Manufactured Home Communities for Retirees: Buying the Home, Renting the Lot

A manufactured home community can look like the low-cost way to own a home of your own. The home has a price you can pay once, or pay off over time, and there is no yard land to buy. What the ads put in small print is the split at the heart of this housing: you buy the home, and you rent the lot it sits on. Those are two contracts with two owners, two sets of costs, and two sets of rules. This guide walks through each side, where each cost is written down, and what to read before you sign either paper. Our independent living section holds the directory and the other housing guides in this set.

Two contracts, two sets of costs

In most home buys, one sale covers the house and the land. Here the two are split. The seller sells you the home: the walls, the roof, the rooms. The community keeps the land. You pay the community each month for the right to keep your home on its lot, and that payment has no end date. It runs for as long as you live there.

That split changes how you judge the deal. A low home price is only half the sum. The other half is a rent that can rise over time, set by a lease you did not write, on land you do not own. Judge both halves together, over the years you plan to stay, before you call the home cheap or dear.

The costs on the home side

These costs sit in the sale and loan papers. Ask for each one in writing before you sign:

• The price of the home itself, and what it covers: the home as it stands, or the home plus steps, skirting, and hookups.
• Loan costs if you borrow: the rate, the term, and the fees. The title question below decides which kind of loan you can get, and the kind decides the cost.
• Transport and setup costs if the home is new or is being moved in: moving, leveling, and tying the home down.
• Home insurance on the home itself, and the property tax or registration charge your state puts on a home titled as personal property.
• Repairs and upkeep inside your own walls and on your own roof. In this housing, the home is yours, so the repair bills are yours too.

The costs on the lot side

These costs sit in the lot lease and the community rules. They are the half most buyers read last, and they should be read first:

No figure in this list can be guessed from the home price. Each one is set by the lease and the rules of that one community. Two parks in the same town can write very different leases.

• Lot rent, paid each month for the ground under your home. The lease states the sum, how and when it can rise, and how much notice you get before a rise.
• Utility charges the community bills itself: water, sewer, trash, and in some parks a share of shared costs. Ask which bills come from the community and which come from the utility firm.
• Community fees named in the rules: guest or extra-car charges, pet fees, late fees, and charges for work the community does on your lot if you let it slide.
• Move-out and sale costs on the lot side: what you owe if you leave, and what the community can charge or demand when you sell.

How the home is titled, and why it changes the loan

A manufactured home can be titled in one of two ways. It can be titled as real estate, like a house on its own land. Or it can be titled as personal property, like a car. The CFPB explains the line this way: for a home to be titled as real estate, it generally must sit on a permanent foundation on land the owner owns. A home on a rented lot in a community is, in most cases, personal property.

The title decides the loan. A home titled as personal property is financed with a chattel loan. That is a loan on the home alone, with no land in the deal. CFPB research found that chattel loan borrowers pay higher interest rates than borrowers with a mortgage. They face higher denial rates, and they are less likely to refinance. The same research notes that chattel loans carry far fewer consumer protections than mortgages. One case the CFPB names: the disclosure rights under the Real Estate Settlement Procedures Act cover mortgage borrowers, not chattel borrowers.

Ask the seller one plain question before you talk price: how is this home titled, and can I see the title? The answer tells you which loan market you are in, and it matters again on the day you sell.

Check the home itself: the federal label

Manufactured homes are built in a factory, not on the lot. Federal law sets the build standard. HUD states that all residential manufactured homes must comply with the Federal Manufactured Home Construction and Safety Standards, and that since June 15, 1976, makers have shown compliance by attaching a red certification label to the back of each transportable section of a home.

On any used home, walk around the back and find that label on each section. A home built before that 1976 date was built before the federal standard existed. A missing label is a flag: ask the seller for the home's papers, and ask your state's manufactured housing agency how the home can be verified. HUD lists each state's agency for this work. The label check costs you five minutes and tells you what the home is built to, which no paint job can show.

The 55+ rule still applies

Many manufactured home communities for retirees are age-restricted, and the same federal frame applies here as in any 55+ housing. Under the Housing for Older Persons Act, a community keeps its age rule only if at least 80% of its occupied homes have a resident who is 55 or older, it publishes and follows policies that show it means to be 55+ housing, and it checks ages under HUD rules. Our guide to 55+ community rules walks through how that test treats a younger spouse, adult children, and guests.

Read the community's own age and guest rules on top of the federal frame. The park's papers set stay limits for guests, rules for other adults moving in, and what happens to a younger spouse if the older spouse dies. Those terms sit in the same rule book as the lot lease, and they bind from the day you move in.

Selling later: the resale limits in the second contract

One day you or your family will sell the home. The lot lease and the rules govern that sale more than the home's worth does. Read these parts before you buy, not when you need to sell:

State law adds a layer on top of the lease. States write their own rules for lot leases in manufactured home communities, covering items like rent rise notice, lease terms, and what must happen if a community closes or is sold. The rules differ by state, so check yours. Your state manufactured housing agency is the office that can point you to the state rules that apply.

• Buyer approval: many communities screen the next buyer, and the sale cannot close until the community approves them. An unapproved buyer means no sale.
• Where the home can be sold: some leases let the home stay on the lot for the next buyer. Others can force a sale off the lot, and a home that must move is worth far less, since moving a home is costly and an older home may not survive the trip.
• Age and condition rules: some communities set terms on the age or state of homes that may stay, which can cap what a buyer will pay for an older home.
• First refusal and fees: some leases give the community the first chance to buy the home, or charge a transfer fee at sale. Both terms cut into what you take away.

Who pays for what

• You pay for the home: its price or loan, its insurance, its tax or registration charge, and its repairs. The home is your property and your cost.
• You pay the community for the lot: monthly lot rent, plus the utility charges and fees the lease and rules name. These are rent costs, and they run for as long as the home sits on the lot.
• The community pays for its own land, roads, and shared spaces, out of the rents it collects. What it maintains, and to what standard, is stated in the lease and rules.
• Original Medicare pays for covered health care. It does not pay rent, lot rent, or home purchase costs in any setting.
• Medicaid does not pay lot rent or buy a home in a manufactured home community. For people who qualify, it can help with care services under state rules. Housing itself stays a private cost.
• HUD's role here is the build standard and the age rule frame, not rent help: the federal standards govern how the home was built, and the older persons frame governs the 55+ rule.

Sample situation

Walter is 71 and finds a used manufactured home in a 55+ community near his sister. The price looks low next to the site-built homes in town, and he is ready to pay cash. His sister slows him down and asks to see the lot lease first. The lease shows a monthly lot rent that can rise once a year with written notice, a water and trash charge billed by the community, and a rule that the next buyer must be approved by the community and meet the age rule. The home may stay on the lot when sold, which helps its value. Walter checks the back of the home and finds the red federal label on its one section. He asks how the home is titled and learns it is personal property, so a loan would have been a chattel loan; paying cash, he still notes the title, since it will shape the next buyer's loan and his sale price. He adds the lot rent and charges to his monthly budget next to the home's insurance and upkeep, and the full sum still fits his check. He buys, with both contracts read and no cost left as a surprise.

Questions to get answered in writing before you buy

Get the answers from the lease, the rules, and the title, in writing. A verbal promise from a sales office is not a term of either contract.

• What is the lot rent now, when did it last rise, and how much notice does the lease promise before the next rise?
• Which utilities and fees does the community bill, and which do I pay to the utility firm?
• How is the home titled, and may I see the title and the home's federal label numbers?
• When I sell, must the community approve my buyer? May the home stay on the lot? Is there a transfer fee or a first refusal right?
• What do the rules say about guests, other adults moving in, and a younger spouse staying on?
• Has the community been sold, or is a sale or closure planned? What does state law say must happen for residents if it closes?

Sources

• http://www.hud.gov/hud-partners/state-administrative-agencies
• https://www.consumerfinance.gov/data-research/research-reports/manufactured-housing-finance-new-insights-hmda/
• https://www.consumerfinance.gov/archive/newsroom/cfpb-finds-majority-of-manufactured-housing-borrowers-have-expensive-loans/
• https://www.medicare.gov/coverage/long-term-care