Possible SAFE compliant "RTO" plan

[Sean Iannucci]

The law allows us to do straight leases then give homes away to anyone who lasts more than X months. The problems with this method come from the fact that we want tenants to know upfront that they are working toward ownership.

A tenant that is working toward ownership will have less turnover on average and take better care of the unit.

My proposed solution is a straight lease including something like this:

Long Term Tenant Appreciation Plan

After “X” months of paid rent and adherence to all park rules, mhp MAY, at its sole discretion, transfer the ownership of the rented home to the tenant.

Downsides:

You would not be able to collect more than market rent.

Some tenants may be turned off by the language that does not guarantee them ownership.

Pros:

The encouragement of long term tenants and ownership

I think this is SAFE compliant.

Helps us get to our goal of a park filled with tenant owned homes.

Questions:

What would be the best way to advertise this?

Could we be more clear when verbally explaining the situation and say things like we “will” transfer the title after x months?

Would you include anything else in that paragraph?

Thoughts?

[Bill Gulley]

Is it common for landlords to give properties away? (LOL)

It's a disguised sale, doesn't matter what you call a stream of payments, the fact is that payments are required and at the end of the term an asset is conveyed to the one who made the payments.

No, it's not SAFE Act compliant, the Act states "any method or scheme" that appears to circumvent the intent of the law will be subject to the Act.

That's pretty clear, you can't employ any method, no trust, no business entity, using your wife or you dog or your cousin in India to effect the transfer of covered residential real estate after receiving any stream of payments or other compensation.

For those just hell bent on getting around the SAFE Act and Dodd-Frank issues, buy a house, move in, register your driver's license and mail to that address. Live in it. If you're there for less than a year, justify your needing to move to another property. At that point you may be exempt as a homeowner, owner occupied. Of course you are still limited to the number of deals allowed and doing this time and again would then constitute that "any method or scheme" issue.

The only way to avoid these Acts is to qualify for the allowed exemptions, but if you're in the business of RE, expect anything you do to be exempt to be examined as any ploy as a business and not strictly a personal transaction.

Folks would have less brain damage just complying with the law instead of trying to out smart regulators.

This is the way things work in reality. A regulator only has to have an opinion, they justify their opinion. You get nailed, ceases and desist, perhaps they send you a fine. It's an administrative action, not a court matter at this point. Send the fine in and stop. Or, go hire an attorney to go to an administrative hearing, state your case, then pay the fine and stop. Or, appeal and go to court. Pay your attorney more money, appear in court and state your case. Your best chance is to get a reduced fine, IMO, you will not win as the intent of the law is what the regulators say it is. This is pretty much the way other federal laws and regulations are applied in financial matters.

The opinions of the regulators would have to be pretty far fetched to have their interpretation to be struck down. I can assure you their opinion will not be far fetched.

If you do one deal you may get a letter. If you're found to have dome 5 deals I'd say money is coming out of your pocket. Do 30 or 40 deals over a couple years you may get a new address in a jump suit. JIMO. :)