Kort & Scott Financial Group (KSFG)
Interference with Mobile Home Sales
What are your chances of selling your “resident owned mobile home” for what it’s worth in a mobile home park owned by Kort & Scott and managed by Sierra Corporate Management? “Slim to none” is the expression we hear when that question is answered by those who have attempted to sell their mobile home for what it is worth and, within a reasonable timeframe.
Many of the resident owned mobile home sales we’ve researched have resulted in the mobile homes being sold for a fraction of their value to a Kort & Scott affiliate and/or being removed from the park by a broker who specializes in purchasing and removing distressed mobile homes.
There are a number of reasons why you may not be able to sell your mobile home in a Kort & Scott mobile home park including but not limited to…
- Space Rent Increases
- Long-Term Lease Agreements with Right of First Refusal
- Forbearance Agreements with Right of First Refusal
- Park Management Interference
- Space Rent Specials for Park/Affiliate Owned Homes
- Income Requirements for Prospective Tenants
- Listing Mobile Homes for Sale with Kort & Scott Affiliated Retailers
- Mobile Home Park Degentrification
Kort & Scott Financial Group
1. Space Rent Increases
Kort & Scott begin interfering with the sale of your mobile home shortly after purchasing your mobile home park. This is done through a significant space rent increase for new buyers which in turn strips the equity from the mobile homes in the park. The industry rule of thumb is that for every $10 per year increase in space rent, you lose $1,000 in equity from your mobile home.
This significant space rent increase is normally justified by Sierra Corporate Management due to an increase in property taxes caused by a reassessment of the land at the time of park purchase. SCM refer to this as a pass-through although it is not a separate line item and becomes a permanent increase in your base space rent.
An example of this happening is Corona La Linda Mobile Home Park which was purchased by Kort & Scott in May 2015. Space rent for new buyers at time of purchase was $650 per month. It was initially rumored that space rents were going to be raised to $1,300 per month for new buyers.
Residents immediately responded to the rumor, formed a Homeowners Association (CLLHOA), and went to the Corona City Council with their grievances. Space rent for new buyers is $950 per month instead of $1,300.
2. Long-Term Lease Agreements with Right of First Refusal
The majority of buyers purchasing a mobile home in a park owned by Kort & Scott sign Long-Term Lease Agreements. During our continuing research of online court documents, the MHPHOA have discovered that a majority of the leases being signed by home owners contain an Addendum Clause that interferes with the sale of their mobile home.
We’ve obtained a copy of this Addendum and it gives Kort & Scott (park owner) the Right of First Refusal to Purchase Tenant’s Mobile Home. This appears to be a willful violation of MRL Civil Code §798.19.5 which states…
A rental agreement entered into or renewed on and after January 1, 2006, shall not include a clause, rule, regulation, or any other provision that grants to management the right of first refusal to purchase a homeowner’s mobilehome that is in the park and offered for sale to a third party pursuant to Article 7 (commencing with Section 798.70). This section does not preclude a separate agreement for separate consideration granting the park owner or management a right of first refusal to purchase the homeowner’s mobilehome that is in the park and offered for sale.
3. Forbearance Agreements with Right of First Refusal
When a mobile home owner is late with rent for the first time, Kort & Scott may serve a combined 3/60 notification, there is no leniency and/or understanding when it comes to rent being late. If you attempt to make a payment on day four (4) of the 3/60, your rent may not be accepted unless you sign a Forbearance Agreement. The MHPHOA consider this agreement an act of extortion, used as a threat to elicit actions, money, or property from the home owner.
Note: We’ve extracted the below reason for the Forbearance along with the Park Right of First Refusal clause.
Forbearance Agreement
This Agreement is entered into by and between [Mobile Home Park Name] and its owners and management (hereinafter ("PARK") and Tenant [First Middle Last] and [First Middle Last] (hereinafter "TENANT"), owner of the mobilehome occupying [Street Address], [City] [State] [Zip] ("the Premises").
- As a result of this Agreement, PARK agrees to forbear from exercising its legal rights pursuant to the Combined 3 Day Notice to Pay or Quit, 3 Day Notice to Perform Covenants or Quit, 60 Day Notice to Terminate Possession and Civil Code §798.56(e)(5) and covenants not to institute suit for unlawful detainer during the term of this Agreement, provided TENANT comply with the following terms and conditions:
- PARK agrees to entering into this agreement with TENANT, in exchange, TENANT agrees to the following:
- TENANT grants the PARK a right of first refusal to purchase TENANT's mobilehome for the price the home was purchased for by the TENANT noted herein or the offer given at time of sale, WHICHEVER IS LESS. If TENANT receives a bonafide offer to purchase the mobilehome, a copy of the offer (including all terms and conditions whether written or oral) shall be submitted to PARK, who shall have five (5) business days to meet and agree to its terms. TENANT shall inform the third party offeror of this Agreement when its offer is made. The PARK may agree to buy the mobilehome on the offeror's terms by sending (or delivering) written notice within such five (5) days period.
Define: Extortion
A criminal offense of obtaining money, property, or services from a person, entity, individual or institution, through coercion. Extortion does not require a threat of a criminal act, such as violence, merely a threat used to elicit actions, money, or property from the object of the extortion.
Define: Coercion
Compulsion; force; duress. It may be either actual, (direct or positive) where physical force is put upon a person to compel them to do an act against their will, or implied, (legal or constructive) where the relation of the parties is such that one is under subjection to the other, and is thereby constrained to do what their free will would refuse.
4. Park Management Interference
Park Manager Told to Push Sale of Park Owned Mobile Homes
On Thu, Dec 1, 2016, documents were made available online regarding a Motion for Preliminary Injunction against Friendly Village Mobile Associates LP, Friendly Village MHP Associates LP and Friendly Village GP LLC, all Kort & Scott DBAs for Friendly Village Mobile Home Park in Long Beach, California which is managed by Sierra Corporate Management.
Within the 8 page Final Order denying the Motion for Preliminary Injunction, there is a Discussion Timeline regarding the Background of the case. On page 6 is a one paragraph summary of the previous [Park Manager]’s Declaration. It reads as follows and has been edited [Park Manager] to remove personally identifiable information.
Further, according to [Park Manager] (who served as the Park manager from March 1, 2014 until September 2015), says that after a resident was evicted, she was instructed to get the Park-owned mobile home unit ready for sale and to list it at a price below the rate of other mobile homes in the Park. She says she did as she was instructed and would have the mobile home units from evicted residents listed for sale at a price of approximately 2/3 of other units listed in the Park at the time. [Park Manager] also says that she was told to push the sale of the Park-owned units over those of other residents when prospective buyers came to the Park. Also, [Park Manager] claims the paperwork to and from Sierra for prospective buyers who were interested in Park-owned units took place very quick whereas paperwork to and from Sierra for prospective buyers interested in resident-owned units took place very slowly.
Acosta v. City of Long Beach – Department 310 – Law and Motion Rulings
SCM Banners – Homes for Sale
Sierra Corporate Management (SCM) Banners – If you’re a mobile home owner selling your home in an SCM managed mobile home park, your primary competition may be a Kort & Scott affiliate.
Park Owned Homes for Sale
5. Space Rent Specials for Park/Affiliate Owned Homes
Sierra Corporate Management may offer park owned and/or affiliate owned homes with space rent specials at 20-40% less than resident owned homes. For example, in 2014 the space rent for new buyers purchasing resident owned mobile homes in Tustin Village Mobile Home Park was $1,600 per month. Space rent for new buyers purchasing park owned and/or affiliate owned mobile homes was $1,150 per month for the first year, $1,250 per month for the second year and $1,600 per month for the third year.
Then comes the fourth year at market rate. The 2016 market rate for Tustin Village Mobile Home Park is $1,700. Most home owners don’t make it past the "market rate" year. This is the time when we see many turnovers take place and Lease Addendums enforced. Residents didn’t fully understand what they were getting themselves into when they purchased their home and signed the Long-Term Lease Agreement and Addendum. They may have been distracted by their excitement of being a first time home owner and didn’t realize there were intentional consequences forthcoming.
Most residents do not read and/or understand the SCM Long-Term Lease Agreement which is 8.5 x 11.0, twenty-one (21) pages comprised of 433 paragraphs, 19,758 words, all stuffed into a 2 column format with 9pt type. When printed in single column format, the lease is approximately 42 pages of confusing legalese that requires review by an attorney that specializes in Contract Law – this is NOT your standard lease agreement.
6. Income Requirements for Prospective Tenants
As a prospective mobile home buyer in a Kort & Scott owned mobile home park, you are required to prove income three times (3X) the current space rent. The MHPHOA consider this requirement as an interference with sales, particularly when Kort & Scott space rents are well above fair market rents for the area.
For example, Kort & Scott purchased Rancho Huntington Mobile Home Park, a 55+ community, in late 2012. In January 2013, space rents were advertised at $1,000 per month. As of July 2019, mobile home space rents are advertised at $2,250 per month.
$2,250 x 3 = $6,750
How many seniors do you know who can claim $6,750 monthly income or $81,000 per year?
7. Listing Mobile Homes for Sale with Kort & Scott Affiliated Retailers
Many mobile home owners are unaware of the special arrangements that Kort & Scott may have with multiple closely affiliated retailers such as Blue Carpet Manufactured Homes or Monarch Home Sales. Residents observe these affiliated retailers listing and selling mobile homes in their park and they are usually the first point of contact when home owners decide to sell.
These affiliated retailers convince the uninformed home owners to sign an exclusivity agreement, usually ninety (90) days. We have been informed that home owners who chose to list their home for sale with one of these retailers experienced problems during the exclusivity agreement and could not sell their mobile home.
Based on our research and documentation of 1,800+ mobile home sales in the Kort & Scott inventory, there appear to be intentional delays for resident owned homes when dealing with the Kort & Scott affiliated retailers.
8. Mobile Home Park Degentrification
The MHPHOA continue to document the degentrification of Kort & Scott owned mobile home parks. After a park is purchased, the process of obtaining, selling and removing newer model mobile homes begins. These newer mobile homes are not affordable for the targeted demographic. A large percentage of these newer homes are sold for a fraction of their value and removed from the park.
These homes are replaced with older dilapidated and/or rehabbed mobile homes that will sell for much less than the surrounding resident owned homes whose values have been diminished through the intentional degentrification process. These are park owned and/or affiliate owned mobile homes that are sold to unsuspecting consumers with "As-Is" Statements claiming no warranty for defects and require the new home owner to make timely repairs.
The Kort & Scott affiliates do not appear to be subject to the same Rules and Regulations that the home owners are. We have been informed that Sierra Corporate Management may require home owners to perform repairs to their mobile home in order to sell it. That’s what is referred to as a “double standard” which is defined as a rule or principle that is unfairly applied in different ways to different people or groups.
Mobile Homes for Sale “As-Is” by Kort & Scott Affiliates
As demonstrated, these are some of the methods that may be used by Kort & Scott Financial Group and/or Sierra Corporate Management, to interfere with the sale of resident owned mobile homes.
Legal References
2019 MRL Article 7 – Transfer of Mobilehome or Mobilehome Park Page
- Civil Code §798.70 “For Sale” Signs 24
- Civil Code §798.71 Management Showing or Listing – Prohibitions 25
- Civil Code §798.72 No Transfer or Selling Fee 25
- Civil Code §798.73 Removal of Mobilehome Upon Sale to Third Party 26
- Civil Code §798.73.5 Home Upgrades on Resale 26
- Civil Code §798.74 Management Approval of Buyer; Credit Rating Refund 27
- Civil Code §798.74.4 Mobilehome Resale Disclosure to New Buyer 27
- Civil Code §798.74.5 Rent Disclosure to Prospective Homeowners 27
- Civil Code §798.75 Rental Agreement Required for Park Occupancy 28
- Civil Code §798.75.5 Mobilehome Park Disclosure Form 28
- Civil Code §798.76 Senior-Only Restrictions 31
- Civil Code §798.77 No Waiver of Rights 31
- Civil Code §798.78 Rights of Heir or Joint Tenant of Owner 31
- Civil Code §798.79 Repossession of Mobilehome; Sale to Third Party 31
- Civil Code §798.80 Sale of Park – Notice by Management 31
- Civil Code §798.81 Listing or Sales – Prohibitions 32
- Civil Code §798.82 School Impact Fee Disclosure 32
- Civil Code §798.83 Homeowner Repair of the Space 33
2019 MRL FAQs 63-71 – Home Sales, Resales, Transfers and Titles
- Selling Home In-Place in Park
Can the resident be forced to move their home out of the park when they sell it just because the home is old?
If the home is NOT a mobilehome (less than 8 feet wide x 40 feet long) and is therefore classified as a recreational vehicle (trailer), the resident has no right to sell it in place and will have to move it. With regard to mobilehomes, the MRL (Civil Code §798.73) establishes two standards. Basically, the home cannot be required to be removed upon a resale if it is 1) more than 17-20 years old or older but meets health, safety and construction standards of state law, and 2) not in substantially rundown condition or disrepair, as determined in the reasonable discretion of management. If the management and resident disagree on the condition of the home, the resident may decide to hire a private home inspector to look at the home and repair any code violations or defects the inspector finds in his/her report. HCD inspectors no longer perform this function in most cases, although some local governments that perform mobilehome park inspections for the state may be willing to perform an inspection, for a fee.
Recap:
- RV and trailer owners may be forced to move their coach out of the park when they sell it.
- Mobilehomes are allowed to stay in the park after they are sold if they meet certain health and safety standards.
- 63.1. Selling Mobilehomes: Realtor’s License and Clean Titles
I own a mobilehome park where there are many abandoned homes. Can I sell them without registering as a real estate agent?
Generally, the answer is “no”. First, in order to act as an agent between a seller or buyer of a used mobilehome or manufactured home, you either must be registered with HCD as a “manufactured home dealer” or with the Bureau of Real Estate as a licensed real estate agent. Acting as an unlicensed dealer or agent can result in criminal penalties, civil penalties, and citations of up to $2,000 for each illegal sales activity.
The only exception to this is if the prior residents/homeowners have “walked away” from the homes, a park owner may sell them if he/she first obtains the right to ownership through a court action for the judgment of abandonment (Civil Code Section 798.61) or after a warehouse lien sale (Civil Code Section 798.56a). After that, if the park owner intends to rent, sell or salvage the units, the park owner must go to HCD and transfer title to his or her name, which includes paying all property taxes or HCD fees that are owed. HCD also has special procedures for when the prior registered owner cannot be found or when there are unpaid or unsatisfied loans on the home. Only after registering as the new owner may the park owner (who is now the homeowner) rent, sell, or salvage the abandoned homes.
Recap:
- Only HCD-licensed dealers or BRE-licensed real estate agents may sell used manufactured homes in a park. Exception: When previous owner has “walked away”, park owner must follow legal procedures governing judgment of abandonment or warehouse lien sale.
- It is illegal for anyone to sell, rent, or salvage a manufactured home that is not registered in his or her name.
- Resale of a Park Model in the Park
Can the resident be forced to move their park-model out of the park after they sell it?
Even though it may look like a small home, a park model is not a mobilehome. It is a “park trailer,” as defined in the Health and Safety Code, which is essentially a type of recreational vehicle that has 400 square feet or less of floor space. A number of mobilehome parks in California accommodate both mobilehomes or manufactured homes, as well as recreational vehicles, but provisions of the MRL that require parks to allow homeowners to resell their homes in place in the park only apply if the home is a mobilehome or a manufactured home.
Recap:
- A park-model is not a mobilehome, therefore the resident may be forced to move a park-model out of the park when it is sold.
- Prospective Buyers Subject to Income Requirements
Can the park’s income requirements on prospective buyers prevent a resident from selling their home?
Yes. The sale of a mobilehome located in a mobilehome park is a three-party, not two-party transaction. The buyer and seller must not only agree to the terms of the sale of the home, but the buyer must be approved for residency in the park by the park owner/management. Management can withhold approval on the basis of: 1) the buyer’s inability to pay the rent and charges of the park, and 2) the buyer’s inability to comply with park rules and regulations as indicated by prior tenancies (see Civil Code §798.74). Although guidelines used by other landlords or public agencies for rental housing may be more lenient, many park owners impose higher income requirements to assure buyers will be able to afford future rent increases without causing the park problems, such as evictions.
Recap:
- A prospective buyer must be approved for residency by the park manager/owner.
- A prospective buyer can be rejected if they don’t meet the income standards for the park.
- Rights of Heirs Inheriting Mobilehomes
Can the park prevent a resident from living in a mobilehome they inherited?
Yes, unless the resident qualifies for residency and has signed a rental agreement. Upon death of a homeowner, heirs cannot simply assume they can move into the decedent’s home or continue to live there if they are not already a party to the rental agreement. Despite the fact that an heir takes title to the mobilehome, the park management has the right to require an heir, or person who had been living with the resident, to newly apply for residency in the park. If the management rejects the heir’s residency because the heir cannot comply with the rules or doesn’t have the income to pay the rent and charges, the heir can be required to move out. The heir has the right to resell the inherited mobilehome in place in the park (Civ. 798.78(a)), assuming it meets health and safety code requirements (Civ. 798.78(b)), but must continue to pay the monthly space rent until the home is sold in order to maintain the right to sell it in place in the park. Otherwise, the park may terminate the tenancy and require the home to be moved from the park within 60 days of the notice of termination. (Civ. 798.73)
Recap:
- The heir of a mobilehome cannot assume he/she has residency rights if he/she has not been on the rental agreement.
- The heir has the right to sell the mobilehome in-place, as long as it meets health and safety requirements.
- The heir must continue to pay rent and fees as long as he/she owns the home in the park.
- Adding or Changing Name on Title of Home
How do I change or add a name on the title to my mobilehome?
Contact the state Department of Housing and Community Development’s Registration and Titling division at (800) 952-8356.
- Replacing a Lost or Never-Received Title
I don’t have the title to my mobilehome. Where can I get a copy?
Every mobilehome owner must have a copy of the current registration for their home. (Health and Safety Code §18080.4) Contact the state Department of Housing and Community Development’s Registration and Titling division at (800) 952-8356 for assistance.
- Resale Disclosure
Do residents have to provide a resale disclosure statement when they sell their mobilehome as-is?
As a measure of consumer protection, mobilehome resale disclosure (Civil Code §1102.6d) became effective in January 2000, making mobilehome sellers and their agents responsible for providing prospective buyers, by close of escrow, with a resale disclosure statement. The form requires the seller to check off a list of conditions or defects that may affect the value or condition of the home. The seller is not subject to a penalty or fine for failing to provide the disclosure to the buyer, and the fact that disclosure was not made does not invalidate the sale of the home. However, after purchasing the home, if the buyer discovers defects that were not disclosed by the seller, the fact that the disclosure statement was not provided could affect the outcome of the seller’s civil liability in court for the defect. Real estate brokers and dealers are also subject to the disclosure requirements and sales agents almost always include the disclosure report. The state Dept. of Housing (HCD) is not required to notify selling homeowners.
Recap:
- Sellers are advised to provide a resale disclosure form, even on “as-is” sales, to avoid possible liability after the sale. (Civ. 1102.1(a))
- Homeowner May Be Required to Sell Home to the Park on Resale
Can the manager force a resident to first offer their home for sale to the park?
It depends on the rental agreement. The MRL provides that a park rental agreement entered into on or after January 1, 2006, shall not include a provision or rule or regulation requiring homeowners to grant the park the right of first refusal to buy their homes on resale. (Civil Code §798.19.5) Hence, if the homeowner entered into a lease on or after January 1, 2006, or is on a month-to-month tenancy, the park could not enforce a right of first refusal to buy the home. However, homeowners may be subject to such a park right of first refusal if they signed a long-term lease with such a provision before January 1, 2006, and that lease has not yet expired. Additionally, the law does not prevent a homeowner and the park from entering into a separate agreement, apart from the lease, for the right of first refusal where the homeowner obtains consideration or compensation from the park for that right.
Recap:
- Check the rental or lease agreement for details on whether the park has the right of first refusal to buy the mobilehome.
- New Home Defects and Warranties
What are the rights of a resident whose new manufactured home has defects?
New mobilehome or manufactured home warranty complaints must be filed in writing with the dealer and manufacturer within the warranty period, by law, one year and ten days from the date of delivery or occupancy, whichever is earlier. This is necessary in order to preserve the purchaser’s rights under the warranty should litigation or a state Department of Housing (HCD) investigation not commence until after the warranty has expired. Accessories that were purchased with the home as a package are normally covered by the warranty. An installation problem may complicate warranty complaints. If the home was installed by a licensed contractor as arranged by the dealer, both the dealer and contractor may be responsible. If the homeowner hired the installer independently from the dealer sale, there may be an issue of whether the problem with the home results from faulty installation, and thus is only the responsibility of the installer, or results from manufacturing defects. If the dealer or manufacturer does not satisfactorily respond within a reasonable period of time after filing the complaint with them, the homeowner should contact HCD’s Office of the Mobilehome Ombudsman (800-952-5275) about filing a dealer complaint. Complaints about licensed contractor installers should be addressed to the Contractors State Licensing Board (800-321-2752 or www.cslb.ca.gov).
Recap:
- A warranty is good for 1 year and 10 days after date of delivery or occupancy.
- If the home was installed by an independent contractor, then problems may occur with identifying who is liable for defects.
AB-2026 Mobilehome parks: sales. (2013-2014)
An act to amend Section 798.74 of the Civil Code, relating to mobilehome parks. Existing law authorizes the management of a mobilehome park to require prior approval of a purchaser of a mobilehome that will remain in the park. Existing law also prohibits management from withholding approval if the purchaser has the ability to pay the rent and charges of the park, except as specified. Existing law authorizes management to require the purchaser to document the amount and source of his or her gross monthly income or other means of support but prohibits management from requiring personal income tax returns as evidence. Existing law requires management, upon request of any prospective homeowner who proposes to purchase a mobilehome that will remain in the park, to inform that person of the information that management will require to determine if the person will be acceptable as a homeowner in the park. Existing law permits the management or owner to be held liable for all damages if the approval of a prospective homeowner is withheld for any unauthorized reason.
California Legislative Information
AB-2026 (Stone) – Interference with Mobile Home Sales (Sponsored)
This bill would protect manufactured home owners’ ability to sell their home in place in parks, without unscrupulous interference. Some parks have imposed impossibly high standards on new residents purchasing a mobile home, in order to purchase the mobile home itself at a drastically reduced price. This bill sought to rein in these abuses by clarifying what has been a vague area of the law. The bill would have required park owners to use reasonable standards when considering whether to approve potential purchasers as tenants. The bill also required reasonable standards when determining whether a repair or improvement to the home is required to transfer title. AB-2026 was sponsored by CRLAF, Western Center on Law and Poverty, and the Golden State Manufactured Housing Owners League (park residents). Unfortunately, the bill failed on the Assembly Floor.
California Rural Legal Assistance Foundation (CRLAF)
AB-2026 in Hindsight
On February 20, 2014, Assembly Member Stone introduced AB-2026, sponsored by GSMOL, to confront the problem of park owners making it difficult for homeowners to sell their homes in place, by refusing to approve the buyer to live in the park. This is one of the biggest problems identified in our survey of members last fall.
Our friend Henry Cleveland (Aptos) has done an analysis of money spent in Sacramento. For the period 2011 through the end of 2012, two park owner groups, the WMA and the California Mobilehome Park Owners Alliance (CMPA – represents California park owners organized by founder, Jeff Kaplan. Edelstein & Gilbert, legislative advocates. 1127 11th Street, Sacramento, CA 95814. Phone: (916) 443-6400) spent a total of $623,500 while our advocate spent $127,000 – a factor of 5 in the park owners favor!
COMO-CAL – AB-2026 in Hindsight
2021 California MRL
MRL Historical References
No MRL Enforcement by HCD
The Mobilehome Residency Law (MRL) is enforced in a court of law.
The Department of Housing and Community Development (HCD) does not have authority to enforce violations of the MRL.