While most mobile home parks have direct access to roads and utilities, others share one or more of these with a neighboring property. In this Mobile Home Park Mastery podcast we’re going to explore the concept of shared services and how to navigate that issue correctly.
Episode 370: When Sharing Is Caring Transcript
Most mobile home parks are terrible at sharing, they would be criticized in elementary school constantly, they don't wanna share their water, their sewer, their roads, their electricity, and in fact, every utility that they need, every access they need is fully contained within their property boundaries. But other mobile home parks don't have that ability, they have to share certain resources with neighboring properties. So how does that work? This is Frank Rolfe from the Mobile Home Park Mastery podcast. We're gonna talk about sharing and navigating shared access to water, to sewer, to power, to everything, including the entry road to your mobile home park. Now, let me first start off saying and acknowledging I'm not an attorney, so I'm not trying to give you legal advice on this concept, but instead I'm just trying to guide you from what I've learned over the past 30 years when it comes to sharing those resources.
Now, the first thing you have to decide is who pays for those resources, because you're probably gonna wanna have everything metered, sub-metered it's such a matter that each person pays their fair share, let's say, for example, the neighboring property, it's a single family home, and it's tied to your water system, you probably don't wanna give them free water because you have no idea how much they're going to use or how much that use may grow over time or what the cost would be, so it seems fair, whenever it comes to utilities that we have an agreement in place that says, who pays, how it's derived and how all of that works, because many moms and pops entered into sharing agreements without ever charging the neighbor or having some ridiculous program on what they charge.
I have seen properties where they give the neighboring property owner access to their water and sewer for a flat fee of $20 a month in perpetuity. And of course, when they entered into that, they thought $20 was fair, but it was in 1965, so clearly, number one thing we wanna focus on is who is paying for the utilities, and more importantly is who pays for the repairs 'cause that's an even bigger deal. I once owned a mobile home park out in Oklahoma City, don't own it anymore, sold it about 20 years ago, but one wrinkle that it had was that there was a sewer line that ran in front of the property and on down the street that was owned by the mobile home park. So all the other park, not even Park, commercial properties, everyone tied into that sewer line, but if that sewer line had ever broken, if it ever need to be replaced, it would fall back on the mobile home park, and I don't know what that would have cost to repair, it would have been a huge sum.
So this could be a very large problem in many cases, when you have shared resources and that resource breaks, let's say, for example, you've got a water well on your property, and yet the neighbor gets to use your water, well, who pays for that well if the well breaks? It's not fair that only you pay because they're also being served by that utility, so it's very important that you analyze what could break, what those costs might be, and have some kind of sharing agreement that in the event the utility breaks that the other person is going to chip in their fair share, the same with roads, let's assume that the neighbor gets to use your road to access their property.
Well, there needs to be some agreement where they pay proportionately, whatever the road repair costs might be. Roads are expensive. It may not just be pothole repair, it might be resurfacing the entire road, it might be $50 or $100,000. So how does that work? You're gonna pay the $100,000, they're gonna pay zero. That just doesn't seem very fair. Also, you wanna have some kind of agreement on what the limitations are and any future expansion of their use of whatever that may be, whether it be road or water or sewer, because let's assume that single-family home next door, they got unlimited free water and sewer, years from now decides to go ahead and put in a 8-plex apartment. How does that work? Who's gonna pay for that? Do they get free use of water sewer? What if it's a 100-unit apartment complex? So we need to have some limitations on what that use can be, if it's a single-family home, it needs to be only a single-family home, if it grows exponentially into a complete mixed use office development.
Well, clearly, that's not going to be fair any longer. Also, who makes the decision when things need to be fixed? This is very important, you may have a road system and you've got a mobile home park, and so you think, well, I wanna keep the road free of pot holes. I wanna keep it up to decent standards, I might go in and make the road much, much better before I refinance or sell later, but what if the other person that you share with, well, they've got a medical building, and they don't want the customers to think that the road is any less than perfect, who makes that decision? Who makes the call of when the road needs to be done? This became an important issue to us once on a mobile home park in Michigan, because we wanted the roads to be nice, to be free of pot holes, but in this case, the person who share these roads was the City, and the City didn't like that idea. They didn't care. So we were in a constant, endless battle over who paid and additionally who made the trigger, the catalyst to get the roads made nicer.
Because sometimes you may not agree with the other person, and as a result, that may cause endless conflict because you wanna make things better and they don't, or maybe vice versa. Maybe your budget with the mobile home park doesn't allow things to be kept up to the best standard but the other party does. So who makes the final decision? How does that work regarding when things get fixed and when they're left alone. Now, let me give you a couple of real life examples of things we've had happen when we share resources, one is a park that we used to own out in Arlington, and it was very strange situation because basically we owned a third of an existing mobile home park, and a very well-known REIT owned the other two-thirds, and that was a perfect situation because they wanted the roads and everything to be to the highest standard, and we very much benefited from that and there was never any friction whatsoever.
People injuring the mobile home park, they didn't really know that we weren't part of the REIT, To be honest with you, had a wonderful entry, roads well-maintained, water, sewer access perfect, power no problem. So that was a great relationship, but I also had a mobile home park once, where out of nowhere, I became at odds with the neighbor who unfortunately, we shared access, and they constantly threatened to do such things as to block access, literally sever the road coming in by the construction of some kind of concrete barrier, those things they put in the high way, you can imagine what a mess that would have been.
It never got to that level. They would threaten that constantly. But that's the opposite end of the spectrum. You think you could have a happy shared relationship, but sometimes the other party turns out to just be absolutely nuts. It's important in all of these issues that you don't go with Mom and Pop's opinion, Mom and Pop will always tell you, Oh yes, we share a road, we share this, we share that, but they're telling you what you wanna hear because they wanna soft sell the situation. Maybe it worked for mom and pop over the past 50 years, but more than likely, it could be a catastrophe going forward, so don't let others try influence your good decision-making by giving bad input to flavor it incorrectly.
It's also very important in these situations, you're probably gonna wanna use an attorney to make sure that whatever agreement that you put together is perfect and it's perfectly situated for whatever state the property is located in. There's nothing worse than an agreement, which you later find out that you've based all of your assurances on and it turns out it was crafted poorly or doesn't even follow state law, so you definitely wanna get around that by using a good real estate attorney to draft it. Also never get fooled by the fact that the other party that you may share something with Seems very wealthy. And therefore, you assume they'll always make good decisions.
We once had a mobile home park, which had a road that was shared through the mobile home park by a large oil company, and they would never maintain that road, it was in horrible, horrible condition. I used to call them all the time, hoping if I was a squeaky wheel, I'd get some grease but I never did. So it all needs to be in writing. Whatever you think to be true all needs to be right out there for all the world to see, so you don't get trapped into some kind of a problem. The bottom line is that the typical mobile home park doesn't have to experience any of these issues, but there are good mobile home parks, you will see from time to time, that do have shared utilities or shared road access, but that doesn't mean you can't buy the park. All you have to have is a well-written document to make sure all of your interests are protected and you should be fine. This is Frank Rolfe, from the Mobile Home Park Mastery podcast. Hope you enjoyed this. Talk to you again soon.