A family owns a home on a ½ acre of land with a fixed manufactured home on the land. The property has a cement driveway, with nice landscaping. They own a few small animals such as chickens, ducks, goats as their pets; they even have a llama named Dolly. Can the family take out a loan that is secured by the real property?
Modern manufactured homes can be both attractive, and often provide the convenience of semi-rural living, such as a mini-farm. Usually, the land parcels are larger and may provide for fewer governmental restrictions on land use and zoning. Also, these communities are rarely subject to covenants, conditions, and restrictions (CC&Rs) recorded by private declarants to establish limitations that may facilitate the ownership and management of common amenities.
A few questions should be asked. Does the prospective borrower possess fee ownership of the land parcel? Is the land parcel on a paved road with municipal utilities including water, sewer, gas, and electricity? Or, does the property use a private septic system relying on a tank and leach lines? Is propane or natural gas in use? What is the description of the manufactured home including size, age, amenities and is the home installed on a permanent foundation?
All manufactured homes that contain wheeled chassis are delivered on large trucks and placed upon a fixed predesignated foundation. Legally manufactured homes are built as dwelling units of at least 320 sq. ft. in size with a permanent under structure chassis to assure both initial and continued transportability.
Manufactured homes are constructed in a warehouse and are delivered by trucks to the site. Prefabricated or modular homes are manufactured in components and are delivered to the site on trucks to be assembled upon a fixed foundation. Various fees paid to the municipality may be required.
The question arises whether the manufactured home is personal or real property. Manufactured homes are required by the federal department of Housing and Urban Development (HUD) to include a certification label posted on the home regardless of whether it is characterized as personal or real property. When the manufactured home is completed and delivered to the ultimate owner and user, the California Department of Housing and Community Development (HCD) will issue a license and certification evidencing the ownership of the home and that it will be taxed as personal property, not real property.
If a manufactured home is delivered to and installed on a rented space, in a mobile home park, the manufactured home will remain personal property subject to the licensing and certification by HCD.
If the land parcel is owned in fee simple title and a manufactured home is installed on blocks or temporary piers (other than in a permanent manner), it will remain as personal property and not become part of the real property. To alter the personal property status of such installed manufactured homes requires that a permanent foundation be constructed and that the manufactured home be installed thereupon. When manufactured homes are installed on a permanent foundation, they are then considered non-movable and therefore become real property subject to the process below.
The manufactured home will stay personal property unless the owner applies for a “433a permanent foundation certification”. This is referred to as titling documentation called, “Installation of a Manufactured Home on a Foundation System” that complies with California Code of Regulations, Title 25, Chapter 2, Section 18551. The completed form must be recorded in county records and will be reflected in a title search. When the manufactured home is permanently installed on a foundation, a permit must be obtained from the local building official who will inspect and approve the manufactured home for occupancy provided that the installation of the home and the construction of the foundation complies with all applicable building codes and zoning ordinances. Upon completion of the loan transaction or conveyance of the title, the title company should issue a title endorsement (ALTA 7). This is a practical process that will assure the reassignment of ownership of the manufactured home from personal to real property.
An owner must obtain an approved manufacturer’s installation instructions with plans and specifications signed by a California licensed engineer who completed the calculations necessary for the structural design of the foundation system and how the manufactured home is to be permanently installed thereupon. The engineer’s plans and specifications are to be submitted to the city, or county building inspection department. The building official may ask that the plans and specifications be submitted to the planning department for compliance with the zoning ordinances. The local jurisdiction which issues the building permit will charge a fee. There are many contractors familiar with the process to ensure quality. Do not attempt this conversion without a competent specialist (either a knowledgeable consultant, engineer, architect, or lawyer).
If a borrower owns the lot in fee simple and has placed a manufactured home on the property, this permit and inspection process is the only way to ensure, that the manufactured home will be considered a permanent part of the real property. To sell, or finance the property as real property, the process described in this article must be accomplished. If the process is not accomplished, the real property’s value will be limited to vacant land estimated by comparable neighborhood sales of similar land.
The example above relates only to California property; other states have a similar process to follow and accomplish the conversion of personal to real property.
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