It’s no doubt that mobile home park purchase contracts can be a bit lengthy and confusing. In this article we will go over the main components of a mobile home park purchase and sale agreement and some contingencies that you can include to protect yourself as a buyer.
Identification of the parties involved
Identification of the parties involved in a mobile home park purchase and sale agreement typically includes:
- The name and address of the seller, including any business entity or trust that owns the property.
- The name and address of the buyer, including any business entity or trust that is purchasing the property.
- If the buyer or seller is using a representative, such as a real estate agent or attorney, their name and contact information may also be included.
- The date the agreement is being signed by the parties.
Ensure that the names and addresses of the parties are accurate and up-to-date, as this information will be used to identify them in the legal transfer of ownership and other documents related to the sale.
Confidentiality and non-disclosure provisions
Confidentiality and non-disclosure provisions are common in mobile home park purchase and sale agreements. These provisions are designed to protect the confidential information and trade secrets of both the buyer and the seller, and to prevent any unauthorized disclosure of such information to third parties.
Typically, the confidentiality and non-disclosure provisions in a mobile home park purchase and sale agreement will require the buyer and the seller to keep all information related to the transaction confidential, and to use such information only for the purpose of completing the sale. This may include financial information, business strategies, and other sensitive data related to the mobile home park.
The provisions may also specify the duration of the confidentiality requirements, and may require the buyer and the seller to return or destroy any confidential information or documents at the end of the transaction.
Violation of the confidentiality and non-disclosure provisions may result in legal action and damages, so it is important for both the buyer and the seller to take these requirements seriously and to ensure that all parties involved in the transaction are aware of their obligations.
Purchase price and terms of payment
The purchase price and terms of payment in a mobile home park purchase and sale agreement refer to the agreed-upon price that the buyer will pay to the seller for the property and the specific terms and conditions of the payment.
The terms of payment typically outline how and when the buyer will make payments to the seller, and may include details such as the following:
- Deposit amount – The amount of money the buyer will initially pay to secure the sale.
- Closing costs – The fees and expenses associated with the transfer of ownership, which may be split between the buyer and seller.
- Down payment – The portion of the purchase price that the buyer pays upfront.
- Financing terms – If the buyer is financing the purchase, this will outline the specifics of the loan, including interest rates and repayment terms.
- Payment schedule – The agreed-upon schedule for making payments to the seller, which may include the frequency and number of payments.
- Late fees and penalties – Any additional fees or penalties that may be incurred if the buyer fails to make payments on time.
- Security interest – If the seller is providing financing to the buyer, this typically includes a security interest in the property as collateral.
The buyer and seller need to carefully review and agree upon the purchase price and terms of payment before signing the purchase and sale agreement, as these terms will have a significant impact on the overall transaction.
Description and location of the mobile home park
This portion of the mobile home park purchase and sale agreement typically provides a detailed description of the property being sold, including its location, boundaries, and other relevant features. This information is relevant for both the buyer and seller to ensure that they are in agreement on the specifics of the property being sold.
The description of the mobile home park may include details such as the number of lots, the size of the lots, the number, age and condition of any park owned homes, and any common areas or amenities that are included in the sale. The location of the property is usually described using legal language, including the physical address, lot number, or other identifiers that can be used to locate the property.
This section may also include any restrictions or easements that affect the use of the property, such as zoning or land-use regulations. This information is critical for the buyer to understand because it defines the potential uses of the property, including any limitations that may affect development plans.
Condition of the mobile home park and any improvements included in the sale
The purchase and sale agreement may include a section on the current condition of the mobile home park, which could cover areas such as the physical condition of the homes and infrastructure, any necessary repairs or upgrades, and any potential liabilities or environmental concerns.
The agreement may also specify any improvements or upgrades that are included in the sale. For example, the seller may have recently renovated or replaced certain infrastructure or amenities in the park.
Contingencies and conditions of the sale
Contingencies and conditions of the sale refer to any requirements that must be met before the mobile home park sale can be completed. These may include items such as inspections, financing, and other contingencies that protect both the buyer and seller.
In a mobile home park purchase and sale agreement, some common contingencies and conditions may include:
- Inspection contingency: This allows the buyer to have a professional inspection of the park’s physical condition, such as the homes, infrastructure, and other amenities. If significant issues are discovered during the inspection, the buyer may have the option to negotiate repairs or adjustments to the purchase price, or even back out of the sale altogether.
- Financing contingency: This allows the buyer to secure financing for the purchase of the mobile home park. If the buyer is unable to obtain financing within a certain period of time, the agreement may allow them to back out of the sale.
- Due diligence contingency: This allows the buyer to conduct additional research and due diligence on the park before completing the sale, such as reviewing financial records, assessing the rental income potential, or investigating any legal or environmental concerns.
- Zoning and permit contingency: This allows the buyer to confirm that the mobile home park is properly zoned for its current use and that all necessary permits and approvals are in place.
By including contingencies and conditions in the contract, both parties can protect their interests and ensure a smooth and fair transaction. You can work with a qualified real estate attorney to draft or review the agreement to ensure that it adequately addresses any contingencies or conditions that are important to you.
Let’s discuss the financing contingency in a little more depth. A financing contingency is a common provision in a mobile home park purchase and sale agreement that allows the buyer to back out of the sale if they are unable to obtain financing for the purchase of the park. The financing contingency specifies the terms and requirements related to the buyer’s financing, which may include:
- Timeframe: The financing contingency will specify the timeframe during which the buyer is allowed to secure financing. This may vary depending on the agreement between the buyer and seller, but it is typically between 30 and 60 days.
- Loan amount: The financing contingency will specify the loan amount that the buyer needs to secure to complete the purchase. This is typically the purchase price of the park minus any down payment or other funds that the buyer is providing.
- Interest rate and terms: The financing contingency will specify the interest rate and terms of the loan that the buyer is seeking, such as the length of the loan and any other conditions.
- Lender qualifications: The financing contingency may also require that the buyer obtain financing from a qualified lender or financial institution. The lender may need to provide proof of pre-approval or other documentation to demonstrate their ability to finance the purchase.
Due diligence period
The due diligence period is a specified time frame in the mobile home park purchase and sale agreement where the buyer can conduct investigations and research to assess the property before finalizing the sale. The buyer’s investigation requirements during this period may include a thorough examination of the property’s condition, financial records, tenant leases, and any legal or environmental concerns that may impact the sale. There are many aspects of due diligence that we will cover in another article, but for now here is a brief overview:
- Review of financial records: The buyer may want to review the park’s financial records, including its income statements, balance sheets, and tax returns. This can help the buyer evaluate the park’s revenue and expenses and make informed decisions about the purchase.
- Inspection of physical property: The buyer may want to inspect the physical condition of the park, including the homes, infrastructure, and amenities, to identify any potential issues or necessary repairs.
- Environmental assessment: The buyer may want to conduct an environmental assessment of the park to identify any potential environmental liabilities or concerns.
- Review of legal documents: The buyer may want to review any legal documents related to the park, such as leases, permits, and licenses, to ensure that the park is in compliance with all applicable laws and regulations.
- Verification of zoning and land use: The buyer may want to verify that the mobile home park is properly zoned and that the land use is appropriate for the intended purpose.
The specific requirements for the buyer’s investigation will depend on the individual circumstances of the sale and the buyer’s needs and concerns. The buyer and seller should negotiate and agree upon the scope of the due diligence period and the requirements for the buyer’s investigation to ensure a smooth and fair transaction.
Environmental issues or concerns related to the property are a standard aspect of a mobile home park purchase and sale agreement. These concerns can include contamination from hazardous materials, soil or groundwater pollution, or other environmental hazards that may impact the property’s value or pose risks to the residents and the environment.
The agreement may include provisions for the disclosure of any known environmental issues or hazards related to the property. The seller may be required to provide reports or assessments of the property’s environmental condition, including any contamination or remediation efforts that have been undertaken.
If environmental issues are identified during the due diligence period, the buyer has the right to request remediation or cleanup of the property before finalizing the sale. By addressing environmental issues in the purchase and sale agreement, both the buyer and the seller can ensure that the property is safe and free from environmental hazards.
Warranties in a purchase and sale agreement are promises made by the seller to the buyer regarding the condition and quality of the mobile home park being sold. These promises are legally binding and ensure that the buyer is receiving goods or services that meet certain standards and are free from defects.
It is also possible for a buyer to provide warranties to a seller in a purchase and sale agreement. These warranties are typically made to reassure the seller that the buyer has the financial resources and ability to complete the transaction and meet their obligations under the agreement.
The buyer can makes the following warranties to seller:
- The buyer is a validly existing LLC in good standing within state laws
- The buyer has full authority to execute the agreement
- All necessary actions have been taken to authorize the execution of the agreement
- There are no judgments against the buyer or any known claims against them
- All representations and warranties in the agreement are true and accurate, and will remain so at the closing
The seller can makes the following warranties to buyer:
- There are no pending claims, suits or proceedings that would impact property value or hinder the transaction
- Records are provided accurately and represent the financial condition of property
- The seller has a good and merchantable title with no other agreements granting rights to other parties
- There are no violations of any laws or ordinances with respect to the property’s occupancy, use and operation
- The seller is not in default or violation of any contract or commitment that would adversely affect the transaction
- There are no hazardous substances on or under the property, the property has not been used as a dump site, and there are no underground storage tanks
- The property has at least ____ manufactured/mobile home sites with zoning and regulatory approvals, there are no restrictions on replacing homes, and power supplies/systems meet code requirements
- Water, sewer, and mechanical systems are in sound operating condition and are adequate to serve the communities needs
- All representations and warranties are true and complete as of the date of closing
- There is no knowledge of notice of codes, pending lawsuits, unsatisfied liens, tenants in bankruptcy, condemnation/eminent domain proceedings, or unfulfilled orders/directives from governmental agencies or insurance companies.
Survey and legal description of the property
A survey and legal description of the property are typically included in a mobile home park purchase and sale agreement to provide a detailed description of the property being sold. This information is crucial for both the buyer and the seller, as it ensures that everyone is on the same page regarding the boundaries and characteristics of the property.
The survey is a professional, detailed map of the property that shows its boundaries and any physical features that are relevant, such as buildings, roads, or bodies of water. The legal description of the property provides a written description of the property’s location and boundaries, often using specific measurements and references to nearby landmarks or streets. Together, the survey and legal description provide a complete picture of the property being sold.
From this the buyer can ensure that they are purchasing the correct property, while the seller can avoid any confusion or disputes regarding the property’s boundaries or characteristics. In some cases, the seller may need to obtain a new survey or update the legal description if there have been changes to the property since the last survey was conducted.
Allocation of taxes and other expenses
The allocation of taxes and other expenses associated with the sale is an important part of a mobile home park purchase and sale agreement. This refers to the division of various costs and expenses related to the sale of the property between the buyer and the seller.
Typically, the purchase and sale agreement will specify how taxes and other expenses, such as recording fees, title insurance, and transfer taxes, will be allocated between the buyer and the seller. This may be based on a percentage of the total sale price or on a predetermined formula agreed upon by both parties.
In some cases, the allocation of taxes and expenses may also include the proration of property taxes and utility bills. For example, if the sale is completed in the middle of a tax period, the buyer and the seller may need to divide the tax payment proportionally based on the amount of time that each party owns the property during that period.
By including these allocations in the agreement both the buyer and the seller can have a clear understanding of their financial responsibilities related to the sale. This can help to prevent misunderstandings and conflicts between the parties and ensure a smoother transaction.
Closing and transfer of ownership procedures
The closing and transfer of ownership procedures detail the final steps in a mobile home park purchase. This is the process by which the buyer takes legal ownership of the property and the transaction is completed.
The closing and transfer of ownership procedures may include several steps, such as:
- Finalizing the purchase price: The buyer and the seller must agree on the final purchase price and any adjustments or credits that may apply.
- Completing any required documentation: The buyer and the seller must complete and sign all necessary documentation, such as the bill of sale, the deed, and any loan or financing documents.
- Payment of closing costs: The buyer and the seller must pay any closing costs, including legal fees, recording fees, and transfer taxes.
- Transfer of possession and keys: The seller must transfer possession of the property to the buyer, and provide keys and access to the property.
- Recording the deed: The buyer’s deed must be recorded with the appropriate county or municipal office to officially transfer ownership of the property.
- Disbursement of funds: The seller must receive the agreed-upon purchase price, and any other payments or credits specified in the purchase and sale agreement
Governing law and jurisdiction
The governing law and jurisdiction clause in a mobile home park purchase and sale agreement specifies which law will be used to interpret and enforce the agreement, and which court or arbitration panel will have jurisdiction over any disputes that may arise.
Both the buyer and the seller should be aware of their legal rights and obligations under the agreement, and to provide a clear framework for resolving any disputes that may arise during or after the transaction. If there are any modifications that need to be done, they have to be done in written form. No modification is allowed to be done orally.