Frank or Dave (or anyone using the rent credit program):Do you still use this program? I would like to implement this in my community in Ohio but two questions come to mind. 1. Would the courts hold that an equity position was being created thereby causing an eviction to (eventually) become a foreclosure?2. What happens to the tenants’ credits in the event the property is sold?
Yes, we still use this program. I believe that it was originally adopted by Sun Communities (the nation’s second largest REIT)You are not creating an “equity position”, if you have set it up properly. Confer with your state MHA. This is a rental. Nothing more. You give the tenant “credits” for customer retention, no different that Southwest Airlines does. I know someone who has over 1 million Rapids Rewards points with Southwest. They cannot be sold or traded. They are his as a gift from Southwest, but do not create an equity position, If they are not used, then Southwest does not care. It’s the customer’s prerogative to use them or not.If the property is sold, the new owner assumes any rent/credit reward balances. Since most park owners prefer to have the customer be the homeowner as soon as possible, this has never been a problem to date.Before you adopt such a program, however, be sure to learn everything you can about the SAFE Act and Dodd-Frank rules in your state. Consult your state MHA and seek their counsel. It’s also a good idea to read up on the internet on every related article. Be an expert yourself on this topic, as there is still not case law regarding SAFE Act and mobile homes, and nobody knows 100% what works and what does not. But there are two givens that most operators assume under SAFE and Dodd-Frank, and that’s that rentals and cash sales are exempt. However, the typical “Rent-to-own” construction that many moms and pops use is now defined as a “disguised mortgage” and not allowed.
Thanks for your reply. I have our attorney looking into the state rules.