Earlier this month the magistrate in my county threw out an eviction filing of mine, after having his “advisor” in Raleigh review my rent credit contract. He did not expressly say who the advisor was other than to say that the person was over all the magistrates in NC. The conclusion was simply that in NC the rent credit agreement is viewed as just another version of “rent to own,” at least as far as small claims court was concerned, and he could not hear any case that involved a rent credit agreement. I actually sat down with the magistrate last week outside of court and he pointed to the specific language in the contract that referenced the possibility that rent credits could be used to purchase the tenant’s home at some future date. The fact that credits had no tangible monetary value, or that the credits were not explicitly tied to a particular home seemed to make no difference. He told me if I divided my “Mobile Home and Lot Rental Agreement” into two contracts, I could come back and evict for unpaid lot rent only. But he couldn’t hear a case that in any way, shape, or form was tied to a contract that involved any sort of implicit or explicit financing of a home.
Right or wrong, I am now in a bind. I can (and will) create a separate lot lease agreement for eviction purposes, but what do I do with the rent credit model now? Many of us have been using rent credit contracts for the past few years, but is there any case law, or legal opinions that we can lean on for some assurance that we won’t get in trouble in the future? If the implications for NC MHP owners is simply that we can’t evict without a separate lot lease agreement, that’s an acceptable outcome. But how sure are we that the existing rent credit contracts are SAFE Act compliant and Dodd-Frank Compliant? The fact that Frank and Dave are successfully using these contracts will be of little comfort to me if I end up in some sort of class-action lawsuit spearheaded by an angry tenant and a zealous attorney.
The experience of the past week has me seriously questioning all my current contracts, trying to figure out what to do next. Is anyone having success with a method of transferring ownership to tenants that does not involve rent credits, and does not run afoul of the SAFE Act?