) above. The Facebook site will give informal updates on what is happening with our firm and its members. The WZ&P link goes to our new website which will give you a pretty good idea of wnat we are in the business of doing and information about those areas in which we practice. The Linked In link is for "networking". I still have doubts about "social media" and what this is all about. For example I now have 196 Connections on Linked In. So what? What difference does it make. So far all it seems to be is a Rolodex on a computer listing people I can contact when certain matters come to my attention needing expert help.
But we put a fair amount of effort into keeping these things up so take a look.
Changes in Legal Aid. For the last ten or fifteen years the Legal Aid operation in central Arizonahas been pretty reasonable to deal with. But there have been a number of changes in management there this year and I am beginning to have doubts about how much longer it will be possible to work and not just fight with them. I was trying to put a judicial training program together to train judges in MHP law. But then a couplke of Legal Aid lawyers got involved who know very little about the field themselves and effectively scuttled it. Not a very good omen for the future.
FBLS Department. There have also been some management changes there. I haven't heard much about them this year and don't know if those changes are going to affect anything they do that impacts us.
September 17, 2012
Non Recourse MH Loans. A park operator in Nevadacame up with an idea to make buying a manufactured home more attractive to a prospective purchaser/space tenant: give the buyer the option to "rescind" the sale at any time but with no refund of amounts paid to date. In effect this is similar to making the loan non recourse to the buyer--giving him the option to walk away from it at any time with no further liability. A condition of this should probably be that the keys and the endorsed title must be returned and the home left in good condition.
Since residential mortgages for site built homes are already non recourse thanks to anti deficiency laws in Arizonaand other states, this would amount to little more than giving such protections to MH buyers.
This does not change the fact that it is a loan financing purchase of a manufactured home and thus the the SAFEAct still applies to it. But it may make MH purchases a bit more appealing to prospective buyers and help get more homes sold.
September 14, 2012
Williams, Zinman & Parham Website. Its new and pretty slick. You can read all about us and see what we do. http://www.wzplegal.com/
Facebook. We also have a new Facebook page. Friend us and see what we are up to every so often. https://www.facebook.com/WilliamsZinmanParham
NevadaParkOwners Assocaition Meeting. I spoke at the Nevada Park Owners Association meeting on September 12 in Reno. The subject was the SAFEAct and other new federal burdens on park operators. They are a sharp and engaged group.. By and large they understand what the SAFEAct means to them and are deeply concerned over the devastating effect it has on the ability of parks to sell low priced older homes they get stuck with and never really wanted to own in the first place.
Unlike Arizonawhich in effect exempts seller financing of five or fewer homes per year when the seller is not habitually and regularly in the finance business, Nevadahas no de minimus exemption. Every seller financed sale is subject to the state SAFEAct, it appears. Hopefully they will seek a de minimus exemption next legislative session.
Firearms in Park. I had a call today from a park that is concerned about a tenant who has started walking around with a gun strapped to her hip. That puts a lot of people off. But open carry of firearms is legal in Arizona. Parks can, however prevent open displays of firearms in their rules, and a sample provision is in the version of rules in the MHCA Blue Book. But if the park has not adopted a rule restricting open display of firearms, then it is lawful. Of course if the weapon is used in a way designed to threaten or intimidate people, then the park can probably do an immediate eviction since threatening and intimidating is a crime.
September 8, 2012
More on Leasing Park Owned Homes. I wrote yesterday on this and the possibility of simply renting park owned homes without use of a purchase option to avoid SAFEAct and Consumer Leasing Act/Regulation M problems. But I left out another important consideration.
Renting dwelling units is a fundamentally different business than renting out mobile home lots. Not only do different landlord tenant laws apply, but the landlord responsibilities for maintenance and potential liability for defects in the homes are sharply increased.
Most parks are financed. By that I mean that the park owner has mortgaged the park and is making payments to the lender. Like other real estate loans, park mortgages are documented by a promissory note, a deed of trust securing the obligation to pay under the note, a loan agreement setting forth all the complex terms of the loan, and a variety of other documents.
In recent years lenders have included more and more provisions in the loan documents designed to protect their interests, especially if the loan goes into default.
A common provision that has appeared in them in recent years is one prohibiting parks from selling, financing or renting homes in the community. Often times these prohibitions extend to other entities controlled by the same party that controls ownership of the park. But often the documents are written in such a way as to allow other controlled entities to engage in this business.
It is important that parks deciding to rent homes, with or without purchase options, check their loan documents to see if there are restrictions on these activities so they can be set up in such a way as to not trigger a loan default.
When Lienholders Won't Pay. One of the most recurring questions I hear involves abandoned homes with lienholders who, despite being notified of the abandonment, won't pay rent due.
ARS § 33-1478 (A) says that when a mobile home is abandoned in a park, the landlord must notify a lienholder of the abandonment within 10 days after it is discovered. The statute goes on to say that a properly notified lienholder is then responsible for paying up to 60 days past due rent and other charges (meaning utilities) plus future rent and other charges until the home is dispoosed of.
The problem is, a park may discover an abandoned home and give the lienholder the 10 day abandonment notice, but the lienholder simply fails to pay rent. Sometimes the lienholder ignores the problem altogether; sometimes it promises to pay but the check never arrives; and sometimes it asks for time to market the home, promising to pay when the home is sold.
Lienholders are having a difficult time, like other financial institutions in this economy. Their cash resources are limited and it is in their interest to try to get landlords to carry them, interest free, on the space rents while trying to sell repossessed homes. But that puts the landlord in the position of acting as the lienholder's bank, extending interest free financing of the space rent obligation. With high vacancy rates and a shortage of qualified prospective new tenants, parks are not in a position to finance lienholders.
That is not to say that parks should always be hard nosed. Cooperative working relationships with lienholders are always a good idea as long as the cooperation is reciprocated. It is fine to let the lienholder have a few months to try and market the home with an agreement the rent will be paid when it is sold. But if it goes on for more than two or three months, or if the lienholder stops returning calls or simply ignores the park altogether, the time for cooperation has ended.
Under Arizona MVD regulations parks can initiate landlord lien sale proceedings to auction the home off and apply the proceeds to the rent arrearage. This can be done even when there is a lien on the title. If a lienholder won't respond to a 10 day abandonment notice within a reasonable time, the landlord can send a termination notice to the owner of the home (normally the tenant), wait 60 days, and then publish a notice of landlord lien sale. At least 10 days before the sale, a notice of the pending sale must be sent to a lienholder advising that the home will be auctioned off and the lien knocked off the title unless rent arrearages are brought current.
If the home has value to the lienholder, that normally will result in a payment being sent. Otherwise the sale can proceed and the lienholder will lose its interest in the home.
This is an over-simplification of the landlord lien sale process. Many other things must be done to complete the sale and get title to the home. You can read the Abandonment page on this site for more information. The MHCA Purple Book describes the process in great detail.
The point of this posting is that a park is not at the mercy of a non-paying lienholder. While cooperation is always preferred, if the lienholder is not responsive, the landlord has the necessary tools to protect its interest and should use them.
Abandonments. There is no slowing in the number of abandonments we are seeing. Cases keep getting referred and whenever I talk to managers, it seems like there are suspected abandonments in their parks that for one reason or another they haven't gotten around to doing anything about.
Unless a diligent lienholder takes responsibility, an abandoned mobile home is going to deteriorate and rent on the space will accrue until the manager takes action. No one is going to come in and magically make the problem go away. The process for dealing with abandoned homes is a pain, but the alternative is worse and ends up with the same process being necessary. If you have a home that looks empty, rent is in arrears, utility service is off, and the space and home needs maintenance, initiate action to get the home disposed of. See the abandonments page on this site by clicking on the left for an idea of what all is involved.
Be especially aware that many homes are abandoned following eviction of the resident.
September 7, 2012
Law Firm Website. We will be debuting a new website for the firm probably next week. Keep an eye out for it.
Leases With Options to Avoid SAFEAct Problems. Uncertainty continues to surround the SAFEAct. We know the state and federal laws are inconsistent since the state law has a five or fewer exception from compliance that does not appear in the federal law. We know the feds in adopting regulations earlier this Summer to implement the SAFEAct, publicly stated that there was no "de minimus" exemption under thelaw and that virtually all financingwas subject to the SAFEAct. We know there are huge penalties built into the SAFEAct for violation. We do not know how it is going to be enforced and enforcement does not seem to be a problem at the present time. But that could change in an instant.
Leasing homes with an option for renters to buy them is usually going to constitute a "disguised credit transaction" and under the SAFEAct will be treated as a sale. They will usually be treated as sales also under Arizonadealer licensing laws and title and registration laws.
Leasing homes with an option to buy for cash at the renter's option is a possible way to avoid the SAFEAct since there is no financing involved on the part of the seller of the home. But that triggers the federal Consumer Leasing Act and something known as Regulation M. The Consumer Leasing Act (15 USC1667) was passed in 1976 to assure that full disclosure of lease terms is provided to consumers before entering into a lease. It applies to consumer leases of personal property which can include manufactured homes. In theory, with this information, consumers can compare different leases as well as the cost of leasing with the cost of buying on credit or the "opportunity cost" of paying cash. In addition, the Consumer Leasing Act puts limits on balloon payments sometimes due at the end of a lease, and regulates advertising.
Regulation M does not apply to leases of real estate where the dwelling is incidental but says in that respect::
(3) This part does not apply to a lease transaction of personal property which is incident to the lease of real property and which provides that:
(i) The lessee has no liability for the value of the personal property at the end of the lease term except for abnormal wear and tear; and
(ii) The lessee has no option to purchase the leased property.
So if there is a purchase option--even for cash--while the SAFEAct does not apply, Regulation M does and requires all kinds of disclosures.
And if the seller intends to finance the balance when the option is exercised, the SAFEAct also applies.
In sum, I strongly recommend against engaging in these transactions.
Renting Homes. A straight rental of a home will avoid the SAFEAct and if no purchase option is involved, will avoid Regulation M as well.
Many parks are resorting to home rentals. Avoiding oppressive government regulation is only one reason for this. Parks often have a large inventory of homes that they bought for resale a few years back before the market cratered. Many have picked up homes along the way due to tenant abandonments or title surrenders. Some have repossessed homes financed in years past.
Home rentals are covered by laws different that the MHPLTA. The Residential LTA applies to them. Special considerations include security deposits which should be the maximum allowed (one and a half months' rent unless more is put up "voluntarily"), the mandatory move in/move out inspection, disclosures about the LTA, etc. A park owned home rental agreement is going to be more elaborate than a space rental agreement. MHCA publishes the Green Book that explains the law and contains fors designed for park owned home rentals. It can be obtained from MHCA at (480) 345-4202 or (800) 351-3350
September 1, 2012
Rent Increase Notices. Many MHC's are on annual renewal and rent adjustment schedules. Since rent increase notices must be given not less than 90 days before the effective date, and since the effective date in those parks will be January 1, 2013, the 90 day notices must go out in September.
It is not uncommon to see errors in the notices meaning corrections must then go out. The correction, if there is one should also go out at least 90 days before the effective date.
In addition it is sometimes difficult to get the notice delivered to the tenant meaning it needs to be mailed. An extra five days gets added to the notice period when mailed.
So the earlier in September the 90 day notice goes out, the better. A late notice can have devastating effects. At the least a month of the increase can be lost and, if the leases are set to renew year ro year, a late notice could result in the increase not being effective for the entire year.
New JP Court Rules for Civil Cases. A few years ago new rules of procedure went into effect for evictions. These were clear, easy to understand, and formalized a lot of inconsistent practices in the courts. Their main attribute was simplicity and ease of understanding. They only apply to evictions.
Justice Court Judges and administrators seeing how those rules improved the eviction process started working on simplified and streamlined rules for all other kinds of civil cases in JP Court. Until now they have been governed by the same rules of procedure that apply in Superior Court. Those are impossibly complicated and serve largely as a device for lawyers to run up their bills on procedural shenanigans and paperwork before settling cases on the eve of trial. They are really inappropriate for JP Courts where a lot of people represent themselves and where the issues tend to be fairly simple and the amounts involved are small.
Now a new set of Justice Court Rules of Civil Procedure have been released by the Supreme Court effective January 1, 2013. Although 64 pages long including forms and appendices, they are much simpler than the rules that currently apply. You can read them at http://www.azcourts.gov/Portals/20/2012Rules/R120006.pdf
A new summons form with a "Bill of Rights" attachment like we use in evictions, and a form of subpoena with explanations are included with the ruiles.
August 27, 2012
Music Usage Royalties. I wrote last year about three associations contacting organizations including RV Parks and MHC's about using copyrighted music without paying royalties. These letters are still being received so I will review this again.
A copyright protects property rights of a person in music. Music rights are personal property of the composer and performer, and when someone wants to use it, permission must be obtained. Most public performances of music need to be licensed.
This is a requirement of U.S. Copyright Law. There are three recognized music licensing companies: BMI, ASCAP, and SESAC which exist to ensure that composers and performers are compensated when their music is publicly used. Each organization represents the rights of some copyright owners and collects licensing fees from organizations using their music. Almost all public use of copyrighted music requires a license.
These three organizations occasionally file suit against entities using music without being licensed for copyright infringement.
SESAC is the smallest of the three organizations, but may also be the most aggressive. Around ten years ago it sent a series of communications to dance studios across the country. It was reported that the SESAC computer simply produced a series of letters that apparently could not be turned off. I suspect RV and MH parks are receiving a similar series of letters.
If your community is 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. But public use can even include such things as using music on hold for telephone calls. Also, if music is being publicly used, it is likely that similar agreements would need to be signed with the other two organizations in addition to SESAC.
August 24, 2012
Bedbug Infested People. Recently I have gotten calls from park managers about residents personally infested with bedbugs coming into the office and the clubhouse to use facilities. A few weeks ago a tenant facing eviction brought an envelope full of bedbugs into the courthouse and threw them on one of my colleagues when she came out to talk to him about his case (this is a criminal assault and the court security system is taking steps to ensure this does not happen again). The linked article talks about a bedbug infested witness called to testify at a courthouse who forced the facility to close. http://detroit.cbslocal.com/2012/08/23/bug-infested-witness-shuts-down-detroit-court-room/
Its fair to say that this is becoming a problem.
When a park finds that members of a tenant's household are infested with bedbugs it should send them home and serve a 10/20 notice on the tenant requiring him or her to have the home treated for bedbugs immediately or face eviction. If the problem persists and the tenant's household members (including children) keep coming around spreading bedbugs, the tenant should be referred for eviction.
Tenants in MHC's are responsible for pest control in their homes. When they fail to do this and instead spread the bugs to other locations, the entire community runs the risk of infestation since it is so easy for other residents to pick them up when using community facilities after an infested person has used them. This is a health and safety problem justifying the use of a 10/20 notice and if necessary, eviction.
August 23, 2012
Facebook. http://www.facebook.com/WilliamsZinmanParham This is our new Facebook page. Take a look and give us some feedback.
"Medical Marijuana". Think what you want about this subject. Here is a slide show about the varieties of "medical marijuana". The thing that stands out to me is the astronomical cost of the stuff. Clearly there is an economic and profit motive behind much of the push for medical marijuana laws. http://www.cnbc.com/id/28561896?slide=1
Dodd Frank Law. The federal Truth in Lending Act (TILA) requires among other things, disclosures as to the true cost of borrowing to a consumer. The TILA disclosures in a manufactured home installment sale agreement form are in the boxes that are typically filled in near the top including the APR. TILA is governed by Regulation Z of the Federal Reserve Board.
The Dodd Frank Law was enacted this year and imposes additional requirements on "higher risk mortgage loans". The newly created Consumer Finance Protection Bureau has the authority by regulation to modify requirements in Dodd Frank. One modification under consideration is to exclude mortgage loans on manufactured homes located in rental communities from the definition of higher risk mortgage loans. Since including them in the definition could, on a long term basis contribute to a huge drop in the number of homes financed in rental parks, amending Regulation Z would be helpful.
No one knows if these changes will be made. But the existence of Dodd Frank and the prospect of onerous new restrictions on lending in rental parks coupled with other repressive regulation including the SAFEAct is already hurting the industry by, among other things, forcing a shift to rental rather than sale of park owned homes. Any relaxation of federal controls will be welcome to an industry already in distress due to over-regulation.
August 19, 2012
Summer Doldrums. This has been a really dead week. Very little is happening as the summer winds down and people get in the last of their vacation time. Perhaps its a good time to review a few basics.
Delinquent Rents. Don't let tenants get too far behind on rent before serving 7 day notices and initiating evictions. More time without paying only lets tenants get into such a deep financial hole that they can't get out and makes their ultimate eviction inevitable. Prompt action will get their attention now and allow them to get the problem worked out before it becomes hopeless.
Rule Violations. Again, prompt action when serious rule violations are discovered avoids worse problems down the road. Delaying action encourages other tenants to start disregarding rules and yet others to complain about the offenders. Also, enforce the rules fairly across the board without fear or favoritism. It is very common for tenants to complain that they are being picked on or discriminated against since others with similar violations are getting away with it. The law says rules are enforceable only if fairly enforced against everyone.
Fair Housing. Be sure the fair housing poster is displayed in the rental office and that you understand the basics of discrimination. Be sure to go to a periodic fair housing training cloass. When a complaint is investigated the investigator will always ask about the manager's fair housing training class record.
Serving Termination Notices. ALWAYS serve personally by hand delivery to an adult resident or by certified mail. Nothing else will do.
Late Fees. Maximum is $5 per day from the first day after the due date unless rent is paid by the 6th in which case there is no late charge.
Rent Increases. A 90 day notice is required. For parks with anniversary dates of January 1, rent increase notices must go out NO LATER than September 25 (adding 5 days for those going by mail). If you are late with the rent increase notice, you run the risk of not being able to enforce the increase and having the tenancy renew at the old rent.
SAFEAct Enforcement. The Consumer Finance Protection Bureau (CFPB) has announced rules under which it will investigates claims of SAFEAct and other CPFB enforced laws. The process is similar to how the Arizona Attorney General investigates Fair Housing complaints. While targets have the right to legal counsel the role an attorney can play is sharply limited. We will be seeing more on this in the upcoming months.
August 12, 2012
Addictive Self Righteous Indignation. This is a bit off topic, but then its my Blog and I decide what to write about, don't I?
How many times have you said something during a discussion (or seen someone else do so) that triggered a response that the listener was "offended" or found what you were saying or how you said it "offensive"? That's a fast way for someone losing an argument to shut it down--just by claiming to be "offended" at what is being said.
There are people who make a career out of being offended. We have lots of them living in age 55+ parks.
A theory is beginning to be discussed that this Self Righteous Indignation is actually a psychological disorder; that the experience of expressing Self Righteous Indignation actually gives the "offended" person a rush, a high, sort of like a drug or alchohol induced high. Such rushes or highs can be induced by things other than substance abuse like gambling or fast driving. One observer has written:
Well, it turns out that there’s substantial evidence that self-righteous indignation is one of these drug highs, and any honest person knows this. We’ve all been in indignant snits, self-righteous furies. You go into the bathroom during one of these snits, and you look in the mirror and you have to admit, this feels great! “I am so much smarter and better than my enemies! And they are so wrong, and I am so right!”
This theory seems to have originated with a scientist and science fiction writer named David Brin who writes extensively on it at http://www.davidbrin.com/addiction.html
So the next time someone expresses indignation at some perfectly legitimate thing you have said, don't worry that you have done something wrong. Just express sympathy over his or her addiction and suggest counseling or therapy for his Addictive Self Righteous Indignation Disorder.
August 11, 2012
Flood Control Plans that Affect MHC's. State law (ARS §48-3602) requires each county to establish a county flood control district to govern flood control within the county. This is in addition to local flood control districts. The Maricopa County Flood Control District states its policy (which is similar to all of them) as follows: "...the Flood Control District of Maricopa County provides flood hazard identification, prevention, regulation and remediation to reduce the risk of injury, loss of life and property damage from flooding in the County."
One of the things these agencies do is to study the lay of the land to determine if current flood plain boundaries and delineations are accurate. Sometimes it determines that they are not and redraws the maps. Having a map redrawn to include land not previously in a flood plain affects the ability to use the land.
Planned new structures to be built on land incorporated into a redrawn flood plain either might not be able to be built or will need to be specially engineered to meet additional construction requirements. Newly placed manufactured homes will need to satisfy special restrictions that may be impossible to satisfy making vacant lots impossible to use.
The expansion of defined flood plains in MHC's could have serious effects on the value and functionality of MHC's. An example of the regulations governing manufactured homes in flood plains appears at page 43 of the Maricopa County Floodplain Regulations: http://the Flood Control District of Maricopa County provides flood hazard identification, prevention, regulation and remediation to reduce the risk of injury, loss of life and property damage from flooding in the County.
MHC's need to follow up and keep up to date on any proposed flood plain changes in their areas.
Judicial MHC Law Training. I have been complaining about the lack of training in mobile home park law for Justices of the Peace for years. I get complaints from Judges, especially outside of the Phoenixand Tucsonareas that despite having a lot of MHCcases, they get no training. Recently when a tiny module dealing with MHC;s was deleted from a judicial landlord tenant training program I went slightly crazy and threatened to seek legislation mandating it. That finally got the attention of the powers that be.
I am involved in creating a one day MHClandlord tenant law training program for Justices of the Peace that will take place on October 15. Others will also be involved including lawyers from Legal Aid as well as one Justice of the Peace who is extremely knowledgeable in MHC law. I am hopeful we can get non urban countyJustices of the Peaceto attend.
Anti Money Laundering (AML) Program. I have written about this previously. August 13 is the federally imposed deadline for "non-depository lenders", including those selling and financing Manufactured Homes to come into compliance with federal AMLrequirements. Entities engaged in the sale of Manufactured Homes that engage even once in a credit transaction are now classified for these purposes as lenders.
A part of the U.S. Treasury Department, the Financial Crimes Enforcement Network (FinCEN) is requiring nonbank mortgage lenders and originators to implement an AMLProgram and file SuspiciousActivity Reports for certain loan transactions.
The new MHCA Park Home Sales Manual has a program template, reporting forms and more information in it. Contact MHCA at (480) 345-4202 or (800) 351-3350 for more information.
August 10, 2012
New Articles. I just posted four new articles on the Articles-2012 Page.
August 9, 2012
Arizona Supreme Court Affirms Election Law Decision In Our Cilent's Favor. Our firm handles a lot of election law cases. Scott Williams has practiced extensively in this field for a couple of decades and with the increasing volume of cases, all of the firm's lawyers (even me) have tried election cases this summer.
In a major case, an incumbent Superior Court Judge in Flagstaff was stricken from the Democrat Primary ballot due to errors in the petitions he submitted to run to continue in the job. The Superior Court in Yavapai County had to hear the case since Superior Court Judges in Flagstaff (Coconino County) were conflicted out. Following a trial the Superior Court decided in our client's favor and struck the Judge from the ballot (our client was the person challenging the petitions). Scott Williams and Mark Zinman tried the case.
About this time my daughter Melissa joined our firm as an attorney. With three and a half years experience in filing and arguing appeals for the Attorney General's Office, she was assigned to help on this case when the Judge appealed the decision to the Arizona Supreme Court.
The Supreme Court affirmed the decision in a published opinion released yesterday. The Opinion can be seen here: http://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2012/CV120221APEL.doc.pdf
I am very proud of all of my colleagues for handling this difficult case so well in such a short time frame. These cases are difficult because they move so fast.
We handled a total of nine election challenges this summer and prevailed on all of them.
August 4, 2012
Restricting Children in All Age Communities. Familial Discrimination provisions of Fair Housing laws prohibit Unreasonable restrictions on use of common area facilities by children. Early HUD comments to its implementing regulations, however, recognized that landlords may impose “reasonable rules and regulations relating to the use of facilities…for the health and safety of persons”. The most common example of this is a rule saying that children under age 14 must be accompanied by a responsible adult when using the swimming pool.
There are still family parks that try to restrict children from using community facilities because of the damage a child might do to the facility itself. This is not a legal justification for restricting children since the concern is the protection of the facility, not the safety of the child. The most common example is the pool (billiards) room where management is concerned over kids tearing up the pool table or damaging/stealing the equipment.
While these are legitimate concerns the answer is good management, not blanket restrictions on children using the facility. Consider making everyone check out the rack/cues/balls at the management office, signing out for tham and signing them back in. Maybe holding the user's driver's license (or that of his parent if a young child) while the equipment is in use will ensure it is returned and the facility is left in good shape.
Other examples of prohibited practices are rules preventing children from being outside without adults present (though local curfew ordinances ordinarily can be enforced), prohibiting children from being in the parking lot or in the clubhouse without an adult present, and the like. If you have rules in a family park singling children out for different treatment, unless you can prove a unique safety hazard posed to the child, either expand the rule to cover everyone or eliminate it. This even excends to exercise equipment in the park gym. If you are concerned over kids using the equipment check the manufacturer's literature and see if there are notices that children under a certain age should not use the equipment. If so, you should be able to enforce that restriction for that piece of equipment.
The fact that a piece of equipment is in a room with other equipment does not justify excluding children from the entire room even though they may be able to be restricted from using that piece of equipment.
And if you have posted signs excluding children from these areas, take them down unless the entire area qualifies for the restriction on children discussed above.
These comments apply only to family parks. Age 55 parks can ordinarily restrict children without being concerned over these requirements.
Homes Sold and Removed From Parks. When the economy goes sour, ruthless business practices ensue. In our industry one of these is parks and street dealers coming into other parks, buying homes and pulling them out. A recent variation of this is one ruthless dealer buying homes and then flipping them to the park for a profit with the threat of a move out if the park does not pay the higher price. A variation is this same dealer buying a home from a tenant in a park with a first refusal right in the rental agreement and including in the purchase contract. a $500 commission in the event the park exercises the right
Tenants Have the Right to Sell and Buyers Have the Right to Remove Homes. Parks need to understand that homes belong to tenants, not parks. One of the good things about the MHC business is that the landlord does not need to worry about maintenance of the home since it belongs to the tenant. But the downside is that since it belongs to the tenant he generally has the right to pick it up and move it out. The MHP LTA has some restrictions on this, but they boil down to requiring the tenant or his successor to pay everything owed to the park through the date of removal (but not future rent on an unexpired lease) in order to be entitled to a Clearance for Removal enabling him to pull the home out. As a general rule the park has no more right to stop a tenant or purchaser from pulling his home out than a parking lot owner has to keep someone from driving his car out of the lot after paying the parking fee.
Even Sharks, Bottom Feeders and Scumbags Are Protected by the Law. Most of us know who the scoundrels in the business are. There are plenty of them and they take advantage of the law's provisions to score a quick profit. As irritating as it is, the law applies to everyone and no matter how loathsome the person pulling the home out is, and no matter how much it hurts you to see it leave, or how much it angers you to have money extorted by a scumbag to enable you to keep the home there, you as a park operator are also bound by the legal requirements.
The Use of First Refusal Rights. These are provisions in rental agreements that require tenants to give the landlord an opportunity to match a ourchase offer if a buyer is buying the home for the purpose of pulling it out, and to buy the home for that price if the landlord chooses to do so. In my view these are valid and enforceable provided the provision is included in a rental agreement that the tenant has signed.
♦ The provision is enforceable against the tenant, not the buyer. If the home is sold and the first refusal right is ignored, when the home is pulled or the park is forced to pay extra to the buyer to keep it there, the tenant who signed the lease can be sued for damages for breaching the right of first refusal.
♦ If a dealer knows about the right of first refusal and convinces the tenant to ignore it, assuming this can be proven, then the dealer can be sued for those same damages for wrongfully interfering in contract relations. To prevail here, it is important to prove that the dealer or buyer knew about the right. Posting prominent signs in the park advising all potential buyers about the existence of these rights and advising them to check with management before closing any purchase of a home in the park is helpful. Contacting predator dealers and buyers and telling them straight out about the existence of the first refusal right also is helpful.
♦ Stopping a sale by going to Superior Court, suing to stop the sale from closing, and seeking a temporary restraining order against the buyer, seller and dealer is a possibility if it can be proven that the dealer/buyer knows about the right. But the court costs and legal expense of this ($1,000 minimum, maybe much more) is usually not justified given the value most of these homes have.
♦ Perhaps the best answer here is to frequently communicate with tenants at meetings and with newsletters about the right of first refusal, the need to give the park a chance to match the offer, and the fact that this costs the tenant nothing since he will get the same money no matter who buys it.
♦ Parks need to be aware that dealers, even bottom feeding dealers, earn commissions. If a home is sold by a dealer who thereby earns a commission, and the park then steps in and exercises its first refusal right, the dealer is still entitled to the commission. If the contract adds a reasonable commission on a dealer purchase if the park steps in front and buys the home, the park is likely also obligated to reimburse the seller that commission since he will need to pay it to the dealer.
August 1, 2012
THE GREATEST COMMERICAL EVER. And it is for mobile homes.; You gotta love this guy. http://biggeekdad.com/2009/10/mobile-home-commercial/#.UBmGjzRM6pE.email
July 29, 2012
Anti Money Laundering (AML) Program. For parks that sell and/or finance mobile homes, federal regulations require adoption of an AML Compliance Management System be adopted by August 13, 2012. You can read a little about it on the MHCA website at http://azmhca.com/news-articles/anti-money-laundering-program and also at the MHI website at http://www.manufacturedhousing.org/lib/showtemp_detail.asp?id=1047&cat=whats_hot
The deadline for implementation is August 13, 2012 and there can be serious sanctions for failure to do so.
A major part of this is the adoption of a written compliance plan called an "Anti-Money Laundering Program and Suspicious Activity Reporting Policy ". MHI has published a sample template but the one on their website is corrupted, at least on my computer. Here is a link to an uncorrupted version. http://volumebuyers.files.wordpress.com/2012/07/mhi_aml_sar_policy_template_2012-7-5.pdf
The new MHCA Park Home Sales Manual has a similar but more comprehensive template tailored to MHC's with explanation of how the AML requirements work. The plan template was provided to MHI before it came out with its own, and is strikingly similar to their's. The Park Home Sales Manual can be purchased from MHCA. Call them at (480) 345-4202 or (800) 351-3350 to order one.
July 28, 2012
Effect of Dodd Frank Law. This law which is gradually being implemented by the federal government is going to have a major impact on the MHC industry. This is in addition to the SAFE Act burdens and Anti Money Laundering burdens the industry is dealing with now. Here is an article discussing Dodd Frank and this industry. http://www.mhmarketingsalesmanagement.com/blogs/industryvoices/putting-the-qualified-mortgage-dilemma-in-perspective/?goback=.gde_131555_member_139402794
Termination Notices Issued in Error or Complied With. Mistakes can be made by parks in issuing 14/30 or 10/20 notices. Or sometimes after they are issued the tenant corrects the problem.
In either case, an often overlooked provision in the MHP LTA requires the park to issue a new notice terminating the 14/30 or 10/20 notice that has been either issued in error or complied with. Doing this can be important.
Recently a park selling a home to a tenant on contract and renting a space thought he was violating the park rules and issued him a 14/30 notice to comply. The tenant objected in writing to the park making it clear that the notice was wrong. For whatever reason the park did not respond so after a while the tenant viewing the notice as effectively terminating his rental agreement, moved out. Now the tenant is demanding return of the purchase price paid on the home and his expenses in improving it after purchase.
The park is in a weakened position since after learning of the mistake it did nothing, failed to terminate the 14./30 as the law requires, and just left it hanging out there.
Pay attention to this requirement. 14/30 and 10/20 notice termination forms are in the MHCA Blue Book.
July 21, 2012
Western States MHC Associations Summit. The executive directors and some selected board members of the MHC associations in the western states had a two day meeting last week which I attended. The purpose was to get some idea of problems we have in common and different ways the associations have come up with to deal with them. I felt pretty good about how our Arizona association (MHCA) is dealing with them. We seem to be somewhat of a leader.
SAFE Act. One of the biggest concerns is compliance with the SAFE Act. Some of the western states have state laws similar to Arizona's exempting parks originating loans on five or fewer MH sales per year from state MLO licensing requirements, though some do not. It looks like about half the states in the U.S. have such laws. Even here, the federal law still seems to require an MLO license for a park originating even one loan in a year. No one knows how these will eventually be reconciled and the upcoming presidential election may have a lot to do with the future of the requirements.
In Colorado, it was reported, "testers" or "secret shoppers" are going out to see if they can document violations of these laws there, though there are no reports yet of park dealerships being visited.
Fines up to $25,000 per violation can be assessed if someone required to have an MLO license is found to be doing business without the license.
Associations are exploring making arrangements with MLO licensed loan origination firms to handle loan placement responsibilities for parks. A presentation was made by a representative of San Antonio Credit Union (SACU) which is active in the MH financing business, about a program it has to do the loan placement work and also service the loans on behalf of parks.
Hopefully I will have more to report in this area in the near future.
Money Laundering. The new federal anti money laundering requirements go into effect August 13, 2012. The federal government has begun imposing onerous regulations governing many aspects of small business involving areas where the government is concerned. One area involves money laundering and the financing of terrorism. The Financial Crimes Enforcement Network (FinCEN), part of the U.S. Treasury Department has promulgated regulations mandating anti-money laundering (AML) and requiring covered businesses to file suspicious activity reports (SAR's) when a financial transaction initiated with the covered business is suspected to involve funds derived from illegal activity. A sample Anti Money Laundering Program is available from MHCA and also appears in the new MHCA Park Home Sales Manual.
The other state associations are aware of this and also that MHI has published a program template dimilar to that of MHCA. The concern, however is that word has not filtered down to park operators that this new requirement is going into effect.
Medical Marijuana. This was a topic of great interest with the focus being on the conflict between state laws in effect legalizing marijuana for card holders and federal laws continuing to treat it as a felony. Ith interplay between medical marijuana laws and crime free housing programs was also discusses as was the HUD position that it need not be permitted as a reasonable accommodation for handicapped persons under fair housing laws. Most of the western states have such laws on the books.
July 14, 2012
New Red Book. This is an MHCA publication covering fair housing laws and how they work in MHC's. Since this area of the law is constantly changing, the book needs to be updated every once in a while. I just finished updating it this past week and sent it to MHCA for printing. It should be available for purchase in a few weeks.
I think it is important that parks have this on hand to answer many of the more common fair housing questions that come up from time to time. For purchase information contact MHCA at (480) 345-4202 or (800) 351-3350.
Inexperienced Fair Housing Investigators and Attorneys. The Attorney General's Office constantly needs to replace personnel in its Civil Rights Division due to attrition owing to lousy working conditions and low pay. Separate from this, hungry lawyers with no particular background or experience in fair housing law are getting into that business seeing that there is money to be made. At least one such lawyer has been telling clients of mine that I am retiring and am too expensive, both of which she knows to be false.
Anyway, both inexperienced investigators and inexperienced lawyers will encourage clients to enter "conciliation agreements" which are merely settlement agreements that avoid the need to go through an investigation or face the remote possibility of litigation. They are putting all respondents/clients they are involved with into these things even if the person did nothing wrong. The theory is that a conciliation agreement is a private settlement and has no consequences. And it is an easy way for a lawyer to rathole time into a case and run a bill up "negotiating" the agreement.
The problem is that these agreements CAN be used against the party in future cases. Evidence of conciliation of past complaints can be used to help document a "pattern and practice" case that is a very serious matter and for which potential damages can be ruinous
Here is a standard interrogatory posed in fair housing investigations to the respondent by the Attorney General's Office:.
For the period of July 1, 2010 through June 30, 2012, has Respondent received
similar complaints of discriminatory treatment from any other rental
applicant(s) :___ Plase describe each circumstance in detail, and the resolution
of the complaint(s) if any. For each individual who made a complaint, please
provide the following:
So contrary to what a person may be told when being hustled to enter into a conciliation agreement, they must be disclosed in future investigations and can be used against the party.
I strongly believe that innocent housing providers accused of discrimination should insist the case be investigated and dismissed. The only time to conciliate is where some mistake may have been made.
Disparate Impact as a Test of Housing Discrimination. Is treatment of people that is not intended to discriminate but that has the effect of treating protected classes less favorably than others unlawful discrimination? 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 some racial minorities and people with certain emotional and mental disabilities. There is no intent to discriminate but statistically the action has a greated effect on protected minorities.
The U.S. Supreme Court has taken a number of "disparate impact” cases under the Fair Housing Act in recent years, but has never decided whether disparate impact claims are valid or what standard should be applied to such claims. In two recent cases, when the briefs filed with the Court indicated how weak the “disparate impact” argument was, the government abandoned those arguments to avoid losing on the issue.
To date the Supreme Court has not decided whether “disparate impact” claims are proper under fair housing laws. Thus, the issue has remained unresolved and ripe for review for over two decades. The federal appeals courts however have adopted the "disparate impact" test and the enforcement authorities all apply it in their investigations.
The most recent case presenting this issue was before the Supreme Court earlier this year and once again the government abandoned it before the issue could be decided. After the withdrawal of Magner v. Gallagher 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.
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.
July 11, 2012
Lorman Seminar. The Lorman Landlord Tenant Seminar that had been scheduled for October has been postponed. It is being offered for Real Estate and Lawyer CLE credit. But the Department of Real Estate apparently advised Lorman that it needed to do a criminal background check on the sponsors of the seminar (i.e., the Lorman people) and that would take a while.
Lorman has been in this business nationally for several decades but there is no stopping a bureaucrat with a regulation to enforce regardless of the stupidity of applying it in a given case. I will post a rescheduled date when it is set, probably in January.
Crazy Summer. We are getting some really bizarre cases in this month for eviction. Threats of violence abound everywhere, most noticibly in age 55+ parks. Be careful dealing with people making threats and waving guns around, and take a zero tolerance policy towards violence. If someone is violent or credibly threatens violence against a neighbor or landlord employee, terminate him and refer the case for eviction
July 5, 2012
Surrender of Possession. Here is a notice from a tenant that one of our firm's client's residential managers received this morning. She found it together with the keys to the apartment taped to a gigantic boulder that had been rolled in front of her front door blocking it until she got a lot of guys to come over and move it.
Then treating it as a surrender of possession she proceeded to enter the unit and found it packed with stuff brought in as the result of the tenant's occupation as a "Dumpster Diver". Now she needs to figure out what to do with that stuff.
So when you think you have problems think of this guy leading the life of leisure with Zeus and the rest of the family on Mount Olympus.
July 4, 2012
Eviction Fireworks. Last week we filed an eviction of a resident from an age 55+ park that generates only about one case a year if that. It is very stable and its residents are quiet and responsible. This eviction invloved someone who moved in with a tenant and then refused to leave.
An eviction judgment was obtained and five days later after the appeal period had run the writ was issued. A constable came out and posted the home, and the cuffs were placed over the doorknobs. That's when things started to go bad.
According to what I was told the resident returned and forced her way back into the home. When this happens the law says it constitutes a criminal trespass. Accordingly the park called the Peoria Police. Again from what I am told, when they arrived the occupant said she had guns in the home and would not come out.
Despite the fact that this is a crime under ARS 12-1178, the police did nothing and finally left after telling Channel 15 News there was no crime. Here is the statute in ARS 12-1178:
D. A defendant who is lawfully served with a writ of restitution and who remains in or returns to the dwelling unit, as defined in section 33-1310, or remains on or returns to the mobile home space, as defined in section 33-1409, or the recreational vehicle space, as defined in section 33-2102, without the express permission of the owner of the property or the person with lawful control of the property commits criminal trespass in the third degree pursuant to section 13-1502.
The Peoria Police Department has a well deserved reputation of avoiding these issues. According to them, virtually everything is "a civil matter". It is this attitude that resulted in the above statute being enacted a few years ago. But according to the television report, the police left because there was no crime involved. This despite the clear threat of gunplay that was made by the resident.
The irresponsible conduct of Channel 15 is in keeping with its reputation of stupidity and affinity for "if it bleeds, it leads" journalism.
The combination of Channel 15's stupidity and the Police Department's indifference to a crime committed in its presence coupled with the threat of additional violence if a lawful Court Judgment was enforced, created a dangerous situation that continues to the present day.
I was just going to forget about this matter since it is not unique but then I read an article about a similar situation in Germany today that resulted in the deaths of several people. Read that story at: http://www.dailymail.co.uk/news/article-2168598/Five-dead-German-gunman-took-hostages-bailiffs-arrived-evict-flat.html
Then listen to the report and watch the video of what happened in Peoria last week: http://www.abc15.com/dpp/news/region_west_valley/peoria/peoria-resident-calls-abc15-while-officers-wait-outside-of-her-home
I'm sure glad I don't live in Peoria.
June 28, 2012
Horses as Assistive Animals. Here is a link to a story about horses qualifying as "service animals" under the ADA. http://cnsnews.com/news/article/new-disability-regs-limit-slope-mini-golf-holes-require-businesses-admit-mini-horses
The ADA does not apply to residential communities like MHC's but ADA rules can give us an idea of what may be necessary under handicap discrimination provisions of fair housing laws which do apply.
To summarize, the Justice Department issued "ADA guidelines for public accommodations" recently. Among the provisions in the "Revised ADA Standards for Accessible Design," which went into effect on March 15, is one requiring businesses to allow miniature horses on their premises as guide animals for the disabled.
A section of the guidelines regulating commercial facilities states that “a public accommodation shall make reasonable modifications in policies, practices, or procedures to permit the use of a miniature horse by an individual with a disability if the miniature horse has been individually trained to do work or perform tasks for the benefit of the individual with a disability.”
“Miniature horses were suggested by some commenters as viable alternatives to dogs for individuals with allergies, or for those whose religious beliefs preclude the use of dogs,” the rules state. Also mentioned as a reason to include the animals is the longer life span of miniature horses – providing approximately 25 years of service as opposed to seven years for dogs.
“Some individuals with disabilities have traveled by train and have flown commercially with their miniature horses,” the Justice Department notes. “Similar to dogs, miniature horses can be trained through behavioral reinforcement to be ‘housebroken,’” it adds. However, “Ponies and full-size horses are not covered.”
Mortgage Loan Originator Available for Parks. Here is a link to an outfit that will act as an MLO to assist parks in financing homes to allow SAFE Act compliance. I do not endorse businesses on this site but certainly would not post links to ones I did not think were reputable. I am familiar with some of the principals in this business and they do know MHC's. I have no idea what their charges are and would welcome feedback from anyone using them. http://www.bhcapitalgroup.com/installment-contracts-safe-act
June 21, 2012
Elections Cases. Our firm handles elections cases. They usually involve challenges to candidates who for one reason or another appear to have submitted petitions for nomination to office and for inclusion on a primary election ballot that are invalid. The cases come in two year cycles--even numbered years--since that is when elections are held.
This year due to the large volume of cases that came in and because of the very short time frames that apply to them, I represented clients in a couple of them. In one the plaintiffs challenging the nominating petitions, and in the other the candidate whose petitions were being challenged. I had good outcomes in both. My partners Scott Williams and Mark Zinman handled many more of these cases than I did and so far we have prevailed in every one of them.
I have enjoyed this work and am proud of how well my partners excell in this practice. These cases go right to trial with no massive paperwork beforehand like most civil cases do. The three of us like trying cases; that sets us apart from many self-styled "litigators" who engage in the massive paperwork that precedes a trial but then settle the case because they don't want to go into a courtroom.
Newsletter. A new one is out. Here is the link: http://wzplegal.com/system/files/Newsleter%20summer%202012%20%20revised.pdf
New Lawyer in Firm. As you will see in reading this newsletter, my daughter will be joining the firm as a new attorney. She has five years experience as a lawyer including nearly three and a half as an Assistant Attorney General and appellate prosecutor.
June 16, 2012
SAFE Act. This continues to create turmoil in the industry. Essentially the Federal Act requires anyone involved in negotiating or placing a loan to finance a residential mobile home to be licensed as a mortgage loan originator (MLO). The State version effective August 2 will create an exception for MH sellers financing five or fewer sales per year. The State law is not consistent with the Federal Act but there is as of yet no enforcement apparent on either one.
Parks stuck with inventories of unsold homes (often obtained involuntarily following tenant abandonments) are looking for ways to dispose of them without falling under the SAFE Act. There is no easy way to do this. The situation is further confused by "experts" in the industry suggesting ways around the law that in my view are loaded with risk. Here are a few ways parks have considered "getting around" the SAFE Act.
Lease and Purchase Option. Here there would be a lease of the home and an option to purchase it would be separately signed. The problems here are (1) under the lease the landlord would still be responsible for keeping the home in compliance with health and safety codes; (2) the home and landlord are at risk for the consequences of tenant damage to the home if he walks away without buying it; (3) statistically it is much more likely a renter will need to be evicted than a space tenant; (4) if the purchase price due at the exercise of the option is a nominal sum, the transaction is regarded as a sale anyway under the SAFE Act, as well as under our registration and dealer licensing laws; and (5) the transaction may be regarded as a "disguised credit transaction" bringing it under the SAFE Act and other federal consumer protection laws. In addition, many parks have mortgages that restrict leases and purchase option agreements (new Fannie Mae loan documents for Fannie Mae financing of parks restrict this).
Also see my April 28 and May 19 posts for more on leases with option agreements.
Finance Fewer Than Five. This may work under the Arizona law but leaves unanswered the problem of non compliance with the Federal SAFE Act.
Sell Cheap for Cash But require Home Stay in Park for Full Term of Multi Year Lease. The idea here is that the space rent (which might be higher than for other tenants) will eventually make up the loss at which the home was sold for. The problem here is that our MHP Landlord Tenant Act prohibits a landlord from interfering with removal of a home from a park if monthly rent is current even if a long term lease is in effect. The law also requires a landlord to mitigate damages by trying to re-rent the lot after a tenant vacates and allows rent to be charged only if efforts to re-rent are unsuccessful. Effectively the landlord cannot require pre-payment of the lease as a condition to letting the home be removed. Finally, charging higher space rent for these could be regarded as a disguised credit transaction.
Give Home Away But require Home Stay in Park for Full Term of Multi Year Lease. There are similar problems here. In addition this too could be regarded as a disguised credit transaction.
Rent the Home With No Side Deals on Purchase. This gets around the SAFE Act but means the landlord is in the business of renting dwellings. MH's are highly susceptible to tenant damage, the applicable landlord tenant law makes the landlord responsible for keeping the home in compliance with applicable codes, and the risk of evictions is much higher than with space renters. Moreover rental tenants do not have the same pride of ownership as those who own their own homes and exterior appearance and maintenance become more of a problem for the landlord. Park insurance coverage must be extended to cover rentals. Finally many parks have mortgages that prohibit or restrict park owned home rentals (new Fannie Mae loan documents for Fannie Mae financing of parks prohibit rentals).
Finance Home But Use a MLO. This is the safest thing to do. It will add to the cost. The problem is in finding an MLO to do this. See next post.
This is a difficult time for parks trying to unload inventory thanks to an ever expansive federal government. But we will work our way through it. Right now the only people I see that have easy answers are those whose answers, in my view, are wrong. I don't have any easy answers. Every option out there has risk. But I am certain within the next year the situation will settle down and we will be able to figure out how to navigate this mess.
Arizona MH Financing MLO. The MHCA is making contact with an MLO who does some work in this field to try and arrange for him to offer a program assisting park owners in placing financing on park owned home sales. It is hopeful that the result will be the availability of MLO services necessary to comply with the SAFE Act but at a reasonable fee in light of the low prices many MH's sell at. MHCA is hopeful that the result will be comparable to successful efforts to get title companies to handle MH sale excrows at reasonable rates to comply with the new Ariziona escrow laws.
Any results are a few months away but this is probably the most effective long term solution to SAFE Act compliance problems.
June 8, 2012
MVD Contractors Handling MH Abandonments.
Some MVD contractors have been discovered improperly encouraging MHC's to disregard following landlord lien sale procedures and instead simply getting bonded titles on abandoned homes by offering to get the titles issued quicker and more cheaply than a landlord lien sale. The contractor charges a lower fee. But the park is getting a title with no legal basis and could be liable for damages for wrongfully doing so.
When a home is abandoned in a MHC, the park needs to dispose of it. Otherwise it will sit there occupying a rental space and deteriorating with no rent coming in. Over the last 20 years, working with various people in the MVD we have developed a method of disposing of homes by way of landlord lien sales, occasionally utilizing a bonded title procedures.
When a home is vacated in a rental park and there is no lienholder willing to take over responsibility, unpaid rent begins to accrue. A combination of statutes along with some Arizona case 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 landlord's MHC, the landlord does have possession.
In order to enforce the landlord's rights under this lien, Arizona statutes create a number of procedures that must be followed. These procedures involve giving a series of notices to anyone with an ownership interest in the home; treating such persons as tenants; giving certain notices to lienholders of record even if they have disappeared or are simply unresponsive to notices; getting the home inspected; and allowing at least 60 days to run before the home is actually sold after giving the first set of notices. Finally, the landlord lien process culminates in the conduct of a public sale of the home.
At the sale the landlord bids in part or all of the rent then due for the space and anyone else in attendance may also bid. The home is sold to the high bidder, the sales proceeds are applied to the rent due, with the balance being remitted to the owner of record of the home if he can be found, or to the State if he cannot be.
Normally the next step if the filing of an affidavit with the MVD showing absolute compliance with the statutory procedures for enforcing the landlord lien and filing proof that each step was properly completed.
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 vehicle surety bond to cover any claims made later by the record owner that the home was improperly transferred out of his name.
But this does not change the fact that the landlord lien sale procedures 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.
Unfortunately the MVD has been issuing bonded titles transferring mobile homes to parks that are not complying with the 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.
There are some MVD third party contractors that are suggesting that parks apply for bonded titles on abandoned homes without messing around with the hassle and expense of the landlord lien sale process. They offer to do the title work fairly cheap compared with the expense of the landlord lien sale.
Of course the problem is that while it will get a certificate of title, the park has no legal right to get 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 turn around and claim against (and if necessary sue) the park for the amount it was required to pay.
Moreover a park simply 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 liability 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 and probably should 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.
June 3, 2012
Electric Cars in Parks. This could be a problem way off in the future or maybe never materialize at all. But it is beginning to happen to landlords in California.
Most parks furnish electricity to tenants and charge for it. The majority of them have separate meters and charge at the single family residential rate. Eventually a park is going to get a tenant who owns an electric or hybrid car that needs to plug into an electric outlet to get power to operate.
My understanding is that many or all of these cars can charge from a normal house current electrical outlet but it takes a long time. If a higher (240 volt) outlet is installed charging time is much less. But the cost of such an installation is high, especially in parks with older electrical distribution systems.
Parks eventually may find cars being plugged into MH electric outlets or tenants requesting permission to do so. Some may get tenant requests for them to install 240 volt lines. These situations are likely to spread as plug-in car sales rise. Here are some things to consider when they arise:
- Standard 110-Volt plugs in parks may be of widely varying qualities and might not be strong enough for the power draw of continuous plug-in car charging;
- If one tenant is allowed to charge a plug-in car, that same right will probably need to be extended to all tenants;
- Depending on the park's rate plan, additional use could kick it into a higher-cost rate bracket to the landlord, and depending on where the park is located the monthly additional consumption charge to the tenant under the local single family rate structure could get pretty high; and
- Since landlords do not provide gasoline for conventional vehicles, why should they provide power for electric cars?
When this first becomes an issue, parks should contact their electrical contractors to see what the park system can handle and whether the individual homesite's electric system can handle this additional demand. Placing too much demand on the electric outlets can create health and safety problems.
Parks that are sure their systems cannot handle these additional requirements may want to consider amending their rules and regulations to specifically prohibit charging electric or hybrid vehicles in the park.
Early Payment Penalties on New Loans to Finance MHC's. Fannie Mae is financing MHC's and multihousing properties. The current 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 the full 30 years--no balloon payment. That means the prepayment premium is due if the borrower wants to pay such a loan at any time before the 30 years 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.
May 23, 2012
Medical Marijuana Loses Again. 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.
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 dicriminated against just because they have a card, but they can be prohibited from possession and use of the stuff in the park.
If interested you can read the Court's opinion here: http://www.ca9.uscourts.gov/datastore/opinions/2012/05/21/10-55769.pdf
May 20, 2012
New Articles. I just created a new page for MHC articles published starting in 2012. I moved three articles from the old articles page to this one and posted four new ones. Click on MHC Articles--2012 on the left to see them.
May 19, 2012
MHCA Conference Results. This was pretty well attended. The MHP Park Home Sales Manual went on sale there for $50 for members and $150 for non members. An extra $20 buys a two year subscription to updates which I suspect will be fairly frequently issued. For purchase information contact MHCA at (480) 345-4202 or (800) 351-3350.
AZ Escrow Law. At the Conference the panel on MH Sales and Financing covered this new law that goes into effect July 1. This 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 MHC dealerships provided they register with the FBLS 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. 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. MHCA members can probably obtain these materials by contacting the MHCA office.
SAFE Act. This was covered at that same panel discussion. 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 MH 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.
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.
Leases with Purchase Options as Devices to Evade These Laws. Several nationally recognized people in the MHC and MH sales business have recently been promoting leasing park owned homes and including an option for the tenant to purchase the home at a pre determined price at the end of the lease term.
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 MH titling laws in Arizona. They are also included under the above discussed federal law 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 even 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 CPFB 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 MH 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 is also 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 Consumer Leasing Act) comes into play and requires the lease have disclosures similar to TILA disclosures in sales transactions.
I don't like these 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 reviewed 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.
Anti Money Laundering Regulations. Finally the panel discussed the new federal regulation requiring small MH lenders to adopt formal written Anti Money Laundering Plans and keep them on file, and to report suspicious transactions to the government. A form of template for this is included in the new MHCA MHP Park Home Sales Manual.
May 17, 2012
MHCA Conference. This takes place tomorrow at Talking Stick Resort in Scottsdale. It is a one day conference. It will focus on hot items of concern to park owners and senior management, especially on new federal and state laws including SAFE Act, Money Laundering, new AZ escrow requirements, Dodd-Frank law, utilities issues etc. If you are not up to date on this stuff you ought to go. Even if not pre registered, show up at the door and register on the spot.
This is important stuff and you need to be as up to date on it as you can be.
May 10, 2012
Medical Marijuana. A recent Superior Court decision in Maricopa County reaffirms 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 recent case incolved 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 and
distribution 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 ON
REMEDIES § 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 marijuana including "medical marijuana" remains illegal in Arizona under federal law despite the state medical marijuana law. Landlords are well advised not to allow its possession and use on their properties.
Read the court's full decision here: http://www.courtminutes.maricopa.gov/docs/Civil/012012/m5069105.pdf
May 9, 2012
Landlord Liability for Pit Bull Attacks. The Maryland Court of Appeals in the recent case Tracey v. Solesky, has ruled that pit bulls and mixed breeds with their bloodlines are “inherently dangerous because of their aggressive and vicious natures, and their capability to inflict serious or fatal injuries." Consequently the court held that victims of their attacks don’t have to prove any history of vicious behavior or knowledge of that viciousness.
As a result, in Maryland to prevail, a plaintiff must only prove that the dog was a full or partial breed pit bull and that the landlord knew, or should have known, that the dog was a full or partial breed pit bull.
Though a Maryland case, the reasoning is no different in Arizona.
This decision could expose residential landlords and management companies in Maryland to liability just for allowing pit bulls on the leased premises. Landlords should prohibit such breeds and other notoriously dangerous breeds to avoid liability for injuries they cause.
Read the full opinion here: http://mdcourts.gov/opinions/coa/2012/53a11.pdf
May 4, 2012
Website Problems. I have been having some problems with my web site host. The second half of the MHC Articles page is corrupted when you scroll down if you are using a Firefox browser. It displays fine on Explorer and on Apple's Safari browser. If you have a problem reading an article and are using Firefox, try using a different browser.
New Park Manufactured Home Sales Manual. I just sent a new manual to MHCA for publication. It covers sales of homes in MHC's by park operated dealers. A few basic forms are included in it (listing agreement; purchase agreements for used and new homes; escrow election form; and installment sale agreement for financing homes).
This was the most difficult manual I have written. The main problem is trying to cover all of the new federal laws and regulations we have been hit with the last few years. In many cases we have no idea how they are going to work (Dodd Frank bill), how to reconcile different state and federal laws (SAFE Act) or even how to comply with laws really meant for huge financial institutions (anti-terrorism/money laundering regulations). Manufactured homes sales of course are regulated by the State which licenses dealers and we are familiar with their requirements. But the avalanche of new, burdensome and expensive federal laws is going to make it awfully difficult for small park dealerships to remain in existence.
I don't know what MHCA will charge for the new manual or when it will be available but if interested you can contact them (480) 345-4202 or (800) 351-3350 and find out.
Raiders Taking Homes Out of Parks. I am aware of at least one dealer that promotes himself to parks with many empty spaces as being able to sell and set up smaller older homes on vacant spaces so the operator can fill the park. He then buys older homes in other parks and moves them to the new park. If there are rights of first refusal in tenant leases he will strive to "not know" about them while encouraging tenants to sell to him and disregard the first refusal right.
The law is such that unless it can be proven that he actually knew about the first refusal right, he can get away with this. The tenant who sells in violation of the right can be sued for breach of his lease but the dealer gets away with it.
Parks suspecting this is going on should be proactive. Think about erecting large signs at the entrances clearly stating that tenant leases contain rights of first refusal allowing the landlord to match a purchase offer and buy homes in the park. Consider putting out a flyer to all residents advising that they may be approached by a dealer looking to buy and remove their home from the park It should remind them that the park has the right to match a bona fide offer and buy the home for the same price, and that tenants risk being sued if they sell the home and ignore the right of first refusal.
Unfortuantely, if this happens and the dealer gets title to the home, the park has no right to stop it from being removed. The MHP Landlord Tenant Act prohibits parks from interfering with removal of homes if rent is current even if a lease has not expired.
April 28. 2012
SAFE Act and Leases With Options to Purchase. Most MHC operators believe that it is next to impossible to comply with the SAFE Act. This federal law requires Mortgage Loan Originators (MLO's) to be licensed. That means passing a very difficult exam on topics mostly unrelated to manufactured home financing and then becoming affiliated with a mortgage broker or banker. The federal definition of what constitutes the business of an MLO is quite broad, including virtually any communication with a prospective MH buyer about available financing. Arizona's version of the SAFE Act has a five per year exemption built in (that is inconsistent with the federal law) but otherwise casts just as broad a net.
Park operators are looking for ways to get homes occupied by tenants and space rent revenue flowing without being put to the extremely difficult task of SAFE Act compliance. Since the ACT and implementing regulations broadly define the kinds of transactions qualifying as "residential mortgage loans" subject to the Act, avoidance is difficult when home ownership is transferred without payment in full. Here is the definition from MLO Registration Regulations released by the Consumer Financial Protection Bureau (CFPB), the enforcement agency last month:
Residential mortgage loan means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined in Section 103(v) of the Truth in Lending Act, 15 U.S.C. Section 1602(v)) or residential real estate upon which is constructed or intended to be constructed a dwelling (including manufactured homes) and includes refinancings, reverse mortgages, home equity lines of credit, and other first and additional lien loans.
Read the full regulation here: http://www.huschblackwell.com/files/Event/2d9bcc5a-fccf-4fc5-9ed0-e9901bc64469/Presentation/EventAttachment/f534f648-a0cc-4198-b07d-6f0bf2509c48/CFPB%20Consumer%20Laws%20and%20Regulations.pdf
"Dwelling" includes mobile/'manufactured homes. Other regulatory pronouncements the last few years have made it clear that when something is a "disguised financial transaction" the reality of what it is will determine whether the SAFE Act and similar laws apply. Consider this quote from a knowledgible source about leases with purchase options:
First, it is important to understand what is actually being done. By converting an operation from sales finance to lease option to evade licensing and compliance issues, the intent is to create a disguised credit transaction. Disguised credit transactions are covered by federal law already, because, for different reasons, other has taken the same path in years past. There are specific provisions for determining what constitutes a disguised credit transaction, and recent efforts at lease options transactions in manufactured housing have focused on how to evade those triggers. Think about the words necessary to describe what is being done and it isn’t hard to understand what is being done is to create what the law prohibits.
See the full article here: http://rishelgroup.wordpress.com/2011/11/07/is-lease-option-a-safe-harbor-from-the-safe-act/
Nevertheless a number of experts still tout leases with purchase options as a workable device. The idea of one of these that some think will avoid coverage is a lease accompanied by an option to purchase that will not pass title for little or no additional value. In other words, no one thinks the conventional "rent to own" where the tenant makes higher than usual rent payments to rent the home with the excess being applied to the purchase price, and with the option at the end of the lease term to get title for little or no additional payment, will qualify.
This topic was the subject of a panel at MHI's National Communities Council Forum in Las Vegal earlier this month, and I have gotten some inquiries since then about it.
Some people think a lease under which the tenant gets an option to buy the home for its market value at the end of the lease term is viable. To me even this is risky, but more importantly, it really does not accomplish either the tenant's or the park's real objectives which is for the tenant to become a home owner.
Moreover this is really just a park owned rental situation with all the attendant problems--park responsibility for basic home maintenance and exposure to catastrophic loss if the tenant destroys the home and then disappears.
Also a lease with a purchase option triggers the need to make federal Consumer Leasing Act disclosures.
I think these arrangements are very dangerous, especially considering the temptation of parks to make them little more than rent to own arrangements, clearly covered by the SAFE Act. But since others think they have some viability I am mentioning them. Here is a link to an extensive description by the Texas MH Association of what is involved. http://leaseoptionmhsales.com/wp-content/documents/Pendleton,%20TMHA%20Today%20Winter%202012,%20L-O%20&%20Reg%20M.pdf
April 21, 2012
Federal Compliance Requirements. When I first started doing MHC work in Arizona some 30 years ago, federal interference in our business was really minimal. That has certainly changed. Over the years we have needed to get used to honoring requirements of the Fair Debt Collection Practices Act (for collecting delinquent rent, etc), the Truth in Lending Act (for making disclosures about loan terms when selling manufactured homes), and a variety of laws restricting access to and use of credit and criminal background reports. But in recent years, federal requirements have really intensified. Especially on those parks that also sell and finance manufactured homes. Consider these new requirements over the last decade:
Safeguards Rule. The Gramm-Leach-Bliley (GLB) Act requires companies defined under the law as “financial institutions” to ensure the security and confidentiality of personal and credit related information. The definition of “financial institution” under the Act is broad, and includes many businesses that may not normally describe themselves that way and probably covers most MHC's. As part of its implementation of the GLB Act, the Federal Trade Commission issued the Safeguards Rule in 2003 , which requires financial institutions to have measures in place to keep customer information secure. The Rule requires each "financial institution" to develop a written information security plan to protect customer information. The plan must be appropriate to the company’s size and complexity, the nature and scope of its activities, and the sensitivity of the customer information it handles.
FACTA Disposal Rule. This is a federal rule that requires businesses and individuals to take appropriate measures to dispose of sensitive information derived from consumer reports. Any business or individual who uses a consumer report for a business purpose is subject to the requirements of the Disposal Rule, a part of the Fair and Accurate Credit Transactions Act of 2003 (FACTA), which calls for the proper disposal of information in consumer reports and records to protect against “unauthorized access to or use of the information.” The Disposal Rule applies to consumer reports or information derived from consumer reports. The Rule requires disposal practices that are reasonable and appropriate to prevent the unauthorized access to – or use of – information in a consumer report. For example, reasonable measures for disposing of consumer report information could include establishing and complying with policies to: burn, pulverize, or shred papers containing consumer report information so that the information cannot be read or reconstructed; destroy or erase electronic files or media containing consumer report information so that the information cannot be read or reconstructed; or conduct due diligence and hire a document destruction contractor to dispose of material specifically identified as consumer report information consistent with the Rule.
Red Flags Rule. The Red Flags Rule was based on section 114 and 315 of the Fair and Accurate Credit Transactions Act of 2003 (FACTA). The Red Flags Rule sets out how certain businesses and organizations must develop, implement, and administer their Identity Theft Prevention Programs. Your Program must include four basic elements, which together create a framework to address the threat of identity theft. The FTC has a created a template for small businesses that can be completed to meet their needs. The template can be found on the FTC website. This template however is for small, very low risk businesses. MHCA has developed a template designed for MHC's.
SAFE Act. Generally this requires examination and licensing of Mortgage Loan Originators (MLO's). Current federal regulations indicate that any entity or person making a single mortgage loan including a loan on a manufactured home (broadly defining "Loan" to include lease with purchase options and similar devices) to be licensed as an MLO. But the counterpart Arizona SAFE Act makes an exception for lenders making five or fewer such loans per year. We have been in a state of Limbo on complying with this for a couple of years now. The federal law seems to call for compliance now but it does not seem to be getting enforced and there are proposals floating around to change it. The problem of course is that getting the MLO license is very difficult and expensive, almost forcing parks to use third party loan origination firms that are licensed to handle all financing negotiations and paperwork.
Anti Money Laundering Regulations. This is perhaps the worst and most ridiculous of all of them. the U.S. Treasury Department has issued regulations that specifically target small mobile home lenders. The regulations apply to anyone involved in financing mobile homes except a person carrying back part of the purchase price on a home he used as his personal dwelling unit. This new set of regulations is in addition to SAFE Act requirements and the Red Flags Rule. All entities subject to the regulations must prepare and maintain an anti-money laundering program. Like the Red Flags Program, this thing needs to be in writing and kept at the management office. It needs to identify what the "lender" is doing to comply with these requirements, and it needs to identify its own set of "red flags" used to detect possible money laundering. MHCA is developing a template for an "AML Program" (anti money laundering). Hopefully parks can use this to satisfy the program requirement and also use it to identify and report any money laundering or large cash transactions that come to their attention.
Some observers believe the new federal requirements are going to require MHC's to have full blown Compliance Management Systems including Compliance Officers, formal employee training programs on compliance with these requirements, and a written Compliance Policy and Procedure Manual.
The next election is going to have a big impact on MHC's and other small businesses. If we have four more years of new federal programs like this, the cost of running a MHC is going to skyrocket.
April 19, 2012
My Last 2012 Training Class is Tomorrow. It's in Flagstaff. I am not scheduled again this year. If you need manager training during 2012 and want to attand my class it is in Flagstaff at Westglen MHP. You can register by walking in (and pay the fee of course) or call MHCA at (480) 345-4202 or (800) 351-3350.
Utility Furlough Discontinuance in Mesa. I have gotten e-mails from unhappy tenants grousing about not being able to suspend utility charges in Mesa this summer. I do not respond to individual e-mails though I will respond to some having merit on this blog. But I will never respond to those based on no more than wishful thinking and reading into the law provisions that are not there.
MHC and RV Park landlords can separately charge for sewer and trash removal at the residential single family rate. What parks pay under commercial rates to the utility provider is irrelevant. When the single family rate no longer contains a provision for temporary suspensions during extended absences, landlords are no longer required to honor such service suspension requests.
April 14, 2012
Raiding Other Parks. That reprehensible practice has reared its ugly head again with a vengeance. This occurs when parks desperate to fill vacant spaces start trying to induce tenants in other parks to move into their communities. A variant is when parks buy homes for sale in other parks and move them to their own. Often this leads to warfare with the first victim engaging in "payback" by recruiting tenants in the first park and buying homes there to move out. Sometimes this leads to litigation.
It irritates the Hell out of me when both parks turn out to be clients and each seeks help in dealing with the other. Of course I have a conflict of interest and can't get involved. Frequently this results in one or both getting advice from lawyers who don't know what they are talking about and may have thier own incentive to encourage litigation.
Here are some common issues that come up.
What must be paid to remove a home? If the home is being moved by a tenant or by someone who bought it from a tenant, everything owed the park (rent, late fees, utilities, etc.) through the date of removal (but not beyond despite the existence of a longer term lease) must be paid for the person removing the home to be entitled to the required Clearance for Removal. An exception is for someone buying from a lienholder following repossession. In that case, all that is owed is rent and utilities going back 60 days before a Notice of Abandonment was sent to the lienholder.
What about a right of first refusal? That binds only the parties who signed it. If a tenant sells his home, the tenant must give the landlord a chance to match the offer if there is a first refusal right in the lease. But if the tenant breaches the lease and goes ahead and sells, the buyer has the right to remove the home and ignore the first refusal right. Of course the selling tenant can be sued for breach of contract. A possible exception can be where it can be proven the buyer knew of the first refusal right and induced the selling tenant to ignore it.
Can a raiding park be sued? If a park goes into another park and induces tenants to break their leases or lies about the park they are in to induce them to move, it could be successfully sued for various things involving interference in business relations. But generally speaking if a park simply has rent and moving concession programs open to the public that tenants in another park like, and those tnenants decide to move, the first park has not done anything legally wrong. That is simply competition.
Can we agree not to compete for each others' tenants? This can become what is known as restraint of trade. Generally restraint of trade consists of contracts or combinations that tend, or are designed, to eliminate or stifle competition, create a monopoly, artificially maintain prices, or otherwise hamper or obstruct the course of trade as it would be carried on if it were left to the control of natural economic forces. Generally unreasonable restraints of trade are illegal per se and interfere with free competition in business and commercial transactions.
Mesa Sewer and Trash Furloughs Cancellation. The City of Mesa has been getting calls from MHC and RV Park tenants angry about cancellation of the furlough program. It posted an information flyer on its website as a result:
The City seems not to realize that parks charge tenants according to the City's single family service rate. The information in the flyer about what is charged to parks involves what parks pay for service from the City, not what they can charge to tenants. Parks have always been charging for service under the single family rate. Because that rate was subject to furloughs during extended absences of customers, tenants meeting those conditions were not charged either. But when the City cancelled the furlough program, parks were no longer required to suspend charges during periods of extended absence, and many have chosen not to allow furloughs any more.
April 7, 2012
Mesa Sewer and Trash Furloughs Cancellation. Since the City of Mesa abolished its furlough program for single family residential customers last summer, those customers have no longer been able to temporarily suspend charges for sewer and trash service while they were away on extended absences.
Mobile home parks and RV parks are allowed to separately charge for sewer and trash service but are limited to the single family residential rate of the local utility provider. Here is what the MHP Landlord Tenant Act says at ARS § 33-1413.01 (D):
A landlord may charge separately for removal of waste, garbage, rubbish, refuse and trash and for sewer services. Any charges for removal or sewer services may not exceed the prevailing single family residential charge, fee or rate for these services levied by the political subdivision or provider.
And here is what the Long Term RV Space Rental Act says at ARS § 33-2107 (G):
A landlord may charge separately for removal of waste, garbage, rubbish, refuse and trash and for sewer services. Any charges for removal or sewer services shall not exceed the prevailing single family or residential charge, fee or rate for these services levied by the political subdivision or provider.
They both say exactly the same thing. A landlord may charge for sewer and trash but cannot charge more than the single family residential rate.
In the City of Mesa, when a furlough provision applied, the single family residential rate was zero since that is what the City charged during extended absence periods. But with the cancellation of the program, the rate is no different when the customer is away than when he is there. In other words, charges are no longer suspended in the City of Mesa for single family residential customers when they are gone, and MHC's and RV Parks no longer are required to suspend them any more either.
Some Mesa park operators are going to voluntarily honor furlough requests anyway. But a number of them are not and tenants in many of those parks are very unhappy about it.
But like it or not, the law allows parks to now charge for trash and sewer service during extended absences.
April 4, 2012
SAFE Act--Arizona Version. The Arizona version of the SAFE Act has been amended. The amendment revises the de minimis exception of five or fewer loans per lender per year from the State Loan Originator licensing requirement. Here is what SB1014 changed in ARS § 6-991 which excludes certain categories of persons from the definition of "Loan Originator":
(iv) A person who
makes originates five or fewer mortgage loans per calendar year if the source of the prospective financing also makes five or fewer mortgage loans per calendar year.
Red is deleted and blue is added.
You can read the bill here: http://www.azleg.gov//FormatDocument.asp?inDoc=/legtext/50leg/2r/laws/0036.htm&Session_ID=107
The Governor has signed the bill so it will be effective 90 days after the Legislature adjourns (or around August 15).
The change means that a person making five or fewer MH loans per calendar year with his own funds is not required to be licensed as a "Loan Originator" as far as State law is concerned. Of course this does not fix the big problem which is that the federal law as interpreted by HUD and implemented in its regulations makes no such exception and requires that all MH lenders regardless of the number of loans made per year be licensed as a Mortgage Loan Originator. While a Bill is floating around Congress that would change this, I do not believe it is likely to be enacted this year.
Sexual Orientation Discrimination. Sexual orientation is not a protected class under Arizona and federal fair housing laws. But I have been preaching for years that it would be stupid to discriminate on that account. Tucson has had an ordinance prohibiting this sort of discrimination for years that applies to housing as well as other kinds of businesses. Now Phoenix is going to consider adopting one that would probably look a lot like Tucson's, and if adopted it will also apply to housing. This simply reinforces the common sense need to avoid sexual orientation discrimination. If you already avoid it, a new City Ordinance prohibiting it will have little or no effect on you if you do bsuiness in the City of Phoenix. Read about this here: http://www.azcentral.com/arizonarepublic/local/articles/2012/04/02/20120402phoenix-stanton-urges-ordinance-outlaw-discrimination-gays.html
March 31, 2012
Lorman Education Seminar. There are three private national professional schools in this country that offer legal seminars in the various states. I have taught for all three over the years. Each of them competes with State Bars in the various states in offering training required of lawyers by those same State Bars. I personally think a State Bar that requires training and then offers it for a price has a terrible conflict of interest and I will not participate in their training classes.
Lorman over the years has conducted more relevant classes than the others and has a slightly more reasonable approach to pricing and avoiding unnecessary frills.
Probably due to the poor economy, none of the three has been very active in Arizona in recent years but Lorman has decided to return and offer a Landlord Tenant Law Seminar on October 10. Scott Williams and I have been engaged to conduct it. The class will cover all landlord tenant laws from commercial to apartments to MHC's and RV Parks. It will cover evictions and discrimination laws including fair housing and ADA. It will be held in the Phoenix area. It should qualify for 6.5 hours of lawyer CLE (including one in ethics) and a bit more than that for real estate continuing credit.
Keep an eye on the Seminars and Appearances page on the left for future details and registration information.
April 20 MHCA Manager Training Class. This is the last one of these I am scheduled to do for MHCA this year. If you need MHC manager training in 2012 and want to come to my class, sign up for this one. It is in Flagstaff. Contact MHCA to enroll at (480) 345-4202 or (800) 351-3350.
March 28, 2012
First Refusal Rights. This seems to be the season for battles between parks and buyers of homes in parks from tenants over whether the home can be pulled out. I keep getting dragged into these disputes but most times I am conflicted out since both the buyer (another MHC) and the current park where the home is located are clients.
I frankly find these disputes disgusting on many levels.
Parks where homes are being pulled out of don't want to lose them and have empty spaces increase. Parks buying these typically older and smaller homes have too many empty spaces and need new homes that will fill the space without violating local setback ordinances. Both are willing to cut each other's throat over their desire to get the home.
To keep homes from leaving, many parks have started including rights of first refusal in leases. In these the tenant agrees that the landlord has the right to match a purchase offer and buy the home to prevent an outside buyer from acquiring and moving it out.
The thing about these is that they bind the tenant but not the buyer. If the buyer purchases a home from a tenant who does not honor the first refusal right, and the buyer does not know of the right, there is no basis to prevent him from removing the home or take action against him for doing so.. The tenant selling the home can probably be sued for damages for breach of contract but the buyer gets the home.
If the buyer knows of the right but buys the home anyway, and if he even induces the tenant to breach the contract first refusal right it gets trickier. Here the buyer can probably also be sued for damages on a variety of theories.
But the question is, can the park where the home is located 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 view he cannot.
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 clear 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.
March 23, 2012.
New WZP Newsletter. This is out. It discusses a lot of MHC issues. Here is the link: http://www.wzlawpc.com/system/files/Spring%202012.pdf
March 22, 2012
New Anti Money Laundering Regulations. In the next chapter of big government run amuk, the U.S. Treasury Department has issued new regulations that specifically target small mobile home lenders among others. The regulations specifically apply to anyone involved in financing mobile homes except a person carrying back part of the purchase price on a home he used as his personal dwelling unit. This new set of regulations is in addition to SAFE Act requirements we are trying to figure out, and the Red Flags Rule that has been in place the last couple of years.
The rules apply to anyone whoi accepts a residential mortgage loan application or is an any way involved in negotiating such a loan.
Such lenders or would be lenders are required to report to the feds "suspicious transactions" conducted or attempted that involve or aggregate at least $5,000 in funds or other assets, regardless of whether they involve currency. They are also required to report currency transactions of $10,000 or more. Forms are provided by the government for these reports and in true Orwellian fashion they cannot be subpoened and the person making the report is immune from suit for having made the report. Failing to file reports, filing misleading reports and failure to keep records on "suspicious transactions" can lead to sanctions being imposed against the lender.
The more burdensome requirement is one requiring all entities subject to the regulations to prepare and maintain an anti-money laundering program. This appears to be similar to the Red Flags Program that has been required for the past few years. Like the Red Flags Program, this thing needs to be in writing and kept at the management office. It needs to identify what the "lender" is doing to comply with these requirements, and it needs to identify its own set of "red flags" used to detect possible money laundering.
MHCA is developing a template for an "AML Program" (anti money laundering--AML). Hopefully parks can use this to satisfy the program requirement and also use it to identify and report any money laundering or large cash transactions that come to their attention.
Once again, Terry Dowdall, a California MHC lawyer has done a good job of analyzing this law and his analysis is posted on line at http://www.dowdalllaw.com/PARKWATCH-Mobilehome-Lenders-02-17.pdf
I don't know how he can stand to read that stuff so closely but he certainly has my respect for doing so.
Although this is a horrible imposition for the government to make I am hopeful that compliance won't be that big of a deal. I hope not because there are some pretty stiff sanctions in the law for not complying with these regulations.
March 18, 2012
New MHCA Blue Book. This publication is the most important of MHCA's series of publications. It contains forms for almost every landlord tenant related need for MH space rentals. It was first published in 1987 and is MHCA's first publication.
The new 25th Anniversary Edition of the Blue Book is now available for purchase from MHCA. Prices for members are cheaper than non members. The new edition reflects changes in many laws through the present time. Contact MHCA at (480) 345-4202 or (800) 351-3350 to order one.
The book will soon be available for on-line purchase and download but isn't yet.
March 15, 2012
Treating Employees as Independent Contractors. Often it is not clear who is an independent contractor and who should be classified as an employee. The IRS suggests looking at three aspects of the employment arrangement: financial control, behavioral control, and relationship between the parties.
Generally independent contractors retain control over their schedule and number of hours worked, jobs accepted, and performance of their job. They often have a major investment in equipment and provide all of their supplies, insurance, repairs, and other expenses related to their business. They usually perform a special service that is not in the normal course of the employer's business, as opposed to regular employees who usually work at the schedule set by the employer and are directly supervised by the employer.
Independent contractors are not employees for purposes of many entitlement programs like workers compensation and unemployment benefits. Additionally, they are responsible for paying their own taxes and FICA (Social Security) contributions. Employers do not withold taxes from them.
This can create problems when independent contractors run into financial difficulty and stop making the required estimated tax payments. There is something called the 100% penalty that allows the government to collect all taxes that should have been withheld from someone treated as an independent contractor but who is really an employee. Technically this can be assessed and collected even when the so-called independent contractor does make his tax payments.
If an independent contractor applies for workers compensation or unemployment benefits, the government will probably look into whether he was truly an independent contractor. If it finds the worker was really an employee, it will declare him eligible for benefits and pursue the employer for the taxes or premiums that it should have been paying into the program. 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 later found to be an employee.
Too many people think treating workers as independent contractors is an easy way to avoid the expense of setting them up as employees. While that may be true, the government wants people treated as employees with employers withholding and remitting 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.
March 14, 2012
New Articles Posted. I just posted five new articles on the MHC--Articles page. A couple of them involve subjects I have been getting a lot of calls on: removal of homes from parks and allowing disabled children into age 55+ parks.
March 10, 2012
Refinancing Opinion Letters. Money to refinance parks seems to have become more available. Of course there are a lot of parks out there that need to refinance their loans either because they are coming due or the interest rates are simply too high.
Lenders will always require commerical borrowers to get local attorneys to review the loan documents (Loan Agreement, Note, Deed of Trust, Guarantees, and Indemnity Agreements, etc.) and their organizational documents (LLC Articles, Operating Agreements, Resolutions, etc.) and prepare a written opinion letter that the borrower is properly taking out the loan and the loan itself can be enforced under Arizona law.
This is a lot more complicated than just signing a form of letter the lender has prepared. It entails a close review of the documents involved, and that review often catches errors in them. That is not surprising since the documents are usually prepared by lender attorneys in other states.
By providing such an opinion the local lawyer is in effect guaranteeing the legal enforceability of the loan. That is a risky thing to do and before doing so a responsible lawyer will do the necessary homework to ensure the opinion is accurate.
Some local law firms charge exorbitant sums for these letters since so much work and a fair amount of risk is involved. But it is important not to be overcharged.
Our office does this work for apartment and MHC refinancing and I have prepared around 100 such opinions over the years. I have prepared three of them this year, two in the last two weeks. This tells me that lending activity is picking up since that is more than I did all last year.
It is important to have competent counsel prepare the opinion but also important to avoid being gouged on the price for this.
March 3, 2012
City of Benson Case Amicus Brief. This involved a case on appeal to the Arizona Court of Appeals. MHCA had me file an Amicus Curiae (friend of the Court) brief explaining why it was necessary to grandfather older MHC's in when local governments change zoning laws so that older parks in compliance before are no longer in compliance. I did so late last year. The case has now been decided. While there is not much in it, you can read the decicion here if you want. http://www.appeals2.az.gov/Decisions/CV20110085mem.pdf
The decision is a non precedent setting Memorandum Decision. Essentially it says the case should not have been in court in the first place since there were additional administrative remedies available. It remanded the case so the Board of Adjustment in Benson can consider the issues including whether single spaces or the entire park constitutes the non conforming use when a zoning ordinance is materially changed.
I think there is a message in footnote 4 where the court notes the issue of whether a space or the entire park ia grandfathered. That note plus the MHCA brief (and of course the arguments of the park attorneys in this case) may get the Board of Adjustment in Benson to take a new, sober look at this issue and perhaps make the decision that it is the entire park that is grandfathered.
Pinal County Junk Homes Case. In another non precedent memorandum decision, the Arizona Court of Appeals held that keeping junk mobile homes and RV's on land including some being lived in could constitute a public nuisance justifying action by the State to get the problem remedied. The land owner owned two lots in an unincorporated portion of Pinal County, containing junk RV's, multiple mobile homes and numerous unlicensed and inoperable vehicles. After a hearing, she was found in violation of the code and fined $700 a day for every day the violations continued. After three years, the County filed an action seeking relief for uncorrected violations.
The land owner appealed but represented herself and did a typically awful job of presenting her case. But the court did address her contention that the current land use was a pre-existing nonconforming use and thus should be “grandfathered” in. The appellant failed to provide a transcript of the trial court proceeding, so the court could not be directed to any testimony on the preexisting use, nor could she show it was even addressed by the trial court. As such, the appellate court assumed the record supported a finding that there was no preexisting use and affirmed.
The court also found the ordinances enforced against the appellant – concerning the storage of vehicles and scrap, and maintaining no more than one dwelling unit – were constitutional. The court said that the appellant provided no authority showing these ordinances where not related to the public health, safety, and general welfare.
Read the decision here: http://azcourts.gov/Portals/89/memod/CV/CV110153.pdf
What Does This All Mean. The issue of what constitutes a pre existing in a mobile home park use is becoming a serious issue in the courts. A bad decision could have serious consequences for the industry as a whole. Local governments have always been hostile to MHC's and may now be becoming more aggressive in enforcing land use laws in a manner that will harm MHC's. Local governments have been hostile towards MHC's generally the last 30 or 40 years and this hostility may be working its way into the courts.
March 2, 2012
Utility Furloughs in Mesa Repealed. Parks that charge the local utility's single family residential service rate when the separately charge for utilities (that rate is 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 and parks of course have been required to do so as well.
But last summer the Mesa City Council repealed its furlough program. 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.
Parks in other areas that have allowed furloughs would be well advised to check on the status of furlough provisions in their rate structures.
New Arizona Takings Case. Our Constitution prohibits the government from taking our property without paying fair value, and the State Constitution limits these cases to situations where there is a legitimate public need for the property. These are called "takings" cases in legal parlance.
Over the years instead of just taking ownership of private property, the government has resorted to limiting us in how we can use it. Zoning is an example. Zoning ordinances don't take our ownership of land away but they do impose restrictions in how we and our neighbors can use it. At some point, however, the restrictions become so severe that it becomes tantamount to a taking away of our ownership rights. An example here would be an environmental law saying our property had to remain in its original condition and that we could do nothing with it in order to allow the critters on it to live in comfort.
Somewhere between these extremes, acceptable land regulation evolves into something so extreme as to amount to a taking for which the government must compensate the land owner. These are called "regulatory takings" as distinguished from "physical takings".
When a regulatory taking occurs the government must pay for the amount by which the value of the property has been reduced. The U.S. Supreme Court, unfortunately has made it extremely difficult to establish a regulatory taking triggering the need for compensation. It has done so in something called the Penn Central Railroad case.
Takings cases are common in California where MHC's and other landlords frequently challenge rent control ordinances as being so restrictive as to constitute regulatory takings. Since Arizona does not permit rent control we don't have that much litigation here, but there is a new case involving a Flagstaff ordinance imposing a lien on private land adjoining municipal sidewalks when the private landloner does not repair the sidewalks. The landowner challenged the ordinance as a regulatory taking.
Since the issue is so rare in Arizona the lawyers in the case did not brief it well and the Court of Appeals sent it back to the trial court after publishing an excellent opinion outlining the applicable law. That opinion in part bases the decision on the U.S. Supreme Court case of Lingle v. Chevron USA in which MHCA had me file an amicus brief (since it involved rent control issues in which we are always interested).
Anyone interested in this subject can read the Arizona opinion in Bonito Partners v. City of Flagstaff here: http://www.inversecondemnation.com/files/cv100819.pdf
February 25, 2012
Republic Editorial on JP Courts. Why is this subject important to MHC's? Because we do evictions in these courts. Between 50,000 and 80,000 evictions per year move through the Maricopa County JP Courts alone. While most are apartment cases, almost all MHC evictions are included in that. Anyone who has ever tried to evict a MHC tenant in California knows that our system is fast and inexpensive. Changes in eviction court rules and procedures a few years ago also made them a lot more fair to all parties involved.
After running the article I described in my February 21 posting, the Republic today published an editorial headlined "Keep politics out of JP selection". In this the paper actually said "Many of Arizona's justices of the peace do a fine job". It said "Some who support the current system argue that Justice Courts are designed to be close to the people. They have a point". And it said:
It would be tricky to impose a merit-selection process for JPs statewide. Such a system is successfully used to pick appellate court judges statewide and Superior Court judges in Maricopa and Pima counties. But every other county still elects Superior Court judges.
February 21, 2012
Republic Criticizes J.P. Courts. A couple of weeks ago I was contacted by a reporter from the Arizona Republic who was writing an article about Justice Courts with a focus on recent problems involving the Arrowhead Judge. It sounded like the article was going to be another of the hit pieces we read every few years in the Republic criticizing these courts, calling for lawyers to be J.P.'s, and calling for "merit selection".
Merit selection is a process whereby judges are picked behind closed doors by panels of community elites with no meaningful public involvement.
I have always favored the current system whereby J.P.'s are elected and non lawyers are eligible to run. I don't think the position requires a law degree or legal experience provided the Judge is reasonably intelligent and applies himself. Centuries of experience have certainly proven that being a lawyer is no guaranty of honesty or that one won't act abusively.
Anyway I spent about 45 minutes with the reporter explaining my views.
The article appeared in this morning's paper and was more balanced that I originally thought it would be. I am mentioned at the end. Here is the link: http://www.azcentral.com/community/peoria/articles/2012/02/07/20120207arizona-justices-peace-merit.html
February 20, 2012
Linked In. I just joined Linked In. I don't know why. I just did it.
February 18, 2012
Post Foreclosure Evictions II. Later in the day yesterday, after I posted my entry about a Maricopa County Superior Court decision on this issue, my partner Mark Zinman received a ruling in an appeal of a Pinal County case challenging the jurisdiction of Justice Courts to hear post foreclosure eviction actions. In this appeal the Pinal County Superior Court ruled that Justice Courts have jurisdiction over these cases. So both the Maricopa and Pinal County Superior Courts are in accord on this issue.
Pool Lifts in MHC's and RV Parks Under the ADA. Recently the U.S. Department of Justice came out with new requirements for "Public Accommodations" covered by the Americans with Disabilities Act to meet with respect to their swimming pools. Included among these new requirements was one dealing with pool lifts. Swimming pool companies and salespeople have been marketing these pool lifts since then as being required by the ADA--even to MHC's and RV Parks.
These are required by the ADA only if the ADA applies to the particular facility operating the swimming pool.
Whether the ADA applies to a park depends on whether it is a "Public Accommodation" within the meaning of of Title III of the ADA. There are 12 categories of these. "Public Accommodations" include most places of lodging (such as inns and hotels), recreation, transportation, education, and dining, along with stores, care providers, and places of public displays, among other things. The only one that could normally even possibly apply to a MHC or RV park generally is "places of lodging".
However even in a park that is not a place of lodging, if the pool is open to public use (i.e., by people other that residents and their guests), the pool alone could be found to be a "Public Accommodation".
"Places of lodging" include traditional hotels, motels and inns, as well as facilities that provide guest rooms for sleeping for stays that are primarily short-term (generally 30 days or less), where occupants do not have the right to return to a specific room or unit after the conclusion of their stay.
Essentially, if a MHC or RV park is limited to longer term residents who keep their mobile homes or RV's there on a long term basis and it does not cater to transient rentals, then I do not believe as a general rule that they qualify as a "Public Accommodation" under the ADA.
Generally, swimming pools in MHC's and longer term residence RV parks that are not defined as a place of "Public Accommodation" do not fall under ADA requirements for pool lifts. However, if such an RV park or MHC opens up its pool to the public (e.g. water aerobic classes are offered to the general public), then ADA pool lifts would need to be installed since the pool would separately constitute a "Public Accommodation" in its own right..
For RV parks offering transient rentals that are open to the public, they would seem to qualify as "Public Accommodations" and therefore would be required to have pool lifts in their pools.
Parks that continue to rent to long term tenants and keep the general public out of the pool will likely not meet the definition of a "place of lodging' or "Public Accommodation" and should not need to satisfy the new pool requirements. But if they do cater to transient rentals or allow public use of the pool, they probably will need to comply.
February 17, 2012
Post Foreclosure Evictions. There has been an ongoing debate for several years over whether an eviction can be filed in Justice Court following a foreclosure when the former owner of the house refuses to vacate, or whether the case needs to be filed in Superior Court. In Maricopa and, I am told, Mohave Counties, Justice Courts handle these. In Pima County and many others, they are required to be filed in Siuperior Court. Last week a poorly processed and ineffectively lobbied bill was voted down after a legislative committee hearing that would have clarified that such cases may be filed in Justice Court. There were other elements in that bill that contributed to its defeat, but the real reason was terrible, virtually nonexistent lobbying.
In any event, my partner Scott Williams just received a Maricopa County Superior Court appellate decision that clearly finds these cases can be filed in Justice Court. The decision can be found here: http://www.courtminutes.maricopa.gov/docs/Lower%20Court/022012/m5112267.pdf
Hopefully other Counties will take a look at this well reasoned decision and conform their practices to permit Justice Court filings.
February 13, 2012
U.S. Supreme Court Fair Housing Case Withdrawn. Magner v. Gallagher, a case that was up before the Supreme Court that challenged application of "disparate impact" as a proper test for determining whether fair housing violations have taken place, has been withdrawn by the government. The disparate impact test says in effect, that if an innocent practice has a greater effect on a protected minority class than on others, it is unlawfully discriminatory. In my view and that of many others, that is the wrong test for fair housing violations. The proper test in my opinion is disparate treatment. Was the practice intended to treat a protected class differently.
Disparate impact is the proper test for employment law discrimination because of the way those laws are written. But Courts and government agencies have long applied it to fair housing violations despite that law clearly on its face requiring proof of intentional discrimination. A number of years ago a case got to the Supreme Court challenging this and it looked pretty clear that the Court was going to rule that disparate impact was not the proper test. At the last minute the government in that case abandoned the issue and it was not decided. Disparate impact continued being used by the government.
The same thing has now happened again. Last Friday, the government abandoned the issue in Magner v. Gallagher and agreed that the case could be dismissed.
So once again the government, knowing it is using the wrong test to force housing providers to do things not required by the law, has avoided losing a case that would correct its incorrect interpretation of fair housing laws.
February 12, 2012
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 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. Here is a link to the form: http://mvd.azdot.gov/mvd/formsandpub/viewPDF.asp?lngProductKey=2085&lngFormInfoKey=1894 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.
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.
February 11, 2012
New Escrow Law. I have written about this in my blog before and have posted an article about it. http://www.michaelparhamlaw.citymax.com/page/page/4695892.htm#10.11.3
The law goes into effect July 1, 2012. Beginning then, all dealers will need to close used home sales through third party escrows with title companies or other licensed escrow agents if the sales price is over $50,000. If a used home sells for less that $50,000 the buyer must be given the option to close through such an escrow. The seller then must approve or the deal will blow up. Under $50,000 used home sales where the buyer does not elect a third party escrow will still close through the dealer's trust and escrow account.
All new home sales must close through a third party escrow subject to a big exception. Mobile home parks selling new inventory or special order homes may elect to close through their own trust and escrow accounts instead. To do so they must post a new $100,000 bond with the Arizona Fire, Building and Life Safety Department. Multiple park operators with a single dealer's license and branch offices in their parks can post a single bond that will cover all parks.
We had expected regulations from the Department but learned last week that it was not going to publish any. It believes the law itself is sufficiently specific and regulations are not needed. So I guess it will not be telling us what it expects to see in escrow instructions or what it expects the $100,000 bond to say.
Parks selling homes need to:
1. Notify the Department that they will be posting a single $100,000 bond to cover new home sales through their own trust and escrow accounts and, if they have more than one park, give the Department a list of park locations that the bond will cover.
2. Revise their home sales forms to address the need for escrow or waiver of escrow for used hojme sales. I have done this for a few multi park operators and find it is a good opportunity to fine tune these forms overall.
3. Identify an escrow agent that will handle used home sales over $50,000 and those under $50,000 where the parties elect to close through a third party escrow. MHCA is working to identify title companies willing to handle these escrows and I will publish them here when available. The escrow requirement will add about $500 to the cost of a sale, representing the fee charged by the escrow agent.
Marijuana. I got my first call from a park saying a medical marijuana card holder was growing it in his yard. I don't know of any parks that allow this despite the medical marijuana law and I do not believe there is any requirement to do so. I posted an article on this some time ago. http://www.michaelparhamlaw.citymax.com/page/page/4695892.htm#7.3
Since the park does not permit possession or use on site and since it still constitutes a felony under the federal Controlled Substances Act and hence a violation of the Crime Free Addendum to Rental Agreement, cultivation in a park could justify an immediate termination notice and instant eviction. Instead I suggested the manager give the tenant a 10/20 Notice.
Nothing in either the State law or fair housing laws requires a landlord to allow commission of a federal felony on the premises even by a medical marijuana cardholder.
Finally, I don't see how marijuana can be cultivated in a MHC in compliance with restrictions in the medical marijuana law. If all the security safeguards required by the law were in place, there is no way the growing area would have been discovered by the park in the first place.
Personal Property Found in Park Owned Homes. When a park gets possession of a rental home, or gets title to an abandoned home, or repossesses a home sold to a buyer who defaults in making loan payments, what happens to the furniture and furnishings left behind by the last resident?
There are procedures in the Residential Landlord Tenant Act (that applies to apartments and park owned home rentals) dealing with this subject. Essestially a couple of notices are posted on the premises and sent to the last resident, and if the property is not reclaimed, and inventroy is made and a public auction is held. Normally this is just junk and no one shows up. The park bids in the cost of sale and winds up buying the stuff. It is then free to get rid of it.
Some parks are tempted to just get rid of it without doing all of that. But if the last resident later makes a claim that there were valuable articles there and the park in effect stole them, the park can be in a fair amount of trouble since it did not follow statutory procedures.
We handles these for a couple hundred dollars. Or parks can do them directly. There are forms and instructions in the MHCA Green Book.
Always take pictures of everything left in the home and the condition in which it was left before disposing of any items found in it. And be sure to keep them in a safe place that can be located it there is a claim filed later.
Defibrillators. I got a call last week from a park where the tenants association wants to put in a defibrillator thinking there is no liability in the event mistakes in its use take place since there is a "good samaritan law" that protects users. There are laws addressing this but the protections are not what people may believe.
ARS § 36-2262 requires anyone acquiring a defibrillator to have an agreement with a physician who will oversee public access to use of the device. It also requires each "trained user" to call 911 immediately when using the device on someone suffering cardiac arrest. "Trained users" are defined as those people expected to use it who have completed training in its use.
ARS § 36-2262 also requires the entity that acquires the defibrillator to maintain it in good working order and ensure it is tested per the manufacturer's guidelines.
ARS § 36-2263 grants LIMITED immunity for an entity acquiring a defibrillator, the property owner where it is located, a good Samaritan using one in good faith in an emergency without compensation, and a trained user. But they are not protected from liability for willful misconduct or gross negligence.
Everyone involved with acquiring this device and in the decision to place it in the park needs to read these statutes closely and understand them. The park needs to absolutely ensure that the unit is properly maintained and tested and that there are "trained users" available who get the required training.
While the law limits liability for use of these things it most assuredly does not eliminate it and it imposes substantial responsibilities on those involved with deploying it to ensure there is a contract with a physician, that it is maintained and tested and that there are "trained users" who receive the proper training.
I would normally advise against placing one of these in a park facility.
February 4, 2012
MVD Changes. MVD is once again going to change its policies that affect mobile home abandonments. A few years ago the inspections to verify VIN numbers on homes were done by MVD employees. When a VIN could not be found, another higher ranking employee would do a second inspection and assign a new AZ special serial number.
When the budget crunch hit a few years back, the initial inspections were farmed out to private third party contractors and MVD employees stopped doing them--at least in Pima and Maricopa Counties. For a while the new AZ serial number assignments continued to be handled in house by MVD employees. But a couple of years ago they also were transferred to third party contractors.
Now that the third party contractors seem to have a handle on assigning new AZ serial numbers, MVD is about to take this function back in house and have it performed by its own employees. A decision on this will be made in March. Meanwhile it is now being done both in house and by third party contractors.
The last year that it was done in house exclusively we had a terrible time getting inspectors to come out and actually do the inspection and AZ serial number assignments. We have been voicing our concerns over timeliness of this function to the MVD and so far the ones they have recently done in house have been promptly done.
MHCA Conference. The annual conference is going to be different this year. On Thursday and Friday, May 17 and 18 a two day conference is scheduled at Talking Stick Resort in Scottsdale. It is designed for park owners only. Topics covered at the seminars on May 18 are going to be policy issues of interest to park owners and operators only. There will be no training targeted at managers. The subjects of seminars haven't been firmed up yet but I will be hosting several seminars.
Past annual conferences have tried to involve both managers and owners and as a result neither really had their needs addressed. This year something new is being tried to more specifically target the needs of each group. I expect another managers' oriented session will also take place later in the spring.
For information go here http://azmhca.com/events/mhca-2012-annual-conference-and-golf-tournament
Or call MHCA at (480) 345-4202 or (800) 351-335.
Tenants Using This Site. This website of course is open to all and is intended to educate the MHC industry. That means tenants use it and I frequently hear from them. I think it is a good thing to put this information out for all because it can minimize disputes.
However, it irritates me when tenants take things out of context, refer to this site as supporting their position when they know or should know that is false. A case in point is happening at an RV park in Yuma where tenants are selectively quoting from materials posted here in arguing that a landlord under the Long Term RV Rental Space Act must charge the local single family rate when separately charging for electricity. At that location the single family rate is less than what the landlord actually pays so these tenants are trying to have their power bills subsidized.
The utilities section of that law recognizes that for metered utilities this is often the case. As a result, the RV Act also allows a landlord the alternative for metered utilities to pro rate his actual utility bill among tenants of his rented spaces and to add a reasonable administrative fee. This group of tenants in Yuma conveniently overlooked this. Now their greed and mendacity is about to create a battle of wills with the landlord that will result in nothing but poisoned relations and possibly more expense to all parties.
Abandonments. We set a record this past month (January) and opened more abandonment files than we have ever opened in a single month. There are still thousands of abandoned homes out there but many parks have gotten the problem under control.
New Escrow Law. This goes into effect July 1. I have written about it before. Sales of certain high priced manufactured homes will need to be closed through escrows handled by licensed escrow agents.
The FBLS Department is supposed to come up with some rules dealing with it before then. Apparently it has been looking for others to do its work for it, in this case the Arizona Housing Association (formerly MHI).. This group was expected to present proposed rules to the Board of Manufactured Housing a couple of days ago (that is the policy setting board for the Department). But its representative was a no show. So there are still no rules and none in sight.
Is it any wonder that I regard this as a profoundly worthless agency?
January 28, 2012
U.S. Supreme Court. Once in awhile this industry ia affected by decisions in the U.S. Supreme Court. This may be such a year. There are two cases now before the Court that could have far reaching effects on the rental housing industry and mobile home parks in particular.
Harmon v. Kimmel is a case challenging the legality of New York City's rent control law under the Takings Clause of the U.S. Constitution. T his is the provision saying that before the government can take private property it must pay fair compensation to the owner. The challengers of the ordinance argue that taking away the right of a private landlord to set whatever rent he wants is tantamount to taking away much of the incidents of ownership of the property, and before the government can do this it must pay the landlord the amount by which the value of his property has been reduced.
Challenges to rent control statutes have been made many times in the past without success. Maybe this one will have a different outcome.
Magner v. Gallagher is a case under the Fair Housing Act posing this question: Can a lawsuit be brought under the Fair Housing Act for a practice that does not have a discriminatory intent or purpose, but does have a discriminatory effect?
Government agencies enforcing Fair Housing Laws the past 25 years have argued that if the effect of a practice is to treat protected classes differently, the practice is discriminatory even if there was no intention to discriminate by the housing provider. This has always been the test for employment discrimination because of the way those laws are worded, but Fair Housing Laws are not worded that way. Nevertheless, fair housing advocates, government agencies, and the Courts have applied this "disparate impact" test instead of the narrower, and I think more correct, "disparate treatment" test.
The practice was challenged once before in the Supreme Court but the defenders of it abandoned the issue when it became clear they might lose, and the Court never decided it. Now the issue is back and it looks like the Supreme Court may finally rule. If the Court decides that there needs to be a discriminatory intent, Fair housing violations will become harder to prove and landlords will achieve some additional protections from claims of discrimination when they had no intention of discriminating.
This case is set to be argued on February 29, 2012 and a decision will be released before the end of June. This could have a big effect on fair housing practices in MHC's.
Property Taxes on Mobile Homes. I conducted a training class on enforcement of writs of restitution and other Court issued Writs for civil Deputy Sheriffs last week. The learning ran both ways because I discovered that contrary to my earlier belief, delinquent property taxes on mobile homes are not automatically transmitted by County Assessors to the MVD. They are manually transmitted and it can sometimes take months or even years for the delinquent taxes to appear on the MVD records.
The MVD will not allow a title transfer when there are taxes owed on a home. I have heard stories about people buying homes, getting titles, and then a few years later finding they cannot sell the homes without paying taxes that had become delinquent before they bought the home. This is unfair to them but they are forced to pay those old taxes before they can sell.
Before a home is transferred the buyer should insist that the seller obtain a letter from the County Assessor showing all taxes up to that date on the home are current.
Qwest/Century Link. This horrible company has been telling park landlords and tenants that it is the landlord's responsibility to trench and then fill and restore the work area before it will agree to install, repair or maintain underground telephone lines in MHC's. When a park refuses to do that work, the company tells the tenant it will not provide service and blames the park. In at least one case it encouraged a tenant's lawyer to sue the park over this issue.
I have complained to the company repeatedly over the years about this but they never respond. The letters they send out telling parks it is their responsibility to do this don't even have a return address or phone number on them. But the main problem in my view is that their statements are just flat wrong and they know it.
In some cases they have gone so far as to lay telephone cables on the surface of the ground when parks refuse to do their excavation work, creating enormous safety hazards. These are truly reprehensible practices.
MHCA has finally gotten the attention of the Arizona Corporation Commission and they are looking into these practices. Hopefully this dishonest and shameful conduct will end soon.
January 20, 2012
Manager Training. My only Maricopa County training class this year is scheduled next Friday, January 27 in Peoria. If you want to attend one of my classes in the Phoenix area this year, be sure to get registered for this one. Contact MHCA at (480) 345-4202 or (800) 351-3350 to register.
Statewide Evictions. We have begun doing evictions in the outlying counties. What we try to do is arrange with the local Court to do so by telephone. Then we get the legal papers to the local Constable for filing and service on the tenant and participate in the eviction hearing by telephone conference call. So far we have been allowed to do this in some of the Courts in Gila, Yuma, and Mohave Counties. We already handle them personally in Maricopa and Pinal Counties. And there is good local counsel available in Pima County so we do not appear there. We work closely with Jim Frisch of the firm King & Frisch to provide reciprocal coverage in Tucson area evictions.
While we are not real anxious to compete with local attorneys for business in their localities, we have begun doing them in these locations because either there are no attorneys available willing to do this work or because the ones that are willing either don't understand the applicable law, charge too much, or both.
We can never guarantee that a particular Court will let us handle a case by telephone conference call but so far we have not been turned down.
If you need to file an eviction but simply cannot get local counsel, you may want to consider this option. If you have capable local counsel, use him or her. Our service should be sought only when there is no reasonable alternative.
SAFE Act. After getting unofficial assurances that the State does not plan on enforcement actions against mobile home parks financing occasional sales of homes under the Arizona version of the SAFE Act, it has been decided that there will be no effort in this year's legislative session to amend the Arizona law to provide additional protections for parks. The feds apparently are looking at perhaps modifying the federal SAFE Act to remove mobile home sales financing by parks from much of its coverage. In addition there is a newly created federal agency involved with SAFE Act enforcement that is just getting its feet wet. The State is going to be looking to it for guidance on overall SAFE Act enforcement and the State enforcement agency will be looking at modifying the State law next year after it gets some guidance.
So we are looking at maybe another year in the same sort of Limbo we have been in with respect to SAFE Act enforcement but in the greater scheme of things, that isn't so bad.
Injunctions Against Managers. Arizona has a harassment injunction law that allows people who convince a judge they are being seriously harassed to issue injunctions ordering the defendant to stay away from and have no contact with the victim. These can be issued with no notice to the defendant. The first he knows about it is when it is served on him by a peace officer. Violations of these can result in arrest.
Judges are supposed to be careful in issuing these but unfortunately, some are not.
It is not uncommon for a tenant getting a termination notice like a 14/30 or even a 7 day rent notice to go to a court and apply for a harassment injunction against the manager serving the notice. All too often these are issued since the judge is either too careless to take a close look at the case or the tenant is lying to him to get him to issue it.
Any manager being served with one of these needs to stay away from the tenant as the injunction requires, but also needs to contact the park lawyer to get it dissolved. To get it dissolved the manager needs to request a hearing which is supposed to be set within ten days, and then the judge will decide whether to keep it in force or dissolve it after hearing both sides of the case.
Managers should not try to do this themselves. These are serious and it is really important to have the park lawyer handle it.
January 15, 2012
Civility. We have all been hearing a lot about Civility since the shootings in Tucson last year. There has even been some sort of Civility institute formed in Tucson since then. I never cease to be struck about how incivil some of the biggest proponents of Civility are. Its not my imagination. Here is a good piece dealing with Civility from The Daily Show: http://www.breitbart.tv/liberal-columnist-calls-tea-party-terrorists-heads-civil-discourse-initiative/
January 14, 2012
New FBLS Department Budget. A new State budget has been proposed. This will go through a series of legislative hearings and changes before being finalized.
Over the years I have developed a fascination with the high handed way this Department has been misappropriating money from the Mobile Home Relocation Fund with impunity to subsidize its feather bedded operations. For essentially a do nothing agency, it sure manages to burn through a lot of money. My interest originates from my representing MHCA and AAMHO in a suit in the early 2000's against the State to stop a sweep of money from this Fund to the State General Fund. We were successful in that effort.
But in recent years the FBLS Department, the supposed guardian/trustee of the Fund, has instead been ripping it off to pay its own expenses, subsidize a high standard of living, and avoid layoffs. A few years ago, AAMHO changed its earlier position that the Fund was sacred and gave cover for this agency to do that. The current leadership of AAMHO appears to have decided that it is important to protect the Fund from the Department and seems once again to be defending the Fund.
An audit last year by the Auditor General found the Department had been "incorrectly" spending Fund monies and recommended it consider returning money to the Fund.
So it was in light of this that I first started reading the "Baseline Book" showing current revenue and expenditure forecasts. You can see it here, starting at page 149: http://www.azleg.gov/jlbc/13baseline/13BaselineSingleFile.pdf
The FY 2013 (which begins July 1, 2012) projection is the same as FY 2012. So it is FY 2012 I am interested in.
In FY 2012 the total withdrawal from the Fund will be $493,700.00. Or nearly half a million dollars. But that includes payments disbursed to people relocating homes out of parks who are covered by the Fund. In 2011 according to the audit report, that came to nearly $200,000.00. So that means that about $300,000.00 will go to subsidize the Department's overhead. That's still way too high and completely indefensable.
But its a whole lot better than in prior years. According to the audit report, in FY 2009, the Department took over $1,314,000 out of the Fund, but only about $119,000.00 was paid to tenants for relocation expenses. So things are getting better.
Then I read the Governor's recommended Budget that was released last week. This Department is covered beginning at page 87: http://www.azospb.gov/documents/2012/FY2013-ExecutiveBudget-AgencyDetail.pdf
The Governor is showing a budget increase of about $33,000.00 over the baseline projection, and is proposing to take $504,500.00 out of the Relocation Fund, more than the $493,700.00 being taken out this year. But still a lot better than in past years.
None of these materials even hints at monies being budgeted to reimburse the Fund for past sums taken, in the words of the Auditor General, "incorrectly" from it.
Don't hold your breath waiting for that to happen. But overall things are getting better and for the first time in years the Relocation Fund is being allowed to grow again.
January 7, 2012
SAFE Act. With the start of the new year I have been getting calls about the need to comply with the SAFE Act. Anyone who has not already read them should review posts on my 2011 Blog (click on page at left). Read the posts for October 29, November 6 and November 19.
To summarize, federal law requires Mortgage Loan Originators (MLO's) to have a federal or qualifying State loan originator license. Federal law includes mobile home loans as "mortgage loans" for these purposes. There is no "de minimus" exception under federal law (i.e., no exception for people originating only one or two such loans per year). All States are expected to enact State MLO licensing codes that conform with the federal law.
Arizona has enacted such a law but it really does not conform to the federal law. It does apply to mobile home loans. Arizona law requires MLO's to be licensed and they must be employed by a licensed mortgage banker or mortgage broker. It is hard to get the MLO license and even harder to involve a mortgage banker/broker or become one.
Arizona has created a "de minimus" exception for people who MAKE five or fewer mortgage loans per year. Not those who originate them but only those who MAKE the loans. The Arizona exception would apply to someone financing five or fewer such loans per year. But it would not apply to people helping the maker to place the loan. These helpers are MLO's and the exception does not apply to them.
Moreover in my view the "de minimus" exception is inconsistent with federal law which is pretty clear that no such exception is authorized under it.
MHCA is going to work to try and amend the State law to strengthen the "de minimus" exception and to let mobile home loan originators become licensed to mobile home dealers, not mortgage bankers/brokers. There will be opposition to this effort. In addition if successful the exception still appears inconsistent with federal law.
For parks financing sales of homes within the community this is a terribly confusing and stressful situation. The safe thing is to have anyone involved in making or negotiating and placing mobile home loans licensed as a MLO. But that is a horribly complex and expensive process. Other possible actions are spelled out in last October 29th's post. None of them is good.
Right now there does not seem to be any enforcement of these laws but with the naming last week of the first head of the new federal agency that will be enforcing this law and the expansion of the federal bureaucracy in recent years, it may be only a matter of time before the law starts getting enforced.
This is a good example of why its necessary for parks to belong to and support MHCA. Its lobbying efforts as shown here are the main reason the legal climate for MHC's is so much better here than in other major MHC States.
Updating Rental Documents. In an eviction case this week an attorney showed up for a tenant and demanded a jury trial, claiming there are significant fact issues and he wants a jury, not a judge to decide them.
This used to be a common tactic of tenant attorneys--demand a jury trial knowing how expensive that will be for the landlord, in the hope the landlord will settle the case on terms favorable to the tenant in order to avoid the time and expense of a jury trial.
Legal fees in an eviction decided by a judge without a jury typically run around a couple of hundred dollars. With a jury trial, that increases tenfold and can come to a couple thousand dollars or more. Over a decade ago landlord attorneys started including provisions in rental agreements waiving jury trial rights in order to avoid these tenant attorney abuses.
Unfortunately this particular park had not updated its rental documents in a long time and there was no jury trial waiver in the rental agreement involved in the case. So this park is going to pay a hefty price for its neglect.
Rental agreement forms in all current and recent editions of MHCA form books have jury trial waivers included. Parks would be well advised to check their rental agreement forms to see if they contain one. If not, update them.
This is kind of like insurance. You don't need it until you need it, and then it is too late to get it.
January 1, 2012
Happy New Year. Here is my opening New Year's post from 2008. Seems appropos today.
To survive the next year, landlords need to do the same kinds of things they should already be doing.
♦ Do not let tenants fall too far behind in rent. If you fall for sob stories or promises that the tax refund or insurance settlement or unemployment check is coming and will be used to pay past due rent, you will be making a mistake. Getting too far behind makes it impossible for the tenant to dig out and seals his fate of having to move or file Bankruptcy. Serve the non-payment of rent termination notice, and if rent is not paid, get the delinquent tenant out of there.
♦ If a home is abandoned, don't just let it sit there and hope someone will come along and "do something" about it. Get a landlord lien sale or bonded title procedure going now. Odds are that no one is going to "do something" and every month you fail to act is the same as flushing a month's rent down the toilet.
♦ Don't fill vacant spaces in Age 55+ parks with underage residents. If the age restrictions are making it impossible to fill vacancies, consider converting to all age status. But pretending to be an Age 55+ community while making exceptions for childless underage applicants will only get you into very expensive trouble with fair housing enforcement agencies.
♦ Enforce your credit and criminal background criteria, even when it hurts. If you have an applicant with the move-in cash but lousy credit or a serious criminal record, it will be more expensive in the long run to give into the impulse to rent to him now and fill a vacancy.
♦ Don't price yourself out of the market. Know what comparable communities are charging for rent and be competitive with them. Landlords often jack rents up to cover expenses without regard to what the market is. People can move but more importantly, prospective renters are unlikely to choose the most expensive place to live.
♦ Enhance amenities and make your place more attractive. A little paint and landscaping goes a long way. Things like Wi-Fi are fairly cheap to put in and can be a good selling point since not many places have it.
♦ Get along with your tenants and their associations. It is amazing how many prospects are driven away by existing tenants telling them what a terrible place your community is and what a tyrranical jackass you are. Make it a point to have periodic meetings with tenant representatives and to act on tenant complaints. Do what you can to encourage them to refer friends to the community and to sell, not complain about the community when encountering a prospective resident looking around.
♦ Don't get crossways with state and local government. Pay taxes and fees when due to avoid penalties. Ensure the community is in compliance with applicable codes to avoid fines. In all your dealings with the bureaucrats, remember the following quote in this morning's Republic from a bureaucrat talking about tax and fee collections:
"Every time we generate another $100,000 in revenue, it probably saves a job. We take a lot of pride in what we're doing," Johnson said. "The more we get everyone to pay their fair share, the more citizens benefit".
To that bureaucrat and thousands of others like him, you are simply a cow to be milked for every dime he can get to save his job and those of his friends. Don't even try to figure out the logic of his claim that the public benefits from worthless unnecessary government jobs not being aboilished. There is none.
It is going to be another tough year. The best way to get through it is to assume no one will be doing you any favors and most people will be out to screw you. Act defensively.
2012 Legislative Program. MHCA is apparently going to try and run a legislative program this year. Hopefully a new positive relationship with AAMHO will allow some badly needed fixes to laws impacting both landlords and tenants to get through.
Look for some kind of bill to relieve landlords financing mobile homes from the worst effects of the federal SAFE Act and the State laws implementing it in Arizona to be proposed. This is desperately needed and MHCA is very much aware of that.
Manager Training. I am scheduled for only ONE Maricopa County Manager training class this year. That is on January 27 in Glendale. If you are a new Phoenix area manager or one who hasn't been to training in around two years and want to take my class, the only chance in this area to go is that class. Contact MHCA at (480) 345-4202 or (800) 351-3350 to register.
FBLS Department. The big question for 2012. Will it be forced to give back some of the money it wrongfully took from the Relocation Fund as the 2011 Auditor General's Report indicates it should or will the whole matter be swept under the rug as has been attempted up to now. If it is required to reinburse the Fund where will the money come from? Will it get a supplemental appropriation, meaning we taxpayers will be forced to subsidize its wrongful conduct, or will it need to cut its operations to free up money for reimbursement?
My bet is it gets swept under the rug. If there is some move to "reimburse" the Fund, it will be a PR move. Don't look for the Department to suffer--in that case it will likely get an extra appropriation to cover the cost. In other words, there will be no consequences for its conduct.
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.
Michael A. Parham
Williams, Zinman & Parham, P.C.
7701 E. Indian School Rd., Suite J
Scottsdale, AZ 85251
Phone: (480) 994-4732
Fax: (480) 946-1211