Community Rules Are Not a Lease: Putting the Right Obligations in the Right Document Under the MHCRA [Part 1]

The Manufactured Home Community Rights Act (“MCHRA”) covers what documents are required to be compliant with the act: the lease, the disclosure of fees statement, and the rules and regulations.

The MCHRA requires a lease to be in writing, for a term of at least one month unless a longer term is mutually agreed, and renewable. It also regulates disclosures, including rent, fees, service charges, assessments, utilities, rent-increase limitations, and rules for longer-term leases. Community rules must be fair and reasonable, related to health, safety, or upkeep of the community, and not arbitrary or capricious. While the lease and the rules and regulations should work together, they do not do the same job.

The basic drafting principle is straightforward: put the parties’ initial economic terms and material reciprocal obligations in the lease. Put day-to-day rules for living in the community in the rules. Then make sure the documents use consistent terms and do not contradict one another.

What belongs in the lease?

The lease should answer the essential business and legal questions: Who are the parties? What is being rented? How long is it being rented for? What is the cost? What else is being provided? What happens if a party defaults?

While all leases must include a statutory disclosure of fees, for leases exceeding 60 days, the MHCRA requires substantial additional disclosures. These include information about utilities and services, the parties providing them, rent-increase procedures, factors affecting rent, pass-through charges, certain utility-charge history, elective service charges, and more.

The lease (with accompanying documents required by the MCHRA) should be the place where a resident can determine the total financial commitment required to occupy the space. If a charge is material enough to collect, it is material enough to disclose clearly.

What belongs in the rules and regulations?

The rules should regulate conduct and operations within the community. They should be specific enough to guide residents community and support consistent enforcement, but flexible enough to address ordinary conditions in living.

Examples of rules and regulations topics would be parking locations; lot cleanliness; outdoor storage, and exterior appearance standards; lawn maintenance, landscaping, snow removal, and seasonal responsibilities; pets

In short, rules and regulations should not be used in lieu of a lease. This is an important distinction. A rule may tell a resident where to place trash containers. But the disclosure of fees document should reveal a new recurring charge for trash service.

Draft for Consistency, not Duplication

The answer is not to copy every rule into the lease. Excessive duplication can make future updates difficult and increase the chance that the lease and rules drift apart. Having a lease and rules document be in conflict could not only create areas for litigation, but it could result in certain rules being unenforceable. Because lease amendments can only be completed after the lease term is over, it could limit how quickly the inconsistency is part of the lease.

Instead, the lease should incorporate the most recent rules and regulations draft. The rules should then handle the details. When the community updates a parking rule, trash schedule, or exterior color palette, it can do so through the established disclosure and amendment process rather than attempting to re-negotiate the entire lease.

A community’s lease and rules should read as one coordinated system. The lease establishes the bargain. The rules explain how residents live within that bargain. When those roles are clear, the community is in a stronger position to enforce standards fairly and defend against claims that a purported rule is arbitrary, undisclosed, or inconsistent with the MHCRA.

Conclusion

If you are a manufactured home community owner, understanding the different statutory documents governing your relationship with residents both protects the owner and the resident from noncompliance issues by clearly communicating duties and obligations in accordance with the law.

Consulting with counsel that is familiar with the MHCRA and your business can help minimize exposure for compliance issues.

Stark & Stark regularly represents landlords, including manufactured home community owners, in all matters relating to their business, including representing them in the acquisition of new communities, lease compliance, rules & regulations compliance, and litigation.