Conversion Survey: Critical or Not?

Mesa Dunes blooms

There is a lot of room for disagreement when it comes to legal issues … thus our legal system.  The conversion process started off with a leap into the controversy about the significance of the owners' survey. Since I do not begin to understand the complexities of the code surrounding conversions, I'm trying to highlight both positions below.

Mr. William Constantine, the attorney who has been retained by the Homeowners' Association maintains that it is critically important and could determine whether or not the conversion would go forward, citing "Chino MHC or the Goldstone decisions."  In his letter of 7/26/2013 to Gilchrist & Rutter he objected to the process of drafting, approving and submitting the survey to the homeowners and claimed that Ms. Susy Forbath "misled the residents by telling them that the 'support survey doesn't mean anything' and 'was just a formality." (Document 13, WC Ltr 7/26/2013) 

In a letter to me, Mr. Constantine further challenged me or "anyone from the law firm of Gilchrist & Rutter to demonstrate why that statement is not true." (Document 14, WC Ltr 8/9/2013) 

I asked Ms. Forbath to explain her position and she sent the following response:

This one is somewhat difficult to answer in simple terms – but I will give it a try!
First of all, it’s not that the survey is “important” “not important” or even “critical”.  It’s that the current law, which I sent you this morning, doesn’t have specific requirements for the results of the survey, only for how it is taken.  This is a matter that has been litigated in several cities, and the courts have continued to uphold our understanding of the current law and its intent (if you read the legislative history it says that the survey should not provide residents with veto power).  Our interpretation is that because the survey, by law, is taken at the earliest stage of the process, it only shows a preliminary interest – not how many people will actually and ultimately purchase. 

However, Mr. Constantine has repeatedly challenged it and has lost each and every time.  He always claims that park owners are not doing it to sell lots, only to escape rent control so if residents don’t want it that means it is a “sham”.  However, he has not been able to show a single park where this has ever happened.  

There was one park – in Santa Cruz – in which the court said that since only one person voted for the conversion it did not show support (and for the record, Mr. Constantine was not the attorney of record on that case).  So this conversion was denied for lack of support. 

What the courts have held is that there is no specific “number of votes” or “majority” that must be shown in support, but rather the owners “intent” to transfer lots to the residents.  Therefore, to show intent, we do need to show that there is a significant number of residents that are in support.  But if 30% are in support, and 40% are not, and 30% don’t vote at all – what does that mean?  

If you ask Mr. Will Constantine – he would probably say that means that 70% don’t want the conversion and it should be denied.   

If you ask me – it means that 30% may be interested in buying (or getting increased rent protection) and so why shouldn’t they be given the opportunity – as long as the others are not negatively impacted?

The other issue is SB510.  This proposed bill which Mr. Constantine is promoting would change the current law to say that a “majority” of all residents in the park must vote in support of a conversion for it to be approved.  That means everyone who doesn’t vote will be counted as “non support”.  Obviously not the way elections of any sort are conducted in this country.  I venture to say there is not a single elected official or ballot measure that would ever have been elected/passed if it required a “yes” vote from every single registered voter!  And since there is no way to force people to send in their votes, it just won’t work and no parks could become resident owned.  

Even in Mesa Dunes, where 99 household voted in support and 33 voted against – it would be denied because 99 is not the majority of all residents in the park.  This does not make sense to me. 

We have been working very hard to get the author of this bill to change the wording to define “majority” as the majority of those who cast a ballot.  But she has refused – obviously her intent is to kill conversions – at the prompting of Mr. Will Constantine and GSMOL.  

I met with your Assemblyman Katcho Acadjian last week and he said that he too has asked Sen. Jackson to change that language and she will not agree.  If you agree with Katcho, it would be great for him to hear from you – he would appreciate the support because all he said he has heard from is from people who oppose conversions. 

Sorry for such a long a rambling reply – it is not a simple or clear cut topic.  But I hope this helped. 

Bottomline:  Author Opinion

The survey has been taken and there seems to be little likelihood that it will be retaken.  Results of the survey showed 99 in favor of the survey, 33 not in favor and 172 non responses.  To me this says there are still a lot of people confused or uncertain about the process and what it means to them.

One way or the other, it appears that the conversion is going forward so I believe the most important thing we can do is get smarter about the process and how it affects each of us.

I've boiled it down in my mind to two questions:

• Will buying my land make financial sense (meaning is the price right and can I get financing)?
• What will happen if I don't buy?

If anyone has information or insight on those two questions, I'd love to hear from you.  Email:  jwycoff@me.com

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Apology to William Constantine

11/16/2013: UPDATE

Interestingly enough, this is the most popular post on the blog.  In my original open letter to Mr. Constantine, I connected him with the website shamconversions.com, a site I think is reprehensible in its fear-mongering and misinformation.  He denied the connection and I apologized and withdrew the letter.

However, I did not apologize, nor do I now, for criticizing his tone and methods.  I believe he is doing the residents of this park a huge disservice by trying to take away an option that appeals to a lot of residents ... that of owning real estate and protecting their futures by stopping the ever-increasing space rent.  As for the residents who don't buy ... they will either continue as they are today ... or actually be better off, thanks to the protections of State and County laws and regulations ... and the additional protections offered by the owner.

While Mr. Constantine and the HOA Board claim to be trying to protect the residents of the park, the biggest threat to our future would come if they throw the park into litigation or force the owner to sell the park to a new owner or hedge fund.  Life is not just going to go back the way it was.  One way or the other, the owner will sell the park.

People who claim that the owner is just "in it for the money," seem to forget that he hasn't increased rents by the full amount allowed for several years.   Last fall, the park re-slurryed the roads at a cost probably in the $60-70,000 range.  I didn't get an assessment for that cost ... did you?  Our leases state that he could have passed that along to us.  Would a new owner be so accommodating?  Not likely.

How much Mr. Constantine has to do with the misinformation that is flooding the park, I don't know. However, much of the language and numbers that are being thrown around seem to sound like things he has said in letters to the lawyers, to me and to the County in his recently filed, 38-page, convoluted, barely coherent letter asking the County to deem the conversion application incomplete.

Mr. Constantine and the HOA Board, while continuing to say they are not opposing the conversion, are doing everything they can to stop it.  I keep wondering whom they represent?  Not the residents who want to buy their lots.  Not the over-80 residents who would have their rent capped.  Not the lower-income residents who would be eligible for state rent control.  Not the residents who would just prefer to continue on their leases as they are today.

Once again, I want to reiterate that Mr. Constantine does not represent me, an opinion that seems to be shared with many others here in the park.  I do not know who will pay his legal fees if he drags us into court ... but I do know that no one wins when things go to court ... and, in the long run, we residents will lose.

********************************************************************************

A few days ago I posted an open letter to attorney William Constantine, the attorney who has been retained by the homeowner's association to help with the conversion.  The letter contained my opinions about his "tone" and presumed stance on the conversion.

I now want to apologize completely to Mr. Constantine for my misunderstandings of him and his position on the conversion.

After a lengthly reply letter from Mr. Constantine and a few emails, we discovered the cause of the misunderstanding.  At the July 9th homeowner's meeting, someone passed out this flyer:

This flyer colored my opinion of Mr. Constantine and linked him with the sham conversions website, which apparently without permission printed a letter of his and immediately beneath his signature put a very offensive notice to readers.  Mr. Constantine states that this is not his website, so whoever passed out this flyer probably owes him an apology also.

This conversion process is complicated and involves something that is very near and dear to our hearts ... our homes.  We need to be careful to strive to find facts and rational information and avoid inflaming emotions unnecessarily.  Let's try to make sure everything we share with each other is factual.

Mr. Constantine, please accept my apology and I hope your assistance with this process helps all of us make the right decision for our specific situations.

Joyce Wycoff

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Financing Highlights

CORRECTION!!!

9/23/2013 - When this article was first written, the assumption was that Murphy Bank would offer 30-year mortgages.  In conversation with Richard Laxton this morning, he corrected me.  They will only offer 20-year mortgages at standard home mortgage rates ... with no mortgage insurance required with 20% down.

Mesa Dunes blooms

Mesa Dunes resident Ann Silver probably said it best when she said there are two requirements for a real estate sale … a buyer and a mortgage banker willing to lend.  

There are probably a lot of us who would like to buy our lots … if the price is right … and if we can get financing.  We won't know about the appraised price of the land for some time, but I wanted to get a better understanding of how the financing works in this conversion situation so I started calling people.  You can see the list of people I contacted at the end of this article.

The first thing I discovered is that the financing would be a mobile home loan rather than a land loan which is on undeveloped land.  The good thing about that is that the mortgage could be for up to 30 years; the bad part is that very few lenders make mobile home loans. Here's what I found:

Mortgage Qualifications

Because this would be a refinancing of the mobile home to include the land, it would have the same requirements as a regular home mortgage based on interest rates at the time of the mortgage. (Today's rate is about 4.5%)

• Good Credit … Richard Laxton at Murphy Bank indicated that a credit score of 670 or better is what they look for.
• Income … the monthly mortgage should be no more than 33% of monthly gross income. Therefore, if your mortgage was $900 a month, you would need to have a monthly income of about $2,750.   
• Equity … amount borrowed should not exceed 80% of the total appraised value.  For instance: If the land value were $150,000 and you wanted to borrow that amount, you would need to have a minimum of $37,500 in appraised value/equity in your mobile home unit so that the total appraised value would be at least $187,500.

Note:  Richard Laxton stated that Murphy Bank does not sell their loans so they have more flexibility about making loans and that they will work with special circumstances such as foreclosures or one time credit events.

Comparables

This is where financing gets interesting.  What is a comparable?  Community West Bank takes an extremely conservative view on this and stated that they would not lend in this park until a "strong history" of comparables was established ... within this park.  When asked how this could happen, he basically said they wouldn't loan to the first round of buyers.

Fortunately, Richard Laxton at Murphy takes a little broader view of comps and would look at resident-owned  Knollwood in Santa Maria and Chumash Village in SLO for example.  They have also packaged units together in Knollwood and helped negotiate a land price reduction.

Permanent Foundation

Apparently few if any of the units here in the park are on a permanent foundation with tie downs. Lou at MH Mortgage said this is mandatory and that a 433a certificate needs to be filed.  He said this retrofit costs between $1,500 - 3000.

Richard Laxton at Murphy Bank said that this wasn't "mandatory" but that we ought to do it as it would save problems in the future.  He is sending me the name of a company that does batch retrofitting so that we could get a group rate.  His estimate of individual cost (if not batched) was $3,500. The group he recommended is On the Level Contractor, Janis Arendsen, 760-415-1982.

Conclusion … Author's Opinion

When I first began this investigation, Susy Forbath stated that Murphy Bank was probably going to be the lender of choice.  After talking to everyone I could find, I concur. 

Richard Laxton was very generous in taking the time to explain his understanding of the conversion and the financing options. He is very familiar with this park and when I asked him what range he would guess the value of the land would appraise at, he responded $150 - $200K.  

He also said Murphy Bank will be setting up an office in this area with Michael Fitzgibbons as the lead.  I asked him if Michael would be willing to come meet with us to explain in more depth the financing process and answer questions and he said definitely.  I'll try to set this up sometime soon.

Guesses about monthly payments:

If the land price turns out to be $150K and you got a loan for that amount at today's interest rates (5%), the monthly payment would be about $989. With a guesstimate HOA fee of $200, and additional tax on the lot of $100 would make the total monthly payment $1,289.

If the land price is $200K, that monthly payment would go up to $1,320 for the mortgage, plus HOA & Tax for a total of $1620.  Here's a link to a mortgage calculator if you want to play with numbers.

More about Murphy Bank (click here).

People contacted:

• Krista, Bay Federal Credit Union, 831-479-6000 … Mesa Dunes park is not on their lending list.
• Neil Rosofsky, TRIAD Financial Services, 916-952-6963 … does not lend in this type of conversion. Referred to Doug or Sheryl at US Financial Network, 800-655-9044 or Lou at MH Mortgage 916-861-2292.
• Will Cunningham, Community West Bank, 805-681-3366. Issue with initial comps.
• Richard Laxton, Murphy Bank, 559-225-0318

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