Home for Good : Mobile Home Owners Organize Movement to Buy Land They Live On
In 1990, Geri and Cary Marshall made a lifestyle decision. Cary Marshall, now 69, was a practicing accountant then. Like many seniors, the Marshalls didn’t want to tie up all their money in a house.
After researching the economic merits of different housing options, Marshall decided that for him and his wife a mobile home provided a high-quality lifestyle for a low price.
The Marshalls sold their San Clemente condo and bought a 1,500-square-foot, double-wide mobile home at nearby Shorecliffs Mobile Country Club, a 43-acre, 190-space senior park restricted to residents over 55.
Although they were attracted by the park’s spectacular views of the Pacific and nearby Shorecliffs golf course and the relative privacy of their cul-de-sac location, those weren’t the clinchers for them.
The deciding factor for the Marshalls was their knowledge that the park would soon be converting to resident ownership. “We wouldn’t have bought here if we couldn’t buy the land too,” Geri Marshall said. “Although we bought into the park in 1991, before the conversion, we had friends who said the process was beginning.”
The Marshalls are not alone. Increasingly, since the early 1980s, mobile home residents in California have been banding together to buy their parks.
The conversion movement is particularly strong in Southern California. There are 155 resident-owned parks statewide and most are in Southern California, said Allison Branscombe, senior program manager of the state Mobilehome Park Resident Ownership Program (MPROP).
Although the 155 parks are a small fraction of the 5,100 rental and resident-owned parks in California, the conversion process is a growing trend, Branscombe said.
The movement has been helped by the Golden State Mobilehome Owners’ League (GSMOL), an association of residents in both rental and resident-owned parks. In 1984, GSMOL sponsored bills that would assist mobile home owners in collectively purchasing their parks.
One of these bills, authored by then-state Sen. John Seymour, created MPROP. The program, part of the Department of Housing and Community Development, makes available financial and technical assistance for park residents with the goal of providing affordable housing for lower-income park residents.
“The state of California wants to maintain affordable housing and wants to make sure that mobile home residents don’t lose their housing,” said John Tennyson, consultant for the Senate Select Committee for Mobilehomes in Sacramento.
MPROP has funded or is in the process of funding 40 projects for a total of about $23.3 million. MPROP loan commitments cannot exceed $1 million per project.
MPROP funds come from a $5 surtax on the vehicle license fee paid by owners of mobile homes purchased before 1980. (Owners of these coaches, which represent about 75% of all the coaches in the state, pay a licensing fee in lieu of property tax. Coaches built and sold after 1980 are subject to property tax.)
Traditionally, park residents own their coaches and rent the land the home sits on from an investment company or individual landowner.
Up until the late 1970s, rents were low, making mobile home living an affordable option for those on a limited income. However as land values escalated in the 1980s, rents rose accordingly.
“The owners of the parks want to maximize their investments. The homeowner’s interests are in minimizing their cost of living,” said Sue Loften, an attorney and partner of Pacific Park Associates, a mobile home conversion consulting firm in Beverly Hills.
“The best way to resolve these issues is for residents to become owners of the land as well as of the coaches.”
San Clemente attorney and conversion consultant Jerry Gibbs believes that the residents who want to buy their parks are often the same people who moved into mobile homes to avoid the problems of homeownership.
“They may be retired and want the freedom to travel without the responsibilities of maintaining a larger property,” Gibbs said.
“They see the advantages of a mobile home lifestyle--the security of having close neighbors, having a small space in which to garden, being able to leave for a month or two to travel. Resident ownership enables them to avoid capricious increases in rent. They also like having a property they can more easily sell or will to their heirs.”
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Converting a park to resident ownership is a difficult process with many obstacles. Because most mobile home parks have listing prices in the millions, purchasing the land can become a formidable task, especially for those with limited resources.
Another hurdle is persuading a large number of residents to participate in the purchase.
Two-thirds of the residents must be willing to participate to receive state funds, and 51% or more must be involved in the sale to take advantage of a law that allows residents to retain the tax base of a park that has not sold since the enactment of Proposition 13.
Mobile home park conversion takes two very different forms--subdivision into condominiums or creation of a nonprofit cooperative that owns the park land and issues shares to each participating resident.
In the condo method, the property is surveyed and subdivided into spaces. The appraisal value of each space may vary based on the desirability of location. Residents must determine how they will finance their individual purchase, and each property must pass through escrow. Upon the completion of the conversion, participating residents receive deeds to their spaces. They also own a percentage share of the common areas of the park.
In the cooperative method, the residents form a corporation that buys the land from the seller and issues membership shares to residents, who own a portion of the total park but not the actual land under their coaches.
The co-op can be organized as a limited equity corporation or as a nonprofit mutual benefit corporation.
In a limited equity corporation, any appreciation in the market value of the property is retained by the corporation. When a member sells a share or membership, any profit is restricted to the original price of the investment plus interest at a specified, limited rate.
In a nonprofit mutual benefit corporation, each member has a share in the nonprofit corporation that is the actual owner of the real property. The homeowners who participate pay a monthly fee, part of which pays for the operation of the park and part of which pays for the mortgage. Residents who do not choose to participate in the purchase pay rent to the corporation. When a coach and a share in the corporation are sold, the price is determined by the market, and the resident is allowed to keep any profit from the sale.
The residents of Cherokee Mobilehome Park in Anaheim were pioneers in the co-op-conversion movement in the mid-1980s.
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The 173-space park with its two recreation halls, a pool, spa, laundry area, car wash and beauty salon is located on Beach Boulevard between Knott’s Berry Farm and Disneyland. By the mid-1980s, the family that had owned the park was being courted by others who wanted to purchase the desirable property.
“The residents were afraid of rent increases with new ownership,” said Walt Jellum, former president of the association. Jellum, now retired from the restaurant business, and his wife, Joanie, a former schoolteacher, had purchased their spacious triple-wide coach in 1965.
“We started to investigate the possibility of purchasing the park ourselves,” he said. “We then learned that there were state funds available that might make this a real possibility. The residents formed a corporation with a nine-member board and began looking into funding.”
The price of the park was $5.6 million. With the help of the city of Anaheim, the state of California and private lenders, the residents were able to purchase the park, which is now a senior (over 55) facility. Each resident unit made a down payment of $3,100 and pays an association fee of $406 a month for day-to-day operations and to pay the mortgage. Each of the 173 resident units owns an equal share of the property.
“We went through trials and tribulations with the process. We felt like we were out there with machetes, blazing a new trail,” Jellum said. “Now everyone’s home is his or her own.”
Although the conversion process is usually faster and less expensive in the cooperative method, there is a major drawback, consultants say.
“Banks recognize deeds. They may not recognize the cooperative stock as a means of ownership,” said attorney Jerry Gibbs. “We push the condo concept over cooperatives because generally it is a better investment.”
In 1987, residents at Shorecliffs in San Clemente learned that if a resident group formed a nonprofit state corporation with the intent of purchasing a park, the park owner would be required to give them a 30-day notice if he intended to list the property for sale. The residents then would have 30 days to come up with an offer. However, the park owner would not be required to accept their offer.
“Although we formed our corporation in 1987, it wasn’t until April of 1990 that the owners, Del Prado Co., gave us a letter saying they intended to sell. The partners wanted to sell to the residents. Escrow closed in September, 1992, 2 1/2 years later,” said Ben Hetherington, president of the Shorecliffs Mobilehome Park Assn.
The price of the park was a $12.7 million.
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The residents interviewed several consultants, choosing Jerry Gibbs to help them with the conversion. To obtain funding, they applied for low-interest funds from MPROP, which assists low-income residents whose loan applications have been turned down by conventional lenders.
To receive MPROP funds, residents must be organized into a corporation and have a commitment of cooperation with a local government agency. The Shorecliffs residents were assisted by the city of San Clemente, which helped residents by applying for a $400,000 loan and by acting as co-applicant for a $1-million loan.
Those residents who were ineligible for state funding applied for loans from private financial institutions. Representatives of several lending institutions made a presentation to residents to pitch their services. Hetherington said 55 to 60 residents paid cash. The price for each space varied according to its location and desirability.
Eleven residents didn’t participate, and the remaining 179 units had to absorb the purchase price of these spaces.
“As of last year 10 of those 11 spaces have been sold to new purchasers, and the remaining one has been paid off,” Hetherington said.
“On the day the escrow for the large park parcel closed, the 179 individual escrows also closed,” he said. “A month later we had a big party to celebrate. We invited all the people who had helped to make it all possible.”
Today, residents each pay association fees of $119 for the services of a management company, trash pickup and maintenance of streets, hillside areas and the other common areas. Individual mortgage payments vary according to the amount owed.
The Shorecliffs’ conversion was simplified because the owners were willing to sell the park to residents.
“Some owners are cooperative, while others won’t sell to residents. Every deal is different,” said attorney and conversion consultant Sue Loften.
“Owners need a replacement investment for their money. Parks are lucrative investments. Some owners want an all-cash deal so they can trade to another investment. Others will allow for creative financing.”
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Henry E. Doney, a park owner and president of Sierra Madre-based MHP Investments and MHP Conversions, believes that most owners are willing to sell to residents, provided that the sale does not hold up a tax-deferred exchange of property.
“Conversion is a long process. I might lose an opportunity to sell the property and make a trade if I have to wait a year and a half for escrow to close.”
Still, if residents can come up with the money, Doney says he would be happy to sell to them. “I can’t imagine why I wouldn’t want to sell a park to my residents,” he said. “I don’t have a hostile attitude toward them. They’re my customers.”
In spite of the work involved in their purchase, the Shorecliffs residents are pleased with the outcome. Mobile homes owned as condos are still less expensive than conventional condominium units in San Clemente.
Currently, homes in Shorecliffs are listed between $99,000 and $159,000, said resident Cary Marshall, who now works as a realtor. Conventional condos in San Clemente sell between $129,000 and $250,000. In 1993, there were eight sales in the park ranging between $109,000 and $159,000. The price range reflects the location and condition of the coach.
The relative affordability of mobile home ownership has inspired other Southland park residents to spend hours of their free time in efforts hopefully leading to conversion.
Kevin Shepherd, 35, a software developer, has served as president of Resident Owned & Run Inc., a corporation formed in 1992 with the goal of accomplishing the conversion of Top ‘O’ Topanga Mobile Home Estates into condos.
The process has been especially complicated because the family park has had more than its share of problems.
During the January earthquake, the park suffered major damage. Eight coaches shifted off their foundations, one space was condemned because of deep strata fractures and a number of residents moved away, making it difficult to get the majority needed for state funding. Shepherd is still hopeful that the conversion can take place.
“I believe that resident ownership is possible,” he said. “The process is complex and challenging, but I feel that this is an opportunity for my wife and myself to help stabilize our cost of living and own our mobile home lot.”
