By Doug Owens
This article is devoted to those investors who own “the dirt” on which mobile homes are situated. Ordinarily owning a mobile home park is considered a good investing business. Rent comes in, the landlord does not have to deal with plugged toilets and overhead is usually favorable. When an investor purchases a mobile home park, ordinarily the park comes with tenants in place under existing leases. A recent case involved a tenant who had negotiated rent cap in her written lease with a park owner who later sold the park to an investor who wanted to raise the monthly rent.
In this case,the tenant had negotiated a written one year lease on a form provided by the park owner, but she had handwritten into the lease a rent cap of $10 monthly increases every other year. She enjoyed this situation for seven years, until the park was purchased by a new investor. Her rent was then $375 per month. Several months after the purchase of the park, the new owner notified her of a $30 per month increase three months later. She began paying $385 per month, based on the rent cap. Two years later the new owner notified her that she would pay $495 per month three months later. She attempted to pay $395 but the new owner rejected the payments and began an unlawful detainer action.
The court considered three issues: was the rent cap prohibited by the Mobile Home Landlord Tenant Act, did the rent cap violate the Statute of Frauds and did the rent cap bind the new park owner? On the first point, the court concluded that because the Mobile Home Landlord Tenant Act is itself a limitation on the landlord’s ability to raise lot rent, requiring three months notice but not otherwise restricting the parties to a lease from agreeing to further limit lot rent increases. Therefore, the negotiated rent cap in the tenant’s lease was enforceable under the Mobile Home Landlord Tenant Act.
The court then proceeded to consider the question whether the rent cap violated the Statute of Frauds. The Statute of Frauds is generally intended to require that certain agreements be in writing and that some agreements in addition be acknowledged before a notary, in order to be enforceable. The Mobile Home Landlord Tenant Act provides that a lot lease is presumed to be for one year and to renew automatically at the tenant’s option, but it does not require the leases to be acknowledged The tenant’s lease in this case had not been acknowledged. The mobile home park owner contended that the general tenancies Statute of Frauds should apply, which would have required that the lease, if for more than one year (under the automatic renewal it would be), be acknowledged before a notary.
The court noted that the general tenancies Statute of Frauds had been in effect since territorial days before there were such things as mobile home parks. The court described the significant disparity in bargaining power between a mobile home park lot tenant and the landlord in that if the tenant objects to a change in the lease the tenant must incur significant cost to relocate the mobile home. The Mobile Home Landlord Tenant Act requires that a lot lease be in writing and signed by the parties, regardless of the duration of the rental. The court found that the purpose of the Mobile Home Landlord Tenant Act was to encourage stable long term tenancies and upheld the lease.
Finally the court considered the new park owner’s argument that the rent cap was not applicable to the new owner because that owner had not been a party to the lease. The court found that because the rent cap burdened the ownership of the park in a way that curtailed the normal rights of a landowner to raise rent, it “touched and concerned” the land and it “ran with the land” so as to bind the new park owner. The teaching of this case is when you do your due diligence on a mobile home park purchase, carefully review the existing leases.
The preceding is intended to be educational and should not be considered legal advice.
About the Author…
Doug Owens practices real estate law and general business law from his office in Seattle. He offers a 20% discount for REAPS members and he can be reached at 206-985-6679 or firstname.lastname@example.org.
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