Master Lease Option Contract


#1

I am looking at a park and the owner is open to doing a master lease option to delay the sale for tax purposes. My question is around due diligence and tying the park up. What document would you use to effectively “put it in contract” or tie it up so I have control of it, allow ample time to do due diligence before then finalizing the terms of the lease option? Does anyone have any examples? I’m looking around and can’t seem to find the answer to this one. Any suggestions would be helpful.
Thanks


#2

I would ask if they would like to minimize their tax gain via owner financing instead of master lease w/ option. You basically get the same benefits - the downside of a master lease you can still put the owner on the hook for certain liabilities and repairs (e.g. major capital expenses like new electric or plumbing lines), which they probably do not want…

However if you do want to proceed with a master lease you’re going to need an attorney with mobile home park experience (not many are out there) to craft that document… and then a separate option to purchase document which would be more standard in line with industry practices.

You will need to consider special procedures alongside the option to ensure you’re able to close at your discretion in line with the option. Especially in cases where you turn a park around as part of a lease the owners will be less inclined to allow your exercise of the option because they think the park is more valuable, at which point you would have to litigate. One way around this is to have a deed put in escrow with terms that stipulate the conveyance of the property.

I am not a lawyer I just know fancy lawyer words. Your mileage may vary.


#3

Thanks @jhutson, appreciate the response. Yes, this sounds like it could take a while to negotiate and I want to tie it up while I’m doing so. LOIs aren’t great, I’m wondering if there is another agreement I could put in place while I negotiate the rest of the details.


#4

Contact me @ mweiss1031@gmail.com

Mike