Texas’ First Tenants Right of First Refusal, and Personal Property MH Killer

At the risk of exhausting my metaphor from my previous post that highlighted this session’s offensive playbook, we all know a team’s defensive is just as, if not more, important than its offense. 

Added to our defense list are two bills filed right before the deadline. These two bills are extremely concerning for our industry (i.e. the Very Bad):

SB 2726 - Relating to the sale of a manufactured home community.

• Texas’ first tenants’ “right of first refusal” bill on MHC sales;
• Before an MHC owner could sell to a buyer, the tenants would be given a 121-day window to organize, vote, and obtain financing to match the private purchase offer.
• If the tenants can match the offer, the MHC owner must sell the MHC to the tenants or state the reasons for the rejection;
• The bill requires the landlord to “negotiate in good faith” (which is not defined);
• The tenants also have the right to assign their right of first refusal and ability to purchase the MHC to any of the following:
  • a municipality;
  • a county;
  • a state governmental entity;
  • a housing authority;
  • a nonprofit organization; or
  • a tribal governmental entity.
• Once a tenant’s organization, or assignee, makes an offer within 121 days, they then have an additional 90 days to arrange financing (for a maximum possible hold of 211 days before the MHC can sell to the original private buyer)
• But the above timeline can be extended even more if there are any of the following:
  • For additional “reasonable delay” in obtaining financing;
  • During the period (not defined or limited in the bill) when a “potential” assignee considers the assignment from the tenants; or
  • The tenants file a complaint with TDHCA that the landlord acted in bad faith (which is also not defined).

SB 2765 - Relating to the treatment of a manufactured home as real property.

• Would allow any owner of a MH who resides in the home as their primary residence the ability to elect to treat the home as real property
• Under the bill, an owner who does not also own the real property where the home is installed, could declare the home real property
• This would have a significant adverse impact to titling and lending if/when homes that are currently titled with finance contracts for personal property ownership are unilaterally changed by the homeowner to real property.
• Additionally, the lender(s’) concern or threat that at any moment in the future a homeowner could declare their personal property home as “real property,” thus jeopardizing the enforceability of their personal property loan, could result in a dramatic reduction or completely eliminate personal property MH lending in Texas.
  • For those who barely survived 2001’s HB 1869, this bill is what we call an industry killer.

Make no mistake, if these late filed bills begin to move at all, TMHA will bring to bear all Association resources in opposition.