Understanding First Right of Refusal Clauses in Mobile Home Park Lease Agreements
Whether you’ve been living in a mobile home park for some time and are in the process of moving or are ready to move in and want to sign a new lease, you’ll likely encounter a “First Right of Refusal” clause in your contract.
Here, the contract stipulates that if you wish to sell your mobile home, you may do so, however, the mobile home park must be notified of all offers prior to a final closing, giving the park the first right to purchase by matching both, the offer and terms found in the contract.
Depending on the contract, First Right of Refusal clauses can be very clear but may also be relatively ambiguous in what is required of the mobile home owner. In some cases, park management may also misrepresent the clause, which can result in difficulties surrounding perceived mandatory sale to the park. It’s important that you understand your rights, options, and how to comply before buying or selling a mobile home under a clause. In this article, we’ll cover what the First Right of Refusal Clause actually is, what it means for you, and what you can do about it in any given situation.
What is the First Right of Refusal Clause?
A First Right of Refusal Clause is a contractual right signed to the contract-holder, giving them the right to request first option to buy (or refuse to buy) property.
In most cases, mobile home parks stipulate this clause in the lot rental contract, stating that if you intend to leave the mobile home on the lot and sell it when you leave or sell it, and have it removed, you have to give the park the first option to buy. Depending on the contract, the clause may stipulate one of many different types of First Rights of Refusal. The most common being that the park has to match whatever you are being offered independently if they wish to make a purchase.
Here, the contractual right of First Refusal gives you the obligation to take any bid or offer on your mobile home to the option holder (the park) before bringing that option to the buyer. In most cases, the park then has 7-10 days to accept or decline the offer.
Most First Right of Refusal clauses will also stipulate that anyone you do sell to must be approved by the park, that they must fill out a rental application, pass a background check, submit their credit check, and so on, just like any other renter. The park may be able to accept or deny the new renter, who can then choose to purchase your home anyway and move it or refuse to complete the purchase.
Is First Right of Refusal Legal?
While First Right of Refusal is a standard practice for many mobile home parks, it is a hotly contested issue. If you’re struggling with a First Right of Refusal clause in your contract, you may be able to take the issue to an attorney specializing in property law.
However, while contested, estimates suggest that more than 1/3rd of all mobile home lot rental contracts include a First Right of Refusal Clause, making the practice very much the norm. At the same time, First Right of Refusal stipulates that you must offer the mobile home park the option to buy at the same price.
The legality of First Right of Refusal is contested, largely over concerns of individual property rights and home ownership rights. For example, the proposed Senate Bill (SB) 237 Senator Midgen, stipulated that no lot rental contract created after 2006 may contain a legally binding First Right of Refusal clause. While this bill was not passed, it continues to be a matter of consideration in courts, where mobile home owners press concerns over their own rights to sell personal property wherever they like.
Can a Park Sue Me Over First Right of Refusal?
If your lot rental contract stipulates a First Right of Refusal contract and you sell to a third-party without going through the park or offering them the first right of purchase, the park can take you to court. However, the First Right of Refusal does not mean that you have to give them the first opportunity to purchase. Meaning… you are perfectly within your right to get offers from buyers and then take those offers to the park to satisfy this clause. It has been stated that park managers have incorrectly informed tenants that they must let the park purchase the home, and that, they were not allowed to get outside offers. This is a gross misinterpretation of what the First Right of Refusal actually stipulates.
Here, the park is typically contesting the fact that removing the home from the lot will devalue the park. Others argue that making a sale to a third-party removes the right of choosing tenants for the park’s property (the lot). In most cases, parks will argue over removing the home from the lot. If you choose to sell to someone who wishes to remain on the lot, the park can deny that person a lot rental agreement based on credit or a background check, but will not likely take offense to the sale. In this case, you may want to still offer first right to purchase to the park to comply with the contract.
If you do choose to sell to someone who wishes to move the home, you can likely protect yourself by getting any refusal from the park in writing. You should also ensure that any offers you get from the park are in writing, so that you can legally prove that the park’s offer wasn’t as good as another offer should it go to court. Consult with your lawyer for full legal advice.
Should you be taken to court over the mobile home park’s First Right of Refusal, you are strongly advised to seek out legal aid. However, the First Right of Refusal clause does limit what the park can sue for to recover damages. The park may suffer some damages through devaluation of park, but they will likely be completely unable to obtain a court order to reverse the sale. It is up to any court involved to determine the extent or validity of damages involved.
Complying with a First Right of Refusal Clause
If you have a First Right of Refusal Clause in your contract, you can still sell your mobile home, with or without the park’s consent. In most cases, individual state law mandates that the First Right of Refusal clause is a non-binding contract, where you must offer the park the right to match any offer on your mobile home, but you aren’t obliged to accept their offer. You may chose not to sell.
In some cases, your park manager may insinuate that you are not allowed to sell your home to anyone but the park. This is false because most states mandate that any First Right of Refusal clause be purely optional. You can sell to whomever you want, so long as you give the park the option to match or exceed the offer you’ve received. Furthermore, if the park matches the offer you’ve received, the original offer may be increased in order to outbid the park. In such a case, the park would be afforded the opportunity to match the offer again, but this could continue on until one party finally gives up.
Complying with a First Right of Refusal clause typically includes the following steps:
- Offer the park the option to match or exceed your current offer
- The park will either accept or refuse the offer. Ensure that you have their answer in writing and retain a copy. Most clauses allow a period of 7-10 days for refusal
- If the offer was matched, you can choose to accept or decline it.
- If you decline, you are free to keep the home on the market in hopes of a better offer
- If accepted, you can complete the sale with the park.
While First Right of Refusal does not legally bind you to sell to the mobile home park in question, it can cause significant delays on making a sale. For example, a park may take up to 10 days to process an initial offer, which can delay your ability to sell. A prospective buyer may find an alternative home, and you may become more desperate to sell at a lower price because you have to move quickly. This is especially pertinent when the park fails to accept an offer or offers a reduced amount, which can prove to be very unfavorable for the seller.
*We do not give legal advice and would strongly encourage you to seek legal counsel should you chose not to comply with any mobile home park’s first right of refusal.