On September 13, 2021, Freddie Mac issued a press release regarding its funding for Prefabricated Housing Communities (“MHC”) purchases. According to this press release, Freddie is implementing his eight tenant protections as a condition on all future operations involving Freddie.
While some of these conditions are in accordance with Iowa law, or even less stringent for homeowners than Iowa law (in which case Iowa law takes precedence over Freddie’s conditions), others are stricter for landlords than Iowa law, thus requiring landlords to change their leases to the applicable CMHs.
Currently, there is some ambiguity regarding these requirements. We have reached out to Freddie for clarification and will keep you updated.
MHC owners are strongly encouraged to review Freddie’s press release, as linked here and partially illustrated below, as well as our initial comments regarding a comparison between Iowa law and each requirement of Freddie:
|System Requirements For Freddie Mac MHC||Compared to Iowa Law||Details|
|(1) Duration of the lease and possibility of not renewing: Lease term renewable for one year, unless there is a “valid reason” for non-renewal||Greater protection than Iowa law. Lease modifications required.||Lease termIn practice, many Iowa MHCs use month-to-month leases, as permitted by Iowa law, which can be terminated (without cause) with 60 days’ notice of non-renewal of the lease. For companies funding a future purchase of MHC with Freddie Mac, these companies must put in place one-year leases for all residents, which means that the initial and subsequent terms must be one year and the lease does not can no longer be canceled or renewed with a period of 60 years. one day’s notice. See also below.
Ability not to renew: The clause of termination or non-renewal for “just cause” will be in stark contrast to Iowa law, which does not require any reason for termination or non-renewal (as long as it is done for no reason. discriminatory). Freddie’s new “good cause” requirement is not explained in his press release. Seek legal counsel in this regard.
|(2) Rent increase notice period: 30 day written notice for rent increases||Less protection for tenants. Continue to follow Iowa law.||Iowa law requires at least 60 days’ notice for the rent increase, so Iowa CSMs should continue this practice – not Freddie’s rule.|
|(3) Grace period for rent payments: Five-day grace period for rent payments and the right to remedy rent defaults||Greater protection than Iowa law. Lease modifications required.||Under Freddie’s new rules, an MHC must wait at least five days before charging a late fee (or declaring the tenant in default), and presumably, a landlord cannot retroactively apply late fees within the deadline. five day grace period.|
|(4) Sale of the house by the tenant without moving: Right to sell the house to a buyer who qualifies as a new tenant in the community, without having to first move it out of the community||Complies with Iowa law. Continue to follow Iowa law.||The right to sell the manufactured home to a buyer who qualifies as a new tenant in the community, without having to first move it out of the community, already complies with Iowa law.|
|(5) Sale of housing by the tenant after eviction: Right to sell the existing house within 30 days of the owner’s eviction from the community||Greater protection than Iowa law. Lease modifications required.||Iowa law currently provides that with the approval of the MHC, an MHC allows the house to remain in place for up to 60 days after the eviction for the owner to sell or remove the house, as per the procedure. 60-day deferred vacation leave from Iowa under Section 648.22A. Freddie’s new rules require landlords to allow tenants to keep their homes in place for 30 days if they choose, whether or not MHC agrees to them to do so, so lease changes will need to be made. Any MHC subject to this requirement should consider opting for the 60-day time frame for homes subject to eviction, and otherwise following current Iowa law in this regard.|
|(6) Renter’s right to sublet: Right to sublet, or assign the lease of the site, for the unexpired term to the new buyer of the tenant’s house without any unreasonable restrictions, provided that the buyer / sub-tenant qualifies as a tenant at within the community||Greater protection than Iowa law. Lease modifications required.||Most MHCs, in their leases, prohibit a resident from subletting their tenancy, such a prohibition being permitted under Iowa law. Thus, lease modifications will have to be made to correspond to this new tenant protection.|
|(7) “For sale” signs: Right to post “For Sale” signs at home that comply with community rules and regulations||Complies with Iowa law. Continue to follow Iowa law.||Iowa law does not directly address or call for rules relating to “for sale” signs, but most practitioners have historically interpreted Iowa law as requiring owners to allow residents to display. signs “for sale”, under reasonable restrictions. Freddie is now going to make it a requirement.|
|(8) Notice of Planned Community Sale: Right to receive at least 60 days notice of sale or planned community closure||Greater protection than Iowa law. Lease modifications required.||Providing tenants at least 60 days notice of the planned sale (or closure) of MHC is certainly not mandatory under Iowa law and would otherwise constitute a substantial change in the way MHC are currently operating. MHC owner-operators who fund future MHC purchases with Freddie must accept that notice should be given for any future sales and how such notice might affect the commercialization of MHC in the future, as buyers generally prefer not that a notice be sent. to residents until the closing of the transaction.|