One P&S contract for land, one P&S contract for POH's?


#1

Good Morning -

We are in contract to purchase a portfolio of parks with a large number of park owned homes, and I’m wondering if anyone recommends separating the purchases into two separate P&S contracts?

The reason we’re thinking of doing that is:

  1. If an issue arises with the park owned homes (i.e. title, condition, etc) we could re-trade only the purchase of the POH’s
  2. If we run into issues financing the inventory of POH’s, we could request that the seller carry a note on the homes
  3. The parks are located in a “point of sale” reassessment state. By separating the purchases we are discounting the value of the land which will in turn limit our re-assessment exposure.

Any thoughts / recommendations / advice would be much appreciated.

Nick


#2

The points you cite are good ones. Although, you might want to think carefully about the scenario where you end up with a park where a substantial number of MH are owned by the former MHP owner who is mad because you re-traded on the POHs and he had to keep them.

A couple of other thoughts:

If your strategy is to sell off the POH, then having the contracts and promissory notes for the MHP and the POH separated would help. The Seller might want a principle payoff every time you sell one of the homes. You could write that all into the MHP agreement, but a separate POH contract might help keep things more clear.

More importantly, you want to separate ownership of the MHP and the POH for liability purposes. That might be more easily accomplished with separate contracts and promissory notes.

Good luck! Hope it goes well for you.