Mobile Home Park Mastery: Episode 296

Understanding Zoning Compliance

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Since most cities hate mobile home parks, it’s imperative that you understand your rights under zoning. In this Mobile Home Park Mastery podcast we’re going to review the components of a certificate of zoning compliance as well as other issues that have an impact on your rights to operate.

Episode 296: Understanding Zoning Compliance Transcript

Cities have long hated mobile home parks, and as a result, you have to know you have a legal right to operate. This is Frank Rolfe, the Mobile Home Park Mastery podcast. We're gonna talk about zoning compliance and mobile home parks. Now, there are three types of zoning compliance regarding a mobile home park. You have the legal conforming mobile home park, that's mobile home park that meets all of the current laws. You can build that same mobile home park on the same piece of property again today. Then you have the legal non-conforming type of zoning for a mobile home park. This is what's called grandfathering.

This means that if you were to want to build the park again today, you could not on that property, and the third classification is illegal. Now, illegal means just that, the mobile home park has no right to exist. Now, either of the first two categories or where you find most mobile home parks to either fall under legal conforming or illegal nonconforming, but I can tell you from experience for the past 30 years, it's also very common to find illegal mobile home parks that are still operating. I've seen some fairly large ones, I've seen a park over 100 lots in Fort Worth. I've seen another part of over 100 lots in Dallas. They had no legal right to exist. Someone basically built them without any permission on the part of the city.

The city knows that they're there, and yet have done nothing to shut them down. So as a buyer, don't be thinking, just 'cause you see that mobile home park setting, they're operating that it actually falls under either legal conforming or legal non-conforming because it may not be true. Some would ask, why are they there? Well often someone in the city, because we all know that cities are to some degree corrupt, was shielding them from the reality of their zoning. Maybe it was a family member, maybe they were getting paid, I have no idea. But just because you see a large mobile home park, even in a prominent spot, don't for a minute think it does necessarily have the right to be there, because sometimes they don't.

Now, if you have the right to be there, here's how it works. If you're legal conforming, then not much could ever happen to you, but if you're legal non-conforming, that means you follow under the laws of grandfathering. Now, what does grandfathering mean? Grandfathering means that if you built the mobile home park in compliance with the zoning requirements at that time in history, nothing passed later can impact you because you had the right to be there. They may have changed how it works to build a new, but it doesn't mean you can't be there any longer, and in our industry, the grandfathering status is grandfathered as a parking lot. We're very different than most all other grandfathered status in the city.

If I have a hotel on a property and on legal non-conforming and that hotel is destroyed in a tornado, I cannot put the hotel back because if you have a property damage beyond a certain percent, and you're illegal nonconforming grandfathered, you can't put it back in. But in our case, if the tornado blows through and wipes out every single mobile home in the park, it has not impacted my grandfathering right, because my grandfathering right is to be a parking lot. So cars can come in and out of the parking lot, but there's no real way to damage the parking lot is just land. Many cities do not understand the subtle modification. As a result, if there is a tornado that goes through a park, sometimes the city will say, "Wait, you can't put any mobile homes back. Those mobile homes were damaged beyond a certain percent," when that is absolutely not how the grandfathering works. Now, in 30 years of doing this, in every case we've ever had with the city that said, "No wait, you can't use those lots," we've always prevailed.

Sometimes, we get there by just talking to the zoning administrator, pointing out different things that are already available on Google as case law. Other times, we've had to enlist a municipal attorney to go to the city to explain our rights, and then sometimes, or at least in one case, we even had to file a suit against the city because they were violating her grandfathering. However, it never went to court because as soon as they were given the suit, the immediately back pedaled and said, "Okay, yeah, I guess you're right." Now, watch out in Grandfathering for situations where your legal non-conforming status was only granted on a temporary basis. Sometimes you will see a special use permit known as an SUP in which it times out.

The city gave this individual the right to have that mobile home park built on that piece of property, but it had a life to it, and that life might have been 30 years or 50 years, and now you're looking at buying it and you realize you're 54 years in, which means you've already lost your right to be there. Because there are in many cases, temporary requirements that some park owners are to established because they thought, "Well, my mortgage is only gonna be 30 years, so if I have this right for 40 or 50, it's gonna be fine. I'll have 30 years to pay off the debt and 20 years of profitability" but that just won't work for you today. So make sure that whatever zoning allows you to be there is in fact permanent and does not expire.

Also watch out for cities that have what are called Sunset provisions. A sudden set provision is one in which the city is able to amortize out your non-compliance of being grandfathered, so basically they have the right to start a time clock, whenever they want, that tells you when your grandfathering dies. Now, there are very few cities that have this ability, because as you can tell, most property owners would not be in favor of this, but do check it out. It does exist out there. In some cities where they may have the right to what is called amortize your existence and give you only so many years before you have to shut down your use. It is incredibly rare. I've never heard of any case of it with a mobile home park, but I want you to be aware that that is also out there, you can check in on. Now, it's also very important when you're checking out zoning to understand how many lots the city says you can have in your parking lot, because obviously, if the city acknowledges you're a parking lot but says you can only use 10 parking spaces and you think you have 50, that's a huge impact.

Now, in most cases, the cities are pretty amenable to allowing you to utilize all of those parking spaces that are evidenced by utilities. So what they normally wanna see is a water, sewer and power hook up to each lot, but every lot that has that, whether there's a home currently on it or not, they will typically state as being a potential parking space for a mobile home. But we have had occasions where the city, in their own records, has the number wrong. We've seen it go both directions. We've seen parks that have 75 lots, but the permit says they have 80, and we've seen parks that have 80 lots, and the permit says they only have 70. Obviously, if the city is overshot, that's fantastic. But you can't buy a mobile home park thinking you've got 80 occupied lots if the permit only says 70 because it's not going to work. Now, even though you may say, "Well, they haven't done anything about it, I can get by with it." You won't get by with it 10 years from now when you go to sell the park off or refinance it with a more sophisticated lender. They will immediately focus on that issue and say, "No, this is wrong." In due diligence, if you ever have the city come to you with the wrong number of lots and they're trying to short you the number of lots obviously, you would say nothing if they said you had 80 lots and only you thought had 75. You sometimes you have to go to them and fight them on that issue.

How did they come up with that number of lots? When you end up doing the crimes investigation of why the lots are wrong, it often just falls down to some low-level employee at the city who was not paying attention, who entered it into the computer incorrectly. It is very possible to get that solved if you'll just go to the zoning department and show them using typically a survey, or we've had it where they've had a survey, they want them to sign something under penalties of perjury that this is how many lots are in existence in the park, and often you can get that amended. Now, it's very important in all of this that as part of your due diligence, you get what is called the Certificate of Zoning. The Certificate of Zoning is going to say on the part of the city in a formalized manner for all the world to see which zoning classification it is, either legal conforming, legal non-conforming, or illegal, and how many laws you are allowed to have in your parking lot. You must get that document. It's absolutely essential. When you get to the level of more sophisticated lenders, it will be absolutely mandatory, and additionally, even though you may have legal non-conforming grandfathered status or legal conforming status, and number of lots is correct, make sure there are not other additional items you need to have to evidence you're right to be there.

Items such as licenses, which may be granted by a state, county or city, or a certificate of occupancy, which often you have to get on the front end when you first build the park, or even maybe an annualized permit that you must obtain or something that's obtained every so many years. You see, it's very critical right now in most markets in America to make sure you have all your bases covered. Because as we all know, mobile home parks are frequently in the media, frequently under attack by those who simply hate landlords in today's strange America, and then city fathers who realize the mobile home parks to cost the cities lots of money in the form of tuition and other services without really an offsetting amount of tax revenue in. So you can't just leave it in a more nebulous fashion, this is a time where it's always essential you ask permission and not forgiveness. You must get this all cleared up on the front end when you buy the property. Because even though you may be doing it with seller financing where it's not essential right now, you will one day wanna sell that property and the buyer and the banker is going to demand that you show legal rights of zoning compliance. This is Frank Rolfe, the Mobile Home Park Mastery podcast. I hope you enjoyed this. Talk to you again soon.