A Low Bar, But a Hard Deadline: The Manufactured Housing Act's Right of First Refusal

Crown Communities, LLC v. Austin arose from a dispute between a prospective buyer (“Crown”) and a resident tenant association exercising its right of first refusal (“ROFR”) under the Manufactured Housing Act (the “Act”).

The Act requires property owners to give residents notice of a proposed sale. Resident tenants or a qualifying association may then purchase the property, subject to timelines governing submission of a purchase agreement, securing financing, and closing. To qualify, an association must represent at least fifty-one percent of the manufactured home-owners residing in the community, and failure to meet the Act’s deadlines, unless extended by agreement, terminates the residents’ right to purchase.

After Crown entered into a purchase and sale agreement for $3.8 million, the owner belatedly notified residents, and residents formed an association, circulating a petition that gathered sixty-one signatures. The association submitted a competing purchase agreement on the same terms. However, the association obtained financing roughly six months after executing its purchase agreement, well outside the 90-day statutory deadline, and never sought an extension. Crown commenced action against the trust and association seeking declaratory relief as to the relative rights of Crown and the association with respect to the property and also filed for a memorandum of formal notice.

The SJC addressed four issues.

First, on the question of reasonable evidence of fifty-one percent approval, the Court held that a signed petition constitutes “reasonable evidence” that at least fifty-one percent of resident tenants approved the association’s purchase, because a signed document tends to make fifty-one percent approval “plausible” or “agreeable to reason,” consistent with Black’s Law Dictionary definitions. Imposing a higher evidentiary threshold, such as requiring affidavits or certifications, would run counter to the Act’s aim of protecting low to moderate income residents by facilitating their purchase of the property on which their community is located.

Second, on the question of whether subtenants count toward statutory thresholds, the Court held that G.L. c. 140, § 32R, concerns tenant rights and makes no mention of subtenants. Reading the statute as a whole, only resident tenants, not subtenants, are counted.

Third, on the question of the request for information requirement, the Court held that because the trust failed to notify residents of its intention to sell until after it signed the Crown purchase and sale agreement, the residents had no reason to request information about any proposed sale under § 32R(b), and the statutory notice requirement was therefore waived.

Fourth, and ultimately dispositive, the association failed to comply with the ninety day financing requirement, executing a purchase and sale agreement with the trust but not securing a financing commitment until more than six months later, and the record is devoid of any evidence that the association sought an extension. The Court rejected the argument that Crown’s formal notice excused the failure, finding no evidence that the formal notice had any effect on the association’s ability to secure financing timely, no evidence that Crown acted in bad faith in filing the lawsuit or the formal notice, and no evidence that the association sought financing within the ninety day window or sought an extension from the trust. The ROFR was therefore terminated.

Crown Communities establishes that a signed petition circulated by relevant resident tenants is sufficient to meet statutory requirements under the Manufactured Housing Act, though subtenants are not to be included in meeting relevant statutory thresholds. While Crown Communities allows resident tenants to exercise their right of first refusal through the circulation of a signed petition, the failure to meet statutory deadlines will be strictly enforced absent evidence of the other party’s effect on a resident tenant association’s ability to meet said deadline.