Most community owners raise their rents annually, and typically in the Spring. As part of that process, they often have to get new leases and rules signed. Additionally, every time you buy a new mobile home park you are going to have to get new leases and rules executed. But how do you navigate that process? In this Mobile Home Park Mastery podcast we’re going to review the methodology to do this correctly.
Episode 374: A New Lease On Life Transcript
Maybe you just closed on a new mobile home park, or maybe you're about to raise the rents in the park you already own. At some point this year, in all likelihood, you will have to confront writing up new leases and rules. But how do you do that properly? This is Frank Rolfe, the Mobile Home Park Mastery Podcast. We're gonna talk about the methodology, the science behind getting new leases and rules signed in a mobile home park.
Now, why do we have to have a lease and rules? Well, they're two different documents. The lease document talks about money, and it talks about the terms of when you are to be paid, what happens if you don't get paid. So, since we're like a parking lot where we rent parking spaces to mobile homes, the lease is the part of the documentation that defines that relationship.
But the rules are something completely different, because the rules mandate what someone who parks in your parking garage is required to do to be in your good graces and the community at large. You clearly can't have one without the other, because having a lease with no rules will default back to the city's own guidelines, and cities are very lax on rules, and probably none of those rules will meet the criteria of your insurance company, or even what you need is a regular ongoing business model, and certainly not in the best interest of your customers.
So, if we have to get leases and rules, how do we begin the process of that? Well, let's start off with the lease itself. Now, the lease is a critical feature because without a lease, you're not going to get any money, or you won't get money in the amount that you're supposed to get. So the first question on the lease is, what are we doing as far as money? How much money are you charging for rent, and who is to pay the utilities? Are the utilities paid by the tenants? Are some portion paid by the tenants and some portion paid by you? When is the rent late?
All the different economic issues you need to decide on the front end, and then go to your state mobile home association, and say, "Do you have a copy of a standard lease for a mobile home park?" And hopefully they'll have a state-approved lease that says things in all the correct way, with all the correct disclaimers and paragraphs regarding tenant rights and everything else. So start off with the chassis of the car, so to speak, coming from your state mobile home association, and then the engine and the drivetrain of the car being your specific needs as far as what you're charging in rent and such. And that's the bare bones beginnings of the lease.
Now, at the same time, you'll have to have the rules. Same, same story. Go to your state mobile home association and say, "Hey, do you have any kind of standard mobile home park rules for the state?" Get a copy of those. And then you're gonna have to bolt onto that chassis what your insurance company is going to mandate, because the insurance company probably is not going to allow you to have dangerous breeds of dogs, large dogs, trampolines, or swimming pools. So, since you don't want to lose your insurance, we're gonna have to go ahead and bolt those on to the rules.
And now that we've got a lease and the rules in a form that we think works, because it's such an important issue, I would still take your work that you've done now and run those by a mobile home park specific attorney in your state, which you can again get from your state mobile home association. Just get a quick once over to make sure that everything is in good standing and not violating any of the rules of your state. And now we move on to the next step.
Now the next step is how we deliver this lease and rules, because you'll find that many states are different. Some will say, just mail it to the customer. Some will say, mail it to the customer, but get it return receipt. Some will say it must be mailed by certified mail. Some will say it has to be handed in in person. But regardless, you got to make sure that you send the lease and rules to the customer in the correct state approved format. And then comes the issue of rounding them up.
In some states, if the customer simply does not move out after they receive the new lease and rules in a certain amount of time, they become bound to them. But in other states, until they actually physically sign and return the lease and rules, they are not technically bound. So in those states, having your manager run around to collect back the leases and rules is going to be a critical feature.
Then you have the issue of timing. When should you get new leases and rules? Every time you buy a mobile home park, more than likely you're operating under Mom and Pop's lease and rules. And that lease and rules is probably of no value to anyone. It probably either has expired, it was poorly written, it doesn't have the right amounts or dates in it, may not even had any rules in it at all. So it's very rare that when you buy a mobile home park, you don't get completely new written leases and rules.
But in some states, every time you raise the rent, you have to run around and get a new lease and rules. So, for some of you, it may be a one-time thing, supplemented by an annual acknowledgment that the rent is going up by a certain amount, if that's the way your state legally allows. But in other cases, in some other states, you may be actually constantly repeat papering, the leases and the rules annually.
As far as timing goes, as we've said many times, we would not suggest if you're going to raise the rent, if that's what we're trying to achieve, that you do that during the holiday season, you would typically send the notice of raising the rent. At sometime in the new year. Probably sending a notice in January or February to take effect based on your state laws a couple months later. And that's because residents are seemingly in a happier frame of mind as it's getting lighter later, warmer outside, school approaching ending, and all their holiday bills are paid off.
So the timing is another integral part of it. Although if you've just bought the mobile home park, you're gonna wanna go ahead and do it immediately, in all likelihood, if that's what your attorney tells you to do. And don't forget the implications if you don't do the lease and rules properly.
Because if you don't do them properly and you have any issue with any tenant, they're more than likely going to try and pick to pieces your lease and rules, claiming that you've done something terrible by not having it within the exact comma and spacing and punctuation that the state requires. And that's why it's so very important that you have an attorney review everything before you send it, even review the manner you're going to deliver it or send it to make sure it's 100% correct, because you don't want that to blow up in your face, then again later.
And then you have the issue of what do you do when people don't give you the lease and the rules back? Now what do we do? Well, again, this will depend on the state that you're in. In some states, if they just give you the middle finger and refuse to give it back, but yet do not move out, well, they're automatically bound.
But in other states, if they refuse to give it to you, there have been cases where the manager may chase after someone repeatedly and yet they refuse to open the door, they run from them at the mailbox, then you may have no choice. If they refuse to sign the lease and the rules since then the customer basically is in a no man's land of living in your property, but yet they're not technically bound. You may have to then file for eviction, non-renew, whatever their perceived month-to-month lease is.
Once again, on those kinds of issues, you're more than likely, you're gonna wanna get the consultation of a state mobile home park specific attorney to make sure you're making the right move. Because you may have any number of people who have not returned the lease and you wanna make sure that you're approaching all of these fairly and consistently and again, correctly.
The bottom line to it, as in all things in life, the first time out, everything seems very, very hard and complicated. But then after that, once you get used to it, it just becomes a very, very simple item that you know exactly how to proceed on, and it doesn't cause you a lot of grief. The moral, of course, is to put forth the proper amount of preparation, do all the correct due diligence, and if you do everything right on the front end and think it through, it should all turn out very smoothly. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.