The Mobile Home: Real Property or Personal Property?
By Robin M. Barefoot
The following article was originally published in the April 27, 1992 edition of the North Carolina Lawyers Weekly. The author is a title insurance company in Chapel Hill, North Carolina. The article is reprinted with her permission (with minor modifications to address issues pertinent to real estate licensees).[NCREC Bulletin, Volume 23, Number 3, Fall 1992]
Real estate agents sometimes encounter a manufactured home that is being transferred with the property that is being sold. In such case, an issue may arise as to whether the mobile or manufactured home is real property. What follows is intended to guide real estate agents through an understanding of the issues raised in these transactions.
A mobile/manufactured home (m/m home) is a dwelling which is factory-built to the specifications of the National Manufactured Housing Construction and Safety Code as promulgated by the U.S. Development. It is transported to the building site either on its own chassis or on a flat bed truck.
In a recent case involving a restrictive covenant which prohibited mobile home, the North Carolina Court of Appeals ruled that a factory-built modular home, designed and constructed to travel on wheels from place to place was a “mobile home” even through the axles, wheels and tongues were removed after the structure was placed on the lot.
North Carolina courts have uniformly held that the term “trailer” within a restrictive covenant includes “mobile Home.” The North Carolina General Statutes also include the terms “manufactured home” when it is uses in the context of restrictive covenants.
M/M Homes as Motor Vehicles
Every m/m home is treated initially as a motor vehicle. At the time it is sold or transferred from the manufacturer to a retailer, ownership is evidenced by a manufacturer’s Certificate of Origin.
When the home is sold by a retailer, the customer or the retailer acting on behalf of the customer applies to the division of Motor Vehicles for a Certificate of Title. The DMV issues the Certificate of Title based upon the manufacture’s Certificate of Origin. If the home is subsequently resold, the certificate of Title is assigned to the new purchaser.
Most m/m homes are sold and financed as personal property, just like motor vehicles. Ownership of the home is evidenced by a Certificate of Title. Any lien or security interest in the home is evidenced by a notation on the Certificate of title or perfected by filling of UCC financing statement.
M/M Homes as Real Property
More and more frequently, however, m/m homes are being placed on permanent foundations in residential subdivisions or on individual tracts of land. In these situations, the homes are being sold and financed as real estate, and loans used to purchase or refinance them or the land to which they have been affixed are secured by deeds of trust.
There are legal and practical implication when an m/m home is sold and financed as real estate. First, information relative to whether the m/m home has been placed on a permanent, enclosed foundation with the wheels, moving hitch and axles removed is often requested by the lender. An affidavit is often requested by the lender. An affidavit from the owner or his attorney addressing these points is recommended.
When the m/m home is new and placed directly on a lot foundation by the manufacturer and not sold by retailer, there will likely be a manufacturer’s Certificate of Origin but no Certificate of Title. While recognizing that is the intention of the new owner to treat the m/m home as real estate, it is nonetheless recommended by the Registration section of the DMV that the new owner apply for a Certificate for Title. After the Certificate of Title has been issued, it can be readily canceled if the m/m home is to be treated as real estate, but having issued the Certificate of Title allows the owner to have the title reissued should he decide in the future to sell the m/m home independent of the land.
Once the Certificate of Title is canceled, no independent intervening liens can arise on the m/m home. Title to the home and lot can by transferred together by deed of trust. The home should also be listed as real property for city/county ad valorem taxes. If the owner chooses to disregard the recommendation of the DMV and does not apply for and obtain a Certificate of Title, the Certificate of Origin must be destroyed to prevent a subsequent issuance of the Certificate of Title.
Similarly, when the purchaser of an m/m home already owns the lot on which the home is to be placed, the purchaser of his attorney must cancel the prior owner’s Certificate of title. It is suggested by the DMV that a new owner should have a Certificate of Title issued in his name before canceling the prior certificate. The DMV explains that when a Certificate of Title is assigned upon purchased of an m/m home and then canceled for treatment of the home as real property, it cannot be reissued to the assignee, nor upon his request, but only the name appearing on the face of the certificate (presumably, the seller) and only upon that person’s request. The home should also be listed as real property for city/county ad valorem taxes.
Cancellation of Certificate of Title
Title: “This home has been placed on permanent foundation and declared to be real estate.’ The owner should then sign and date the title certificate directly beneath this statement. If there are any liens noted on the title, these liens must be satisfied or with the consent of the lien holder, transferred to other collateral (perhaps the by a note and deed or trust). Satisfaction of transfer of a lien must also be noted on the face of the title. The owner should then send the Certificate of Title, along with a short cover letter to:
Registration Section, Division of Motor Vehicles, 1100 New Bern Avenue, Raleigh, NC 2697 (910) 733-3025. If the Certificate of Title is lost, the DMV requires that a replacement Certificate of Title be issued to the owner, and then canceled for treatment of the m/m home as real property.
The importance of complying with the steps outlined above will be dictated in each case by whether the lender considers the m/m home as part of its collateral, or whether the loan was made on basis of the land value exclusive of the home. Failure to subject the m/m home to the lien of the lender’s deed of trust will prevent the lender from exercising its right of foreclosure against the m/m home.
There is a common belief among real estate licensees that they are prohibited by law from selling mobile homes. This is untrue. When a sale involves only a mobile home, but no real property, a real estate license in not required. However, in some cases the licensee must obtain a motor vehicle dealer’s license from the Division of Motor Vehicles.
Nevertheless, when the land on which the mobile home rests is included in the listing agreement of sales contract, a real estate license is required. Similarly, when a mobile home Certificate of Title is canceled and the mobile home becomes part of the real property, a North Carolina Real Estate license is required to list and sell the mobile home/land combination.
When those homes come rolling in!
By Blackwell M. Brogden, Jr., Chief Deputy Legal Counsel [Summer 1995, Volume 26, Number 2]
As a real. estate licensee, you should have a general knowledge of manufactured housing (i.e., transportable structures used for dwelling, office-space, etc.). You should be familiar with basic construction methods and know the difference between manufactured homes and manufactured buildings. You should know the requirements for licensure to list, sell, and install manufactured housing, and should be aware that subdivision covenants and zoning codes may restrict or prohibit such structures on a property
Manufactured or Stick-Built?
In the past, it was easy to distinguish “stick-built” structures (built on-site) from manufactured structures (built off-site and transported to the lot where they were installed). But today, due to new construction technologies and conflicting definitions in subdivision covenants and zoning codes, the determination of whether a property is “manufacture” or “stick-built” is not always clear.
The question is further complicated by owners or developers who combine elements of manufactured and stick-built structures. Some, for example, purchase off-site-built structures without exterior siding and then add brick or some other veneer; others assemble multiple manufactured units on site into a two-story building, or order a base unit and then “stick-build” a second floor. Are the resulting structures stick-built or are they manufactured?
Manufactured Home vs. Manufactured Building
State and federal laws make an elementary distinction between a “manufactured home” and a “manufactured building.” A manufactured home (formerly called a “mobile home”) is designed and built on a permanent chassis even if more than one unit is required to make a complete home (e.g., a “double wide”). A manufactured building (also referred to as a “modular building” or a “modular home”) is constructed in units at an off-site location and then transported to and assembled on the site.
Look for the label
Each manufactured home unit should have a serial number and a label permanently attached to it showing its compliance with federal standards. Likewise, any modular unit should have a serial number and label showing its compliance with the State building code.
Look for the labels near exterior doors or inside built-in cabinets. If you find a label, you will at least know that the structure is “manufactured.” Furthermore, you should be able to determine more specifically whether it is a manufactured home or a [modular] building.
Manufactured home builders are licensed and regulated by the Division of Motor Vehicles (which licenses motor vehicle dealers and salesmen). Persons selling manufactured homes are separately licensed and regulated by the North Carolina Manufactured Housing Board.
Persons who install modular homes, regardless of the cost of the homes, must be licensed by the North Carolina Licensing Board for General Contractors. A general Contractor License also may be required when a unit built off-site is to be incorporated into on-site construction, depending upon the total cost of construction.
A real estate broker or salesman license is not required when selling a manufactured home or building which has not been affixed to real estate; however, in some cases, licensure may be required through the Division of Motor Vehicles and the Manufactured Housing Board. When a manufactured home or modular home becomes a part of real property (and the manufactured home’s Certificate of Title has been canceled), a real estate license is required to list, sell, lease, etc. the home and land combination.
Subdivision covenants which restrict or prohibit manufactured homes have been in effect for many years. If properly drawn and recorded, they have been considered legally enforceable. On the other hand, North Carolina courts have recently ruled that modular homes are permitted in subdivisions where covenants bar manufactured homes. Of course, some subdivisions may have different language in their covenants that could prohibit all manufactured housing.
Subdivision covenants and local zoning codes restricting manufactured housing are now being challenged by the manufactured home industry. This issue is still undecided in the courts.
When you are aware that a prospective purchaser is seeking vacant land on which to install any type of manufactured construction, or when you list or show an improved property where there is a question as to the type of its construction you should exercise extreme care.
Look at the label to help you identify whether the structure is a manufactured home or a manufactured [modular] building. It will likely affect its appraised value and the amount, if any, a lender will lend on its purchase.
Contract the Department of Motor Vehicles, the North Carolina Manufactured Housing Board, and the North Carolina Licensing Board of General Contractors to determine what license may be required before you sell or construct a manufactured home or building.
If an owner of a manufactured home or building wishes to locate it on a lot that you are offering for sale, check for subdivision covenants or zoning codes that prohibit manufactured housing.
Be careful to avoid making an inaccurate claim that a particular type of construction is present or permitted on the property; or you may be subject to disciplinary action by the Commission and possible civil liability.
Long time readers of the Bulletin and those who have reviewed the articles posted on the Commission website (www.ncrec.state.nc.us) will be aware of the article discussing the legal nature of manufactured housing (formerly known as mobile homes) found in the Fall 1992, Vol. 23, #2, issue, and titled Mobile Homes: Real or Personal Property? In essence, manufactured homes begin their existence as items of personal property but can lose that status upon being permanently affixed to real property. Their status can change back upon being severed from the improved real estate to which a manufactured home was once affixed.
Recent statutory changes by the General Assembly have introduced reforms into the process of determining whether a particular manufactured home is real or personal property. One of the changes provides for creation and filing of affidavits with the Division of Motor Vehicles and the county Register of Deeds to identify manufactured homes that have been legally classified as real property. Additionally, these changes will provide for uniform treatment of manufactured homes for ad valorem tax purposes.
The legal difference between the treatment of manufactured homes either as real property or personal property is important in real estate transactions. For example, a contract that listed no personal property to be conveyed when at the time of execution there was a manufactured home on the property would not convey title to the home if the unit was personal property. That same contract, under the same circumstances would include conveyance of the home if the unit had been permanently affixed so as to become real property. The legal difference also affects the method for obtaining and perfecting liens on units and determining who owns a unit.
The distinction between whether a manufactured home is real or personal property has no bearing on the separate issue of the type of construction of buildings assembled off the property and subsequently transported to a site. Whether real or personal property, a manufactured home is still a manufactured home and this fact should be disclosed. (If a modular home is constructed to the state building code standard, the home is incorporated into, and becomes part of, the real property upon installation. See the Bulletin, Summer 1995, Vol. 26, #2 issue, article entitled When the Homes Come Rolling In.)
Know the Difference
Licensees will not typically review title records or participate in the process of changing personal property to real property. However, completing sales contracts in a proper manner to protect the interests of the parties is important. Thus, it is important to know whether a manufactured home is real or personal property.
Practice Tip: If the parties intend that a manufactured home be transferred as part of their sales contract, whether the unit is real or personal property, the licensee should include sufficient information in the personal property portion of the sales agreement to cover the specific unit present on the property. If the unit is already classified as real property, no harm is done. If the unit is still personal property, then the intent of the parties will be adequately reflected in the contract.
Note: Article appeared in the Real Estate Bulletin, June 2002