Home Park Owners Agree To Reforms In State AG Rent-To-Own Investigation

Manufactured home park owners with locations in Southampton Town have agreed “to make significant reforms” to rectify unfair rent-to-own practices, according to an industry-wide investigation by the New York State attorney general’s office.

Kingsley Management Corporation of Utah—the owner of Riverwoods Mobile Home Community in Riverside—and Garden Homes Management of Connecticut—the owner of East Quogue and Hampton Bays mobile home parks—are among eight of the largest park owners in the country that have agreed not to engage in rent-to-own practices that Attorney General Barbara Underwood says violate state law. As part of a settlement agreement, Kingsley will pay a fine and reimburse tenants for certain costs.

Rent-to-own leasing options allow tenants to make monthly rent payments that count toward the purchase of a manufactured home. In these agreements, the tenant is usually given the right to purchase the home at the end of a designated period of time. The title of the property does not transfer to the tenant unless the tenant exercises that right.

“We didn’t do any rent-to-own contracts but we were compelled to sign by the attorney general,” said Richard Freedman, the president of Garden Homes Management. “We didn’t engage in them because they don’t make much economic sense. There is nothing inherently wrong with them, if they are done fairly. But I stand by the A.G.’s decision.”

The attorney general’s office found that some park owners negotiate contracts that often are falsely marketed as home sales, don’t lead to homeownership, and lack basic tenant protections. For instance, in some agreements home park owners are not contractually obligated to compensate tenants for any damages, claims or penalties. Tenants were also responsible for restorations, exterminations and maintenance. As a result, tenants—many of whom are 55 and older and in low-income households—never achieve homeownership and are hung out to dry.

“These companies took advantage of that struggle, promising home ownership and instead leaving families with default, eviction and financial devastation,” Ms. Underwood said in a statement. “This settlement holds these manufactured home park owners to account and provides rent-to-own tenants with much needed protections and relief.”

Park owners with existing rent-to-own contracts are poised to pay penalties from $1,000 to $5,000 depending on the number of contracts in place. Kingsley agreed to pay a $1,000 penalty to the state for more than four dozen contracts in Riverwoods, as well as two communities in Riverhead. The company also allegedly created barriers for tenants to be able to express their interest in buying the property, according to the attorney general’s office.

Kingsley neither admits nor denies those claims, according to the settlement. Nate Nelson, the company’s president, could not be reached for comment.

As part of the settlement, park owners are required to put language in future agreements that acknowledges they are “not a contract to buy.” Park owners are also mandated to reimburse any down payment paid as well as maintenance and non-minor repair costs, also taxes incurred by park tenants. Reparations are available for tenants with established contracts since January 1, 2015.

The attorney general’s office plans to work with the New York Housing Association, a manufactured home industry group, to continue efforts to reform the industry in the new year.

Despite the recent victory, Riverwoods tenants say rent-to-own was just the tip of the iceberg for the problems that they face, including unregulated rent hikes and difficulty in making renovations to provide accessibility for people with disabilities.

“This is the first relief anyone has seen in a decade, never mind having a strong advocate like the attorney general in this rent-to-own scheme,” said Ron Fisher, the president of the Flanders, Riverside & Northampton Community Association. “The fact that they kind of plead guilty to this settlement gave hope to the mobile homeowners association and bringing to light more issues.”

“Tenants are being mistreated by the management company, and it has to stop,” he added.

The Mobile/Manufactured Homeowners Association of Suffolk Inc., which is operated in home parks including Riverwoods, has filed additional complaints against Kingsley management to the New York Department of State Division of Homes and Community Renewal.