NY A.G. Announces Major Settlement with Manufactured Home Park Owners to Reform Rent-to-Own Practices

Attorney General Barbara D. Underwood announced that – following her office’s industry-wide investigation into rent-to-own practices of the manufactured home park industry – eight major corporate owners have agreed to major reforms of their practices. As part of the settlement announced today, the owners must make significant reforms to their practices, including reimbursing tenants for any down payments and other costs expended and allowing tenants to rescind their Option to Purchase Agreement.

Key findings of the Attorney General’s investigation into manufactured home rent-to-own contracts included that:

  • Optionees usually make a significant upfront, non-refundable payment. If the optionee defaults before the end of the option period, they are subject to eviction and forfeit their deposit.
  • Title to the subject manufactured home does not transfer to the optionee until the end of the option period and then only transfers if the optionee has made timely rental, insurance, and property tax payments and performed all repairs and maintenance throughout the option period.
  • In almost every case, rent-to-own contracts include indemnification provisions that hold manufactured home park owners harmless against all damages, claims, and penalties arising from injury anywhere in the manufactured home park.
  • Optionees agree to take the manufactured home “as is” and are responsible for all repairs, restoration, extermination, and maintenance to the home throughout the option period.
  • Contracts do not require that “clear” title, free of superior interests, liens, or encumbrances be transferred to the optionee at the end of the lease term. The optionee takes title “as is.”
  • Contracts prevent optionees from protecting their interest by recording the Option Agreement.

As part of today’s settlement, eight manufactured home park owners, which together own over 100 manufactured home parks in New York State, agreed to the implement the following reforms, which will apply to both existing and new contracts:

  • Optionees with existing rent-to-own agreements will be permitted to rescind their Option to Purchase Agreement and receive reimbursement of any down payment paid, as well as all costs expended by the optionee for maintenance, non-minor repairs, and taxes.
  • Rent-to-own contracts will no longer contain indemnification provisions holding a manufactured home park owner harmless for damages, claims, and penalties arising from injury to the optionee.
  • The agreed upon fair market value purchase price of the manufactured home will be based on the information provided by the NADA guides, MH Connect, or other similar independent systems or publication(s).
  • Contracts will include the following statement in capital letters in any of their Option to Purchase agreements: “THIS IS NOT A CONTRACT TO BUY” or “THIS IS A CONSUMER LEASE WITH OPTION TO PURCHASE; YOU WILL NOT BE THE OWNER OF THE HOME UNTIL YOU EXERCISE THE OPTION TO PURCHASE.”
  • Park owners will return down payments within 45 days after the end of the lease term if the optionee chooses not to exercise the option to purchase on the subject manufactured home.
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Those seem like reasonable reforms. Not a very harsh settlement.

Very interesting post, thank you for sharing. This is the first case of this kind I’ve seen.

Basing home prices on NADA is silly, but everything else seems fairly reasonable in this settlement.

One important item the article doesn’t address is if the park is still able to place any maintenance responsibilities on optionees/renters. That’s a pretty important detail.

One interesting item is how small the fines were that were levied on the parks.

Have the recent modifications to Dodd Frank made it any easier to offer seller financing?

The law is not ambiguous. New York law clearly states the following:

Landlords of multiple dwellings must keep the apartments and the building’s public areas in “good repair” and clean and free of vermin, garbage or other offensive material. Landlords are required to maintain electrical, plumbing, sanitary, heating and ventilating systems and appliances landlords install, (such as refrigerators and stoves), in good and safe working order. All repairs must be made within a reasonable time period. Such time period may vary depending upon the severity of the repairs.