Can I Give a POH to a Tenant?

14 Replies

With all of the Dodd Frank and SAFE Act concerns around seller financing I'm wondering if I can simply give a POH to a tenant as part of their rental agreement?  What I want to achieve is passing all home maintenance requirements to the tenants of my mobile home park.  The homes in this park are all 70s-80s era homes and really don't have a lot of value.  All need a some repair, mostly minor age related wear and tear, but some need a lot and a full rehab on these would be more than the value of the trailer.

Anyone done this before?  Is this legal under DF and SAFE?   Thanks BP for any input.


@Reid Hanley, as always, please confirm with a local attorney, however, I don't see how giving a home away would fall under DF or SAFE as there is no mortgage involved. If you were to sell the home you would need to check with state regulations for licensing as a mobile home dealer. Giving it away appears to be the same as gifting so maybe check for rules around that? I hope this helps. 

@Reid Hanley I don't see why you can't but I'd have a few concerns:

-Could this be a "gift" under the IRC?

-The tenant has no "buy in" to the asset, so they are less likely to have pride of ownership. I wouldn't expect the condition of the homes to improve from their current state. That may or may not be acceptable to you. 

-Going along with the above, they are more likely to leave in the night if things go sideways because they have no skin in the game. Now you have a non revenue generating lot AND abandoned property on your hands that has more likely than not deteriorated since the last time you held title.

Not what you want to hear and I don't have the details on your park so I could be way off base, but if it were me, I'd:

-Get the homes up to the standard you envision for the park. 

-Sell them off  on Rent Credit or Lease Option. 

Yes, its capital intensive and yes its slow, but it allows you to control both the quality of the home and your tenant base. 

This park is an illiquid long term investment so it will come out in the wash.

also you could donate the homes to a local charity who then make sure the tenants still meet requirements and then you fill it in and get a tax write off. 

Or you can sell it for a $1 literally

Just check state laws on how many you can sell or give Away before you need a dealer license

@Bill F. are Lease-Option contracts DF and/or Safe Act compliant? Like if a tenant is on a separate lot lease, home lease, and option to buy (3 separate documents). 

@Gulliver R. ---not legal advice as im not a lawyer----but anything that is/could be disguised as a mortgage could violate the safe act compliance....that is where some people do rent credit...your familiar with this correct?

anything that is a single family residence/mobile home the safe act/DF applies to it.

look up Ohio's ruling of the mobile home's and renting to own/lease option contracts

Giving homes to tenants will usually result in deterioration of the home to the point that the tenant will simply walk away and you will be left with the cost of demo and replacement. Park tenants that rent have no inclination to maintain anything.

I would attempt to sell the home to a more qualified buyer before I would give up on it and allow a tenant to run it into the ground. Selling it will allow you to put conditions on the buyer that you may be able to inforce. If you give it to a renter you will never be able to inforce any conditions. If they can not afford to own a home they will never be able or willing to maintain a home.

@Gulliver R.  

@Ryan Groene answered for me lol. Could you link to Ohio's ruling Ryan? I could only find anything about Grandfathering parks. I appreciate it man.

 My only non-lawyer additions from what I have read and doing DD on a park with LOs:

No one really knows.  On one hand you have the acts themselves and their text. By the very nature of law there are lots of "what-ifs" that the statues don't address. Usually this is where you could look back at other cases to see what juries/judges had decided.

However, there is not a ton of case law to set president  nationwide. Why? Some say its because DF/SAFE are designed primary for residential mortgages and not MHPs.  The CFBP (or BCFP if your are a stickler) is tooled up to take on people that write hundreds of mortgages a month, not 80 in a year. This could lead them to "not care" about Lease Options/ Rent-to-Own. 

Up to you if you want to hang your hat on the de jure letter of the law or the de facto realities of the situation as it stands now.

The real question is "If I do a LO and the resident fights it what happens?" I'd try and figure out the downside risk. Your State's manufactured housing association is best suited to answer that question, since they can give more color to the federal statues and whatever your state laws say. 

Option C is, you can still write like 5-10 mortgages in a 12 month period without getting listed under DF/SAFE. Look into it more, because there max number changes based on the type of mortgage and has some funny rule on the time frame. 

If you only have a few POHs you want to get rid of that may fit the bill too instead of rent credit, which is fairly management heavy to institute.

@Bill F. understood! Thanks for explaining. Do you think this stupid law will change for the better for us MHP investors? I want to be able to seller finance sell mobile homes to tenant/buyers. Any hunch when we can do that safely?

@Gulliver R. you can seller finance right now, subject to the rules of DF/SAFE. 

The one thing I know for certain is that I am not even close to being plugged in to the going-ons inside the beltway to make a call on DF/SAFE. 

MHCW will have a better idea than any of us;  they and MHI pay lobbyists to know these things. 

Correct me if I’m wrong but I think a MHP owner can sell 3 MHs per year to a buyer via seller finance.  

@Gulliver R. DF/SAFE has all sorts of different rules for who you are and how you do business that dictate the absolute number.

You are a smart guy, so I know you've already joined MHCW. Give them a call and they can point you toward someone who, for a few bucks, will take a look at the specifics of your situation and give you a better answer than some guy (me) on the internet.

Sorry it's taken a while, but I want to thanks @ryan groene, @Bill F, @Thomas S and @Gulliver R for all the input on this topic.  Great points all.  Thanks guys.