What paperwork fits this situation?

Question

I just started building tiny homes in my hometown in Eastern Texas.  I have a customer that wants to order a number (~25) of my tiny homes through his company in connection with a city initiative to provide unconventional housing options in their city, also in Texas.  I agreed to send a model unit to his city so that he can have his engineers and architects inspect them as well as have an open for potential residents.  He will not be buying the model unit, it will simply stay for four weeks and then be taken back to my yard.  He plans to place the unit on some land that his company owns and he has a narrow deadline that he has to meet in order to submit his bid.  What type of considerations should I think of and what type of paperwork should I have for this situation?   All help is appreciated.

Chris K. · Answer

@Amin Brodie

I would hire an attorney to review and draft appropriate agreements. Aside from the general sales agreement, you probably need to have the attorney review what the state law says about these tiny homes when it comes to whether it is real property, personal property, or a fixture. It can have incredibly important consequences.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

Glenna Wood · Answer

Congrats on building tiny houses! The more acceptable they become, the more it will help counter the current overleveraged McMansions on postage stamp lots. I'm in a rural area in MD 50 miles from DC and it's sad to see the farms turn into bedrooms for DC commuters. OK I'm way off topic...

The first thoughts in my non-expert head were:

1) why would they not buy the model as part of their potential 25 order? I would want them to have skin in the game to take good care of it if it's coming back to my yard. After people tromp through it you'll essentially be selling a "not new" unit like a demo car.

2) who's paying for transport? Seems silly for you or they to pay for round trip transport if they are serious buyers.

3) how are you covering liability while it is off your premises? How are you covering somebody falls off the ladder to the loft?

4) are they trying to sell the concept to their community or are their plans already approved? How real is their potential 25 order or are you part of their sales pitch? If it's a sales job, are you getting enough compensation? If you see it as good advertising for your product, what marketing materials of yours can be included during the open house? A sign, brochures? Can you get in on a local TV human interest segment?

5) it sounds odd that they want to "have their engineers and architects" check out a finished unit on their premises. If I'm going to check out your building practices and quality control from a engineering perspective, I'd want to see your yard and examine what/how you're putting behind the finished walls by checking out several units in process. I'd want to meet your work force and check out your QA processes.

6) Hailstorm comes through. Somebody backs into it while it is being transported.  It gets vandized while on their property. You or they submit the damage claim to which insurer?

7) it will be sitting on their property. With or without utilities hooked up? Could they have somebody bunk in it? Normal wear and tear is so hard to define. It leaves your yard new but how do you best define acceptable condition back to you? You may wish to add that they include this unit in  the 25 order. Again incentive to take care of it.

8) paperwork wise I would guess that a simple lease would cover it. This is out of my orbit so this is not advice... But may be a good investment to work with your attorney to create a lease to rent your units for off premises use. Somebody may want to rent as transition housing or to check if they can be comfortable before they commit to buy one. If you are not far from an interstate, you could set up a few units on your property to rent as AirBNBs. Great advertising. But again I wander off topic...

Best of luck on your tiny house business!