MEEB SECURES LONG AWAITED VICTORY FOR MOBILE HOME PARK RESIDENTS
Residents of a Cape Code manufactured housing community (a/k/a mobile home park) appear to have won a five-year legal battle to purchase their community. At trial, a Superior Court judge ruled that the residents had not met the procedural requirements for exercising their statutory right of first refusal provided under the state Manufactured Housing Act, clearing the way for an investor to purchase the park. But on appeal, the Massachusetts Appeals Court ruled that the Superior Court erred on several key points of law and fact. The Appeals Court remanded the case back to the lower court and ordered the judge to correct the errors and issue a new ruling based on those corrections.
The appellate decision blocks a trial court ruling that would have made it more difficult for manufactured housing residents to exercise their first refusal rights, contrary to the purpose of the state law, which was enacted to make the purchase process relatively easy for them.
In a manufactured housing community, residents typically own their mobile homes but lease the land on which they are parked. “Mobile home” is actually something of an oxymoron, because most mobile homes are older and can’t be moved easily – if at all – due to their poor condition and modern code requirements. Even if they can be moved, there aren’t many communities in which to relocate them, because most mobile home parks are at or near full capacity. If mobile homeowners are evicted, they often have nowhere to go, making them particularly vulnerable to abuses by less reputable landlords.
The state legislature enacted the Manufactured Housing Act to protect manufactured housing residents and their communities, which are among the few true affordable housing options available to lower income and often elderly residents. The law creates what is supposed to be an easy and straightforward “right of first refusal” process, allowing residents to purchase their park on the same terms offered by a prospective buyer. The process involves presenting to the park owner some proof that more than half the residents support the purchase of the park under the right of first refusal. In practice, this typically involves collecting signatures on a petition that is presented to the owner.
But the Superior Court interpreted the law in a way that made the process more onerous and complicated for residents. Among other issues that troubled the Appeals Court, the Superior Court judge found that the homeowners association had not submitted any verification – “not even so much as a brief sworn statement by its attorney” ꟷ to prove the validity of the petition signatures submitted by the resident association to the park owner. The Appeals Court ruled that no such requirement exists, as “neither verification nor [even] a signed statement” is required by the statute.
“A Heightened Standard”
An amicus brief submitted by the state Attorney General emphasized that point, noting that the statute requires only “reasonable evidence” that owners support the purchase. “A document signed by such persons” meets that requirement, the A.G. said. “The burden is intended to be low,” she added. The attorney general argued that requiring verification would impose “an improper heightened standard” the law didn’t intend. The Appeals Court agreed with this interpretation, which, the court noted, “is entitled to deference.” The Appeals Court concluded, “Nothing in the act required the association to submit verification with the petition, and we will not read that requirement into the act.”
The Appeals Court identified three errors of law in the lower court’s decision:
First, the trial court erred in requiring the association to prove that 51 percent of park owners were members of the homeowners association. In fact, the Appeals Cour noted, “the act requires that a group or association represent fifty-one percent of a manufactured housing community’s resident owners, not that fifty-one percent of a manufactured housing community’s resident owners be members of the group or association.”
Second, the trial court erred in ruling that because the association’s proposed purchase agreement contained a mortgage contingency clause, it was not on “substantially the same terms and conditions” as the cash offer submitted by the private entity seeking to purchase the park, as the statute requires. The Appeals Court said that this ruling failed to recognize how these transactions are structured.
The right of first refusal is typically given to a low to moderate income individuals “in order to allow them to protect their homes even when a third-party purchaser might be able to make more money converting the park to another use, “ the court explained. As a result, “financing is virtually always likely to be necessary to exercise the right of first refusal.” For that reason, the Court said, “the inclusion of a mortgage contingency to a purchase and sale agreement by an association where the bona fide offer is for cash does not take it outside the universe of offers ‘on substantially equivalent terms and conditions’ within the meaning of the statute.”Third, the trial court erred in concluding that the resident association failed to meet crucial deadlines. On this point, the Appeals Court found that the timing problems were created by Crown Communities, the investor seeking to purchase the park. Prior to the deadlines, the court noted, the company filed the lawsuit and recorded a notice of lis pendens (litigation pending) against the property, essentially blocking the purchase transaction. “As the association argues, and as we have held in analogous situations,” the Appeals Court explained, “a party who takes such an action, the purpose of which is precisely to hamper the sale of the property and the ability to obtain financing for it, will not be heard to complain that the statutory deadlines for those actions were not complied with.” Quoting from another decision, the court added, “A party that frustrates, innocently or otherwise, another party's ability to comply with a discovery…cannot with impunity seek to capitalize on the problems its own conduct created.”
Protecting Owners’ Rights
The decision is important not only for the residents represented in this case, who should now be able to purchase their community, but also for Massachusetts manufactured housing residents generally. Had the lower court ruling been upheld, it would have been extremely onerous for mobile home residents to exercise their right of first refusal that enables them to purchase the communities in which they live. The Appeals Court decision makes it clear that the Manufactured Housing Statute is designed to protect the interests of residents who want to preserve their mobile home communities, not to protect the interests of third parties who wish to maximize the value of these properties for investors.
For more information regarding protecting your right of first refusal, contact Thomas Aylesworth.