Mobilehome Parks’ Super-Priority Status in California Bolstered with Attorneys’ Fees Against Lenders
If you service or own loans secured by mobile/manufactured homes in California, your letter to Santa was lost in the mail. The California Court of Appeals delivered a lump of coal for mobile home lenders by confirming California law affords mobile home parks super-priority status over other lenders/lienholders in conducting sales of homes for defaulted borrowers, and holding that same law now entitles those parks to attorneys’ fees if they bring a quiet title action to confirm the sold-property is free and clear of your liens.
For those of you who are not California residents, it is important to remember that whereas in many other states mobile/manufactured homes are treated as real property and often are built/installed on a permanent foundation, California’s mobile/manufactured homes are frequently considered personal property akin to a vehicle and are treated entirely differently in most circumstances. If your borrower’s home is located in a mobile home park, you must be familiar with a completely different set of rules than those applicable to loans secured by real property. That includes the effect of a borrower defaulting on their lease payments to the mobile home park for the lot upon which the home is situated. Unlike defaulted payments to, for example, a Homeowners’ Association, a borrower's default on lot lease payments entitles the mobile home park to initiate proceedings to have the home deemed abandoned and obtain an order of sale which under California law (MRL Section 798.61(e)(4)) generally extinguishes all other liens and ownership interests - including your loan!
In a new opinion issued on December 4, the California Court of Appeals made the situation worse for you by finding that you owe the park its attorneys’ fees if the park purchases the home at the sale and subsequently brings a quiet title action to deem your liens extinguished.
In Canyon View Limited v. Lakeview Loan Servicing, et al, (Cal. Crt. App., 2nd Dist., Div. 1, Dec. 4, 2019) Case No’s. B285489, B286322, B286614, and B286686, Canyon View obtained properly noticed judgments deeming several homes abandoned and ordering the homes to be sold. Canyon View purchased the homes at the sale, and the lenders subsequently began issuing foreclosure notices. Canyon View filed quiet title actions to deem the lenders’ interests extinguished. In nearly every case, the lenders entered into a stipulated judgment and Canyon View moved for attorneys’ fees. The lenders argued that the quiet title action did not fall under the Mobilehome Residency Law which entitles the park to attorneys’ fees because the quiet title actions were not related to residency issues. The Court of Appeal disagreed, noting that the quiet title actions all “require application of an MRL section addressing nonlandlord/tenant issues and entities:” namely, that MRL Section 798.6(e)(4) guarantees “title free of any liens” to a purchaser of a mobile home through an abandonment sale.
This case makes clear that lenders with loans secured by mobile homes in California need to pay particularly close attention to notices from the mobile home park to ensure the lender can decide to either (a) cure the borrower’s default with the park to preserve the lender’s lien; or (b) reconvey the lender’s lien after a park-sale to avoid a costly quiet title action made worse by an award of attorneys’ fees.
Hall Griffin LLP’s Financial Services team is trusted by some of the nation’s largest and smallest servicers/lenders alike to deliver appropriately aggressive, creative, effective, and efficient results in California, Arizona, Texas and Washington.
Jered T. Ede, Hall Griffin, Partner