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Landlords’ Consent Agreements Can Jeopardize Your Rights and Subject You to Liability

Jan 19,2008

Some lenders are now asking landlords of manufactured home communities to sign a document labeled as a “landlord’s consent agreement” or a similar name when making a loan on a manufactured home already existing within, or to be installed in the landlord’s rental community.

Most of the landlord’s consent documents that I have seen were not been by someone having an understanding of Arizona law, Arizona’s manufactured housing industry or the risks landlords are undertaking by signing such a document. In each such instance to date, I have been compelled to advise my clients, as landlords, not to sign such documents.

The landlord’s consent documents essentially ask landlords to voluntarily give up many critical rights and remedies, which can be a dangerous practice for landlords. Below are some of the typical provisions and potential problems I have observed:

  • The lender acquires the resident’s rights under the Rental Agreement, as partial security for the home loan to the resident.
  • The landlord is prohibited from modifying the Rental Agreement, the Rules and Regulations or the Statement of Policy without first obtaining the lender’s written consent. If you are a landlord, good luck getting this accomplished, particularly years down the line. Thus, the lender can prevent you from updating your policies and documents.
  • The lender is released from any liability for unpaid rent, even if the tenant abandons the home. This is directly contrary to the rights given to landlords under the Arizona Mobile Home Park’s Residential Landlord and Tenant Act.
  • The lender can reassign the Rental Agreement or vacate the premises, without any liability to the landlord. Therefore, Landlords can lose control over the rental premises.
  • The landlord gives up its landlord’s lien rights against the home. This is a valuable right that landlords should not readily give up.
  • The landlord gives the lender the right to enter onto the property, without liability, for purposes of removing the home.
  • If the resident defaults under its obligations to the lender, the lender has the right to sell the home to someone else and to force the landlord to accept the buyer as a tenant, subject only to some limited rights of approval by the landlord.
  • The landlord must agree not to terminate the resident’s Rental Agreement, no matter what the resident does, unless the landlord first gives the lender written notice of the default and then gives the lender 60 or more days in which the lender can cure the default. In other words, if the resident fails to pay rent, threatens or injures the management or commits other serious breaches, the landlord cannot timely pursue its legitimate legal remedies under the Mobile Home Act or otherwise.

 Aside from the obvious provisions that are significantly detrimental to landlords, giving up such rights and remedies can subject landlords to potential liability. Under the Mobile Home Act, landlords have certain obligations to all of the residents in their community. For example, if a resident commits a material violation, the landlord may be required to take timely action to address the violation. Similarly, if a resident files a complaint with you or makes a demand that the landlord cure a material violation caused by another resident,  the landlord, can  be in violation of the Mobile Home Act and can  be subject to a lawsuit or administrative complaint if you do not timely address the situation. Unfortunately, if a landlord has given up the right to timely enforce violations as required by law, the landlord is subjecting themselves to unnecessary liability.

Landlords’ consent agreements may work in other States, under different laws and possibly even in Arizona, if properly written. Unfortunately, to date, I have not seen a consent agreement that has been tailored to work in Arizona. I highly recommend that if you are presented with such a document, you have it examined by an attorney who is knowledgeable in this area of law so that you are not signing onto a long-term nightmare and potential liability.

John Buric has a multifaceted practice of law that includes the mobile home/manufactured home and recreational vehicle community industries, landlord-tenant, contracts, construction, real estate, administrative proceedings (including the Arizona Department of Housing), general business law and civil litigation. Knowledge of these practice areas is particularly suitable for serving the mobile home/manufactured home and RV industries. Since the 1980s, John has represented and advised the owners, developers and managers of manufactured home communities and resorts, mobile home communities and recreational vehicle communities in hundreds of matters involving a broad range of state and federal laws, business issues, real estate matters, eminent domain, governmental disputes, contracts, administrative complaints and litigation.
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