We’re under to purchase a park and through the title review process our lawyer uncovered a Land Use Contract that was executed between a previous owner of the park and the City about 15 years ago. Most of the stuff in the contract is pretty generic (setback rules, tie down requirements, etc.), but there is one provision that is an issue…
It states that if occupancy every dips below 40% for any 6 month period, the park loses its grandfathered status and would have to comply with current zoning…meaning it could no longer operate as a park since the current zoning is for standard residential, not MHP.
We’re buying the park at 50% occupancy, so it’s teetering close to the 40% number currently. We plan to increase occupancy once we close on the park, but there’s also the chance according to our lawyer that if occupancy dipped below 40% at some point in the past 15 years under a previous owner, the City could come back in the future and use that to shutdown the park.
Anyone seen this type of contract provision in the past or have any recommendations for addressing it?
Would you go to the City and see if they’re willing to amend the agreement to remove the provision or at least update it so that it only applies moving forward? Would you kill the deal? Would you accept the risk and close on the deal anyway?
What are your state laws regarding grandfathering? The municipality may not be able to enforce that deal anyway… I suggest you call your state MHC association or get a municipal attorney and find out.
Definitely need to get a legal clarification on the issue. The seller may have cancelled your grandfathered status which makes the park worth less. What if a tornado rips through and puts you below the 40% threshold?
You would be wise to consult with an experienced attorney on this issue. At first read, it seems that the land use cannot expire. However, it seems that the prior owner may have agreed to the land use status being revoked. I would question if the prior owner’s agreement to have it revoked is legally valid. This is a complex legal situation and requires a review of the local ordinances.
I certainly would not accept the risk unless you are a lands speculator.
Agree only in-state lawyer can answer.
As a practical matter you can appeal directly to the City Council. This is what we did on at least one occasion. If the political temperature is favorable, you can ask for a new deal. If the political temperature is unfavorable, you will never succeed against City Hall and you should back away from the deal for this reason.
I would look at how the City ordinance’s sunset provisions differ from this agreement - if it’s drastic then I’d try to have your agreement amended or otherwise nullified before closing. Try to get an understanding why the agreement was drafted in the first place as you might be able to pull other levers to alleviate the city’s concerns, and use it as an opportunity to have the city take on road maintenance or utilities services for the tenants, if not already.
At the most basic level - you need an affidavit from the city (whichever department is appropriate) stating that there have not been any violations of this agreement since it has been executed. As others have mentioned - get legal counsel to advise you. This is the peanut gallery.
Thanks everyone for your earlier responses and advice on this topic. I thought I would update the post with the end of the story…
After a number of attempts to engage the City to see if they would be willing to remove the vacancy clause from the land use agreement, the City’s Zoning Director decided to drive over and take a look at the park… the City then came back to us with a list of zoning non-compliance issues and said that they would be willing to remove the vacancy clause if we would put forth a written plan to bring the park into compliance with all of the City’s MHP zoning regulations.
The issues that they wanted resolved included adding a storm shelter, putting down concrete parking slabs on each lot, repairing or replacing the exterior fencing around the park, converting the road from gravel to asphalt, and some other items.
With all the capital needed to make these changes the numbers no longer worked for us on the deal.
The city got what they wanted in this one. They prevented a sale, which eventually can lead to closure of the park. Eventually the owner will want to sell, but perhaps cannot find a buyer.