Purchasing & Selling Mobile Home Parks in Maryland

Under the Manufactured Housing Modernization Act of 2023

 

This Article provides an overview of Maryland laws governing the purchase and Sale of mobile home parks and manufactured housing communities

The Manufactured Housing Modernization Act of 2023

When investors and developers purchase existing mobile home parks in the State of Maryland, it can be a disruptive experience for the mobile home owners who rent lots in these communities. The new park owner may significantly increase lot rent or may announce that the property will no longer be used as a mobile home park, requiring the park residents to relocate or even abandon their mobile homes.

The Manufactured Housing Modernization Act of 2023 (“MHMA”) seeks to address these issues by imposing conditions that must be fulfilled before a park owner can accept an offer to purchase a mobile home park. In short, if the potential purchaser does not intend to continue using the property as a mobile home park for at least 5 years or will not agree to limit rent increases for 3 years, then the park owner must afford the park residents an opportunity to purchase the mobile home park community.

The MHMA is effective October 1, 2023, and amends the Maryland Mobile Home Parks Act of 1980 (“Mobile Home Park Act”) by incorporating new statutory provisions codified in the Maryland Real Property Article, Sections 8A-1801 through 8A-1806.

The New Mobile Home Park Terminology

The Mobile Home Park Act, as amended by MHMA, now refers to both “mobile” and “manufactured” homes. The new sections of the Act, added by MHMA apply to, and use the term, “manufactured homes.” Below is an explanation of the terminology as used in the statute and in this article.

Manufactured Home: The terms “manufactured home” and “mobile home” are synonymous and overlapping. Both refer to factory-built homes, but “manufactured home” is the more precise and modern terminology. For an article discussing the difference between the terms “manufactured homes” and “mobile homes,” see Manufactured And Mobile Homes In Maryland. This article uses “manufactured home.”

Manufactured Housing Community: The terms “manufactured housing community” and “mobile home park” are also synonymous in that both refer to a residential community located on property that is divided into two or more lots that are leased to owners of manufactured homes (“homeowners” or “residents”). This article uses “manufactured housing community” or simply “ community.”

Manufactured Housing Community Owner: The terms manufactured housing “community owner” and mobile home “park owner” are synonymous in that both refer to a person or entity who owns a manufactured housing community. This article uses “manufactured housing community owner” or simply “ community owner.”

Homeowner: The terms “homeowner” and park “resident” are also synonymous in that both refer to an owner of a manufactured home who leases or rents a lot in a manufactured housing community for residential use.

Homeowners Organization: The term “homeowners organization” means an organization that represents the interests of the homeowners in a manufactured housing community and is comprised of at least 75% the homeowners who rent lots in the community.

Pre-Conditions To Accepting an Offer to Purchase a Manufactured Housing Community

An owner of a manufactured housing community (“community owner”) that receives an offer to purchase the community cannot accept the offer without fulfilling one of the following 2 statutory obligations:

(1) Affidavit of Continued Use: the prospective purchaser files an affidavit stating its intention to continue operating the community for 5 years with a 10% cap on rent increases for 3 years ; or

(2) Homeowners’ Opportunity to Purchase: the community owner discloses the details of the purchase offer and allows the homeowners an opportunity to make a matching or competing offer on substantially similar terms.

Effective October 1, 2023, “acceptance” of an offer to purchase a manufactured housing community is “conditioned on” the fulfillment of one of these two options. There are exceptions to this law, including sales among family members, sales incidental to financing, sales among owners of the community, eminent domain sales, foreclosure sales, and certain sales involving mergers or recapitalization.

A.  Purchaser’s Affidavit of Continued Use as Manufactured Housing Community

Compliance with MHMA is relatively simple if the prospective purchaser intends to continue using the property as a manufactured housing community and is agreeable to statutory limits on rent increases for 3 years. In this case, a community owner may accept the offer to purchase a manufactured housing community if the purchaser agrees to file an affidavit in the land records office of the county in which the community is located, confirming that:

(1) the land will continue to be used as a manufactured housing community for 5 years after the purchase date; and

(2) rent will not increase by more than 10% per year for the first 3 years after the purchase date.

The purchaser must provide notice of the affidavit to each homeowner via first class mail and post a copy of the affidavit in a public area of the community.

The purchaser’s affidavit provides assurance to the homeowners that they will have at least five years to reside in new community under the new ownership and 3 years with predictable rent increases. This affords homeowners time to decide whether to continue living in the community under the new ownership as well as time to change their living circumstances if desired.

If the purchaser does not live up to its affidavit it will be liable to the homeowners organization for $10,000.

B.  Notice of Intent to Sell and Homeowners’ Opportunity to Purchase

A prospective purchaser may not want to file an affidavit of continued use, either because it does not intend to continue using the property as a manufactured housing community or is unwilling to limit rent increases. Whatever the reason, if the prospective purchaser will not agree to condition the purchase on the filing of the affidavit, then the community owner must alternatively give the homeowners notice of its intent to accept the offer to purchase the community including a description of how the homeowners can make their own competing offer to purchase the community. The notice must conform to the following requirements:

(1) Notice of  Intent Accept Offer to Sell: each homeowner in the manufactured housing community must be provided with notice of the terms of the offer or the actual contract to purchase the community which the community owner wishes to accept or has conditionally accepted on compliance with the statute. The notice must include the price, material terms and conditions of the offer and any evidencing documentation. The notice must also be given to the Maryland Department of Housing and Community Development (“DHCD”) and the appropriate housing agency for the county and/or city in which the community is located.

(2)  Statement of Homeowners’ Opportunity to Purchase: The notice of intent to accept an offer, must also contain a statement advising the homeowners that they may purchase the manufactured housing community through a homeowners organization by submitting an offer on substantially similar terms to the offer that the community owner wishes to accept from a third-party prospective purchaser. The homeowners organization must submit this offer within 60 days of the mailing date of the notice. The notice of this opportunity to purchase must also list organizations and agencies available to assist homeowners with financing for the purchase of the manufactured housing community.

This notice, referred to as a “notice of intent to sell a manufactured housing community” must also be posted in a public area of the manufactured housing community and be sent by registered or certified mail to the homeowners organization. The statute does not specify how the notice of intent to sell must be provided to each individual homeowner and DHCD. It would be prudent to at least mail the notice by registered or certified mail as the statute refers to “mailing” as the starting date for the 60-day period within which a homeowner organization must submit its offer to purchase. It would also be prudent deliver notice by hand delivery or certified mail, return receipt requested, to avoid a notice compliance issue from arising, especially if there is no homeowners organization to receive notice.

Within10 days after providing its notice of intent to sell, the community owner must “make available to the homeowners organization” the same information about the manufactured home community that it provided to the prospective purchaser “or would provide to other prospective purchasers.”

Homeowners Organization Offer To Purchase

Once the notice of intent to sell the manufactured housing community is given, the homeowners organization has a 60-day period to offer to purchase the community. The statute sets forth the procedure by which the homeowners organization may make this offer.

A.  Creation of Homeowners Organization

If a homeowners organization does not exist, the homeowners who wish to make an offer will need to create one in a short period of time. A homeowners organization can be an incorporated or unincorporated organization, including a cooperative housing corporation formed under Maryland’s Cooperative Housing Corporation Act (Md Corps & Assns Article § 5-6b-01, et seq.). If a Homeowners organization exists at the time a notice of intent to sell is made, it will be in a better position to make a timely response within the 60-day period allowed by statute. To qualify as a “homeowners organization,” it must:

(i) be open to all homeowners;

(ii) represent the interests of the homeowners;

(ii) be controlled by members of the organization; and

(iv) be comprised of homeowners who lease or rent at least 75% of the lots in the manufactured housing community.

B.  Contents of Homeowners Organization’s Offer To Purchase

The homeowners organization may offer to purchase the manufactured housing community by notifying the community owner of its intent to purchase the manufactured housing community within 60-days of the mailing of the community owner’s notice of intent to sell. This notification must be sent to the community owner by registered or certified mail and contain the following:

(i) Documentation indicating that at least 75% of the resident members of the homeowners organization voted to purchase the manufactured housing community; and

(ii) A proposed agreement to purchase the manufactured housing community, containing terms substantially similar to the terms described in the community owner’s notice of intent to sell.

Community Owner Consideration of Homeowners Organization Offer

The community owner is not required to accept the homeowners organization’s proposed agreement to purchase the manufactured housing community. However, it must “consider the offer in good faith,” and has a statutory duty: (1) not “to act to scuttle all the proposed agreement;” (2) “not to arbitrarily or capriciously refuse to proceed with negotiations;” and (3) “not to engage in misconduct or dishonesty in the negotiations.” RP § 8A-1804(c)(1). If the community owner “willfully fails” to comply with these obligations and duties it will be liable to the homeowners organization for $10,000.

The community owner’s statutory obligation to consider offers from the homeowners organization ends once the 60 days period expires without an offer being made. Likewise, even if the homeowners organization makes a timely offer, the community owner is not required to consider “additional offers” from the homeowners organization after the 60 days period expires.

Community Owner Acceptance of Homeowners Organization Offer

If the community owner enters into an agreement with the homeowners organization based on its offer to purchase the manufactured housing community, the homeowners organization must be given at least 105 days after the date of the agreement to obtain financing and close the purchase unless the parties agree to an alternative period (the “allotted financing period”). However, the community owner’s statutory obligation to consider offers from the homeowners organization ends if the homeowners organization is unable to obtain financing and fails to close in the allotted financing period.

Assignment Of Homeowners Organization Right to Make an Offer 

A homeowners organization may assign its statutory right to make an offer to purchase a manufactured housing community to a state or local government agency or nonprofit that intends to purchase the property for purposes of continuing its use as a manufactured housing community, providing affordable housing.

Notice of Contract of Sale

A community owner that moves beyond the offer stage and enters a contract of sale, either with the homeowners organization or a third-party, must give prior notice of the sale to each homeowner and DHCD. The notice must be given 30 days before the date of the sale and posted in a public area of the manufactured housing community.

Relocation Plan for Change in Use of Property

If the new owner wishes to close the manufactured housing community and use the property for another purpose, it is required to apply for a change in land use with the appropriate local government agency (county or municipal corporation) where the community is located. The application must include a relocation plan for the homeowners who are also entitled to receive a 1-year prior written notice of termination of their rental agreements.

NOTE ON MOBILE HOME PARK ACQUISITION LEGAL ADVICE

This article should not be considered legal advice as to any specific purchase of a mobile home park in the state of Maryland. Each transaction regarding the purchase and sale of a manufactured housing community requires individual evaluation to determine the applicable laws and the strategies available for mobile home park acquisition. For a free consultation, contact Cowie Law Group, P.C., a Maryland mobile home park law firm with Mobile home park attorneys and manufactured home community lawyers assisting clients with the purchase and acquisition of mobile home parks in Maryland and providing legal advice regarding the sale and on-going operation of manufactured housing communities throughout the state of Maryland.

MARYLAND MOBILE HOME PARK ATTORNEYS

MARYLAND MANUFACTURED HOUSING COMMUNITY LAWYERS

Maryland and Washington DC Real Estate Law Attorneys

410-327-3800 | 301-830-8315

cowielawgroup.com

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