HOA owns the Mobile Home Park

I am researching on one mobile home park in Texas and the tenants own the land and homes, they pay their monthly HOA fees to cover the water/sewer bills. Has anyone heard about this kind of entity set up? Thanks.

There is an organization that feels mobile home park owners exploit tenants and the world would be better off without park owners. The organization has money behind it supported by the Ford Foundation and an agenda. They are pushing with success state by state legislation that a park owner has to offer their park for sale to the residents and give them first right of refusal. Then they offer low interest loans for the residents to purchase. A not well known fact is that they charge the park for management assistance and guidance ongoing.

The problem for park owners is two fold. The resident owned parks offer lower rents because they are non profit, don’t have to pay taxes, have grants and low financing. Furthermore, they don’t know lot rent has to be high enough to cover future infrastructure repairs. Their rents will be lower than you can offer.

The other problem is when you want to sell your park. No investor is going to incur the costs of due diligence and invest time knowing that the residents can take it with a matching offer, Of course the residents can match the investors offer because they have the organization behind them and no profit. Other complications are that you can’t sell the park to your adult children or relatives which has a lot of people upset. We are seeing a lot of this in the northeast. They have a well financed lobbying effort and keep introducing legislation.

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We are in the process of selling one of our parks to the tenants via the group known as Resident Owned Communities (ROC). But their footprint is small (I think less than 10 states) and doing such a deal is extremely complicated. Most park residents don’t want to own the park they live in, so most of these deals die in the early stage through a lack of interest. I do think that this will be a bigger force going forward, but none of the states we operate in have a “right of first refusal” so we sell to the tenants only when their offer is the best. I think ROC has only closed on around 300 parks since inception, so it’s clearly not a big deal so far. We have no problem with selling to the tenants, all things being equal. But we know from experience that getting these deals is far less likely than selling to a mobile home park owner.

Oregon just enacted a law in 2015 that requires owners to notify residents of a park that they entend to offer the park for sale or if owner receives an offer they intend to consider. Residents have 10 days to notify owner they are interested and then 15 days to form a corporation or other entity to be able to purchase the property. Residents may then request financial and other info. Then they must make a offer to purchase. Owner may refuse. Residents dont have first right of refusal on any offer made on park.

The main exemptions from this requirement are selling to heirs or transactions envoling a 1031 exchange.

Here is the actual text of the law

I believe Florida at least with +55 parks has similiar laws. The section 5 B has a nasty twist and perhaps investors might back off that state since there can be added problems buying and selling. Government seems to know best and wonder how many envelopes changed hands with this mischeif of our benevolant goverment messing around with a businees that generally serves the public well that if people desire other options as per housing they can!!! Wondering if other states are considering such laws and if seller in those states are happy with the NEW regulations!!!

I do not see how, at least upon sale the owner is disadvantaged. The idea is to sell and make a profit assuming the HOA matches the best offer who cares if the community is sold to the residents. Everybody’s money has the same value. Reality is that it will be rare that the residents buy as they can barley scrape together enough to purchase the home and buying a community comes with costs to the home owners.
As far as being able to pass along (sell) to family there are ways around that.
I actually hope to get my residents organised to purchase my community when I am ready to sell but again unlikely as the majority would not be renting if they had the desire or money to own land.

From my experience in Florida people can be loaned money at very low interest rates plus long term when setting up coops and thus owning individual lots vrs. loans they could not get buying a mobile home ln our parks. My initial thoughts are WHY is the government of states seeing a need to do this??? What is their goal and desired outcomes–just trying to see if a patern is developing that needs some light and concern from park owners. Being invovled in many different kinds of businesses I am always suspicious with words like–I am from the government and am here to help. In the USA the loans being given I believe are backed by the government WE THE TAXPAYERS!!! Wanting to see other peoples personal experience with the above discussion.

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I am also very suspicious of government involvement in anything as it usually results in a lot of wasted tax payers money. In this case - government supporting HOA - I can see ways for park owners to take advantage and actually make a much higher profit on the sale of a community. Government incompetence and HOAs having very little financial experience or caring smells like a formula for making money.
The fact that we are a group of community owners we could “assist” each other in insuring the highest possible offer for the HOA to match. With easy money and likely little concern on the part of the HOA I can easily see the potential for this to be a profit bonanza. Too bad for owners that most community residents will not be interested.

Thanks Greg, good idea. Maybe it could be a new stream of buyers totally incompenent of value and might as well suck the cow dry till our government funds another farce some congressman is backing.

It has been our experience that the underwriters in these deals are pretty competent. The only benefit you have over selling to a third party is a slightly lower cap rate and no need for due diligence as the goal is not to make a profit and everyone already lives there. It’s a win/win for both buyer and seller. But, again, the limitations are huge as to which properties qualify and if the tenants even have an interest in it.

I hate to see my hard earned tax dollars wasted but I have no issues with admitting I am a hypocrite when it comes to putting money in my pocket.

A park owner told me they did come in with the highest offer by far. I’d take the money an run too. The problem is you may loose a buyer while they tie it up, demand information and try and make up their minds.

The normal steps are they have to 1) form a home owner’s association 2) elect officers 3) vote to want to buy the park 4) work on buying the park. Most planned purchases by tenants (in our experience) crash and burn on step #3. The majority of tenants do NOT want to buy the park they live in, they prefer to rent the land. To pull off these deals, the tenants have to passionately want to buy it, not just a luke warm interest. Smart tenants realize that there may be capital calls in the future (to replace infrastructure) as well as issues with collections, etc. and all the things that park owners deal with, and they don’t want the responsibility or uncertainty. I believe that one ROC deal to date required a huge 30% rent bump within the first few years to meet their lenders thresholds based on the way things were working out.

The bottom line is that buying out the owner is not the magic solution that some tenants think, nor is it an attitude that is shared by the majority of residents in many parks.

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I will also add that many tenants are finding it hard to run their park as well as the professional landlords, especially when it comes to collections and rules enforcement. They don’t seem to miss their landlord until they have to do it themselves, and then it’s too late to ever go back. Having the tenants manage themselves is hard work, sometimes similar to nailing jello to a wall.

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Hey Frank,

Do you know which states must give tenants the First Right of Refusal to purchase other than Florida and now Oregon?

If I understand the FL law correctly, you only have to notify them and offer it to them at the asking price. If a 3rd party makes a lower offer you do NOT have to go back to the residents again with the lower offer and give them a chance to match it.

Thanks for sharing your knowledge, everyone! I will pay some attention to this trend!

Interested thing is I drove by this park and it caught my attention because some distressed signs I saw, such as the faded park signage, the tall grass at the common area, tires, auto parts & old furnitures piled on the side of trailers, etc. Guess the HOA did not do its job!

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