Insight Best Practices for Landlords in Manufactured Home Community Leasing

This blog provides an overview of Idaho law and leasing in manufactured home communities.

Background

Manufactured home communities (“MHCs”) operate on a land-lease model where residents own their homes but rent the land (aka “pad” or “lot”) underneath the home. Typically, the landlord owns the land, roads, utility infrastructure and associated amenities (such as parks, pools, and clubhouses). The landlord or its manager often enforces community rules, such as landscaping and parking regulations, passes on some provided utility services, offers third-party utility hookups, and provides property maintenance services. Periodic fees paid by tenants to the landlord in consideration for occupying the land (referred to in this blog as “Base Rent”) are commonly paid in monthly installments, and are often calculated to cover the landlord’s out of pocket costs, including garbage collection, water/sewer/septic services, property taxes, insurance premiums, and infrastructure and common area maintenance. Tenants sometimes pay landlords additional fees for other incidental property-related services, and may pay fees for violating the lease or rules, such as late payment fees, etc.

Generally being more affordable than traditional site-built homes which are owned together with the fee estate in the land, MHCs allow for homeownership by lower-income individuals. However, there are inherent risks to the homeowners and residents in MHCs because of the limited leasehold estate and the physical characteristics of manufactured homes, which are still sometimes referred to as “mobile homes” or “trailers”, using the vernacular for structures built prior to the 1976 HUD Manufactured Home Construction and Safety Standards. Under the 1976 HUD standards, manufactured homes typically have pier and beam foundations allowing for relocation of the homes by specialized contractors. But despite this potential for relocation, manufactured homes are not really mobile, in that they are intended to be relocated only once (from the manufacturer’s yard to the MHC). These factors create an obvious risk to tenants and residents of MHCs arising from the potential for increases in rental rates due to rising land values and costs, leading to the risk of eviction, and an attendant difficulty in moving the home if an eviction occurs or the MHC closes.

Idaho Law

The Manufactured Home Residency Act, first codified in Idaho in 1980 at I.C. § 55-2001, et seq. (the “Act”), governs the tenancy relationship between Idaho landlords and tenants in MHCs, and apparently sought to address some of the risks to homeowners in MHCs. At the outset, the Act provides that “[e]very duty under this chapter and every act which must be performed as a condition precedent to the exercise of a right or remedy under this chapter imposes an obligation of good faith in its performance or enforcement.” This good faith duty is an overriding concern for both parties, including as to the landlord’s charge and the tenant’s payment of Base Rent. Other Idaho law, including but not limited to, Chapters 6 (specifically, sections 6-303 to 6-321) and 55, Idaho Code, also govern the relationship between landlords and tenants in MHC leasing.

Best Practices of Landlord

Following is a general summary of some of the rules applicable to MHC leases under the Act which a landlord should keep in mind. This is only a summary, and doesn’t cover all of the rules applicable to MHC tenancies.

• The Act applies ONLY to tenancies where the landlord owns the lot, and the tenant or a third party owns the home, and the landlord rents the lot to the tenant for placement of the home.
  • The Act doesn’t apply if the MHC contains only one lot.
  • The Act doesn’t apply when the landlord also owns and rents the home to the tenant (or the tenant is renting-to-own the home from the landlord).
  • The Act doesn’t apply to lots rented for use by recreational vehicles or travel trailers.
  • The Act doesn’t apply if there is an employment relationship between the landlord and tenant.

• The landlord and the tenant must act in “good faith”.
  • “Good faith” generally requires the party to be fair and reasonable. A party acting in good faith does not try to unfairly and unreasonably deprive the other party of the benefits of the contract.
  • The landlord may not act in retaliation against a tenant who complains in good faith about safety or health code violations, or the rent charged, or MHC rules, or who organizes a homeowners association, or retains an attorney for help with their tenancy.

• Lease agreements have certain requirements and presumed terms.
  • Lease agreements must be in writing.
  • Lease agreements must be executed in original duplicate by landlord and tenant, each receiving a duplicate signed original.
  • At minimum, the lease agreement must contain: the Base Rent amount, instructions on how to pay the landlord (time and place for payment), all other charges to be paid by the tenant to the landlord, a description of all utilities and services included in the Base Rent, the current MHC rules, the name and address of the MHC manager, the name and address of the MHC owner or their agent, and the amount, terms and conditions of any security deposit.
  • If the landlord amends the lease agreement, it must give the tenant 90 days’ advance notice.
  • The landlord cannot amend the lease agreement more often than once each 6 months.
  • If a resident fails to sign and return to the landlord a new or amended lease agreement, but continues to possess the lot, the landlord can consider the new or amended lease agreement to be enforceable against the resident as its tenant, effective 90 days after advance notice is given to the resident/tenant.
  • Lease agreements are automatically renewed for the original lease term unless timely notice is given to non-renew by the landlord or the tenant.
    • The landlord must give the tenant 90 days’ prior notice of non-renewal.
    • The tenant may end a tenancy by giving 30 days’ notice to the landlord prior to the end of the lease term (unless the tenant is a member of the armed forces or has a change in its place of employment, in which case, the tenant may give shorter notice).

• There are statutory provisions regarding Base Rent charged.
  • Idaho law does not control the amount of Base Rent that can be charged by a landlord, and it does not allow an Idaho city or county to control the amount of Base Rent charged.
  • The landlord must give 90 days’ notice to the tenant of a change to Base Rent.
  • Base Rent increases must be uniform throughout the MHC, unless Base Rent is structured by tiers, in which case, Base Rent must be uniform within each tier.

• There are statutory provisions regarding other charges.
  • Fees and utilities may be charged as a part of Base Rent, or in addition to Base Rent.
  • The tenant’s share of taxes, utility charges and other service charges may be increased from time to time, if the actual cost of those third party charges billed to the landlord have increased; but the landlord must give the tenant 30 days’ notice of the increase, and the lease must provide that landlord can pass that increase on to the tenant.
  • Security deposits must be recorded in a separate ledger; upon termination of the lease, the security deposit must be returned to the tenant, unless it is used to compensate the landlord for a default under the lease (like necessary repairs, or failure to pay rent).

• There are statutory provisions regarding rules of the MHC.
  • Rules are enforceable only if they are made a part of the written lease agreement. Rules can be stated in a separate document if that document is integrated into the lease agreement.
  • Rules are not enforceable without the tenant’s consent, unless the tenant is given 90 days advance notice.
  • Rules must be fairly and uniformly enforced.
  • Rules must state their effective date.
  • Residents may form a homeowner’s association. The homeowners association has the right to meet on the MHC grounds. The homeowner association must give the landlord the names and addresses of 3 of its members every year. The homeowners association does not have any special collective bargaining or other legal rights under Idaho law.

• There are statutory provisions regarding how a party may end a tenancy early.
  • The tenant may not end a tenancy early.
  • The landlord may end a tenancy early for any of the following causes:
    • Substantial or repeated violation of the lease agreement or rules. The tenant must be given notice to comply, then an opportunity to cure, then a notice to vacate.
    • Nonpayment of rent. The tenant must be given notice to comply, then an opportunity to cure, then a notice to vacate.
    • Closure of the MHC. All tenants must be given 180 days’ advance notice.
    • Abandonment of the home.
      • If the tenant fails to pay rent for 60 days, or the landlord reasonably believes the tenant has left the home and has no intention to return, or if the home is unoccupied or uninhabitable because of its condition, the home is deemed “abandoned”.
      • If a home is abandoned, the landlord must give notice to the lienholder before taking steps to end the tenancy. Specific rules apply to lienholder rights.

• There are statutory provisions regarding how a landlord must give notice to a tenant. The following also includes some best practices advice.
  • The landlord should always give notice in writing, directed to the specific tenant at their own address, in a dated document.
  • Notice to a tenant must be sent by first class mail, certified mail, or given by personal delivery. If given by personal delivery, the landlord or its agent should hand the notice directly to the tenant or an adult resident of the home, and document the delivery occurrence in its records.
  • Notices for eviction have special service rules.

The application of the law discussed in this blog to specific facts will change as those specific facts change. Each party to a lease contract should consider their own particular circumstances and read the law with those in mind. This blog is intended to give general guidance for further consideration, and is not intended to be relied upon by any particular party. No landlord should rely upon the analysis in this blog without considering its particular circumstances, and seeking its own legal advice from a qualified attorney licensed to practice law in the state of Idaho.

This blog is provided by Hawley Troxell Ennis & Hawley LLP for educational and information purposes only. It is intended to notify our clients and friends of certain events or issues. It is not intended to be, nor should it be, used as a substitute for legal advice regarding specific factual circumstances. © Hawley Troxell Ennis & Hawley LLP all rights reserved.

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