This is a multiple part series on a private owner of a Manufactured Home Community willingly attempting to sell that Community to an Association of tenants within that Community. Riverbend MHP is a 39 space community located within the city limits of Clatskanie, OR. The motivation of the seller was discussed in the first part. In this second part, the owner meets with the Deputy Director and the Real Estate and Cooperative Development Manager for CASA of Oregon. The framing, presentation and negotiation of the “Agreement to Purchase” is discussed.
In this second part, the owner meets with the Deputy Director and the Real Estate and Cooperative Development Manager for CASA of Oregon. The framing, presentation and negotiation of the “Agreement to Purchase” is discussed.
By Dale Strom
Dale Strom is a second generation Manufactured Home Community landlord. He is a Board Member, past President and current Treasurer of MHCO.
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My process started when I reached out to a Deputy Director of CASA. I explained that I owned a park, was interested in selling that park, was not interested to make a 1031 exchange and my motivation is the exemption of the Oregon Capital Gain tax.
CASA was immediately interested in my situation. They wanted to see statements, park rules and regulations, contracts with current suppliers and other obligations and agreements that were previously made. They also wanted the names of one possibly 2 tenants that could be interested in forming this Association or buyers group. I asked for my price and a signature on the bottom of a confidentially agreement. I got the signature, they got the information they wanted. The information that I provided was sent to CASA’s Real Estate and Cooperative Development Manager to crunch numbers and make an onsite visit to justify my asking price for my park.
After about 2 weeks of silence, I received a 13 page “Agreement to Purchase” my community. Now it was my turn to look at all 13 pages and go over this with my personal attorney. Even before conferring with my attorney, some items in the offer struck me as not common to the sales process in properties that I have bought or sold in the past.
First, the Ernest money offered was only $10,000. A small amount for the size of this transaction. Second, an appraisal would be ordered on the park within 90 days. If an appraisal is less than the purchase price, CASA reserves the right to negotiate the purchase price or terminate the sale agreement within 10 days. Third, the closing would occur 6 months after my signature on the “Agreement to Purchase” contract. And if 6 months wasn’t long enough, two (2) thirty (30) day extensions CASA would be granted to close this sale.
Now I had to go over this “Agreement to Purchase” with my attorney. Several points my attorney were brought to my attention that I wouldn’t have picked up beyond the 3 items mentioned above. Many aspects of this agreement I now needed to address with the Development Manager. We agreed to meet at the CASA offices in Sherwood, OR the next day.
I believe that CASA thought that I would sign their agreement that morning. I had several adjustment and points of this agreement that we needed to change and others points that needed to be further defined. Those terms were:
-The Ernest Money would need to be increased to $50,000
-The length in time of the appraisal
-The length in time to form the Cooperative (association) (30 days)
-The length in time for the Cooperative to approve this agreement after the successful formation of the Cooperative
-Of the 30 day extensions mentioned above, an additional $10,000 Ernest Money would be added to the agreement per extension
-My park is located within a flood plain. This agreement stated that they needed 45 days to determine that the park was not within a flood plain. I divulged this information and CASA was previously aware of this fact. This is a useless section of this agreement. An acknowledgement of this fact would have been more appropriate.
-Personal property section was discussed and agreed to
-A provision to remove unacceptable homes was included. My contention that there we not currently any unacceptable home in my community. CASA agreed. Again, another acknowledgement here would have been -nice.
-The agreement also stated that I would give 4 business days warning to CASA before I commenced an FED. I asked that this not include any acts that were deemed to be “outrageous in the extreme” as defined by ORS 90.396. CASA agreed to this; I agreed to allowing the 4 business days on all other FED issues.
-Finally, the entry into new leases (my park is month to month) without written approval by CASA. We defined how this would not interfere with another provision of this agreement in that the park shall operate in the same manner as it has operated in the past. This point my personal attorney picked up on (no, this attorney is not my L/T attorney).
I do believe that CASA was disappointed that I didn’t sign the agreement that day. I do think they were ready to go immediately. I asked them to revise my concerns.
Within 24 hours of addressing the points above, I received an email from the Development Manager that CASA agreed to all my points that I wanted changed. We agreed to meet at 8:30 the next morning to sign the “Agreement to Purchase”
After cordial greetings and the offer of a cup of coffee, the revised agreement was presented to me. This meeting lasted approximately 20 minutes before I signed the agreement. More than half of that time was spent by me reading the edits to this document.
Also waiting for me was a letter waiting for my signature. This letter would be invitation to the tenants of the park to attend a meeting at the PUD building within the next week. The topic of the meeting would give CASA the platform to inform the tenants of their opportunity to purchase a Manufactured Home Park.
At this point in the timeline, there is absolutely no tenant interest or feedback on my expressed interest to sell this community. All interest to continue this process is with CASA. CASA has asked me to attend and speak to the tenants at the PUD building. Not knowing anything about the agenda of the meeting, I agreed to attend and speak, but not knowing what I would specifically need to speak about. I would like to say I am boldly going forward, but the fog is thick right now and am not sure what lays ahead.
In the third of a series, CASA needs to get the tenants interested in forming an Association and organizing a Board of Directors. This is where the status of the “Agreement to Purchase” is currently. The remainder of this series is stuck where all good “cliffhangers” should be. The final segment(s) may take some time. CASA does have until, at least, November to make this work out.
Dale Strom is a second generation Manufactured Home Community landlord. He is a Board Member, past President and current Treasurer of MHCO.
