City not Honoring Grandfathered Usage - How to Shape the Deal?

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I know this topic is already covered in extensive detail, but haven’t discussed how to look at it when shaping your deal.

Looking at a Park in a smaller town with lots of anti-MHP ordinances - are saying this non conforming Park cannot freely move homes in - only out. I know this is wrong and could / should be reversed, but for a certain cost and time. There is lots of case law for this stuff in this state.

Has anybody knowingly gone into a deal knowing they would have to address this with the City? Do you make this a contingency for the deal to close and offer using your typical approach - or optionally adjust the offer to get a good deal and work it out later?

I hear sometimes it’s as simple as a $250 phone call between my attorney and the city’s, but what’s the high side look like? How much of a discount would you ask for on a Park like this assuming you would close before working with the City - assuming it makes 50K NOI (and dwindling) for easy reference. Thanks for any thoughts or alternative approaches!

Adding the seasoned pros @frankrolfe @Jefferson

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Thank you for throwing me into the same ‘seasoned’ category at Frank. He’s the seasoned one; I’m just a bit … salty. :relaxed:

We’ve never faced this exact issue and timing. I’d certainly not walk away from a deal just because of a few ignorant folks on a City Council. I think it would be a good idea to try and get a price adjustment since you will definitely have to spend a few bucks on legal fees to get the City to straighten up and fly right.

I’d do the following:

  1. Explain the problem to the seller and ask him what he’d think would be a fair discount
  2. Call a local attorney with requisite experience and ask him/her what cost it’ll be to make this right (do this first)

Hopefully #1 exceeds #2 and you agree to a cost reduction. That said, if this is a great deal, then even if the seller won’t budge on price, you probably just go ahead and buy it and eat the legal fees (which I would not guess would be more than $5,000 worth of small-town attorney time).

Your mileage may vary,

-Jefferson-

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Thanks for this @Jefferson - good steer.

It seems like time and frustration is the biggest variable, and that has value too (specifically, for me).

I wonder if a Park like this that has suffered over the years can be compensated for past loss of rent (e.g. I could have a full Park and a sustainable business if not for the City’s illegal actions) - probably not but might be a fun place to start the conversation with the City.

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I would not close on the park until you have the following items in hand:

  1. A Certificate of Zoning from the city showing how many lots the park is allowed to have and whether the park is 1) legal conforming 2) legal non-conforming (grandfathered) or 3) illegal. This brackets down their argument substantially.

  2. A roster of any outstanding code violations from the inspector (typically none). This brackets them down even further.

  3. An understanding from the city that they are going to respect your property rights under grandfathering, including bringing in homes any time you want.

Not having these items in hand is as dangerous as not having a Phase I. If you have to go to court, the legal fees could easily exceed $25,000 to $50,000, but even worse, you might lose and the park is doomed.

Don’t let a city push you around – definitely bring in a lawyer and press for your rights. But don’t proceed until it has been resolved.

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I agree with Frank. I walked from a deal, partly because of this very issue, but the deal had other issues as well. The city was being obstinate about and wouldn’t budge.