The CrossMod Conundrum: Defining ‘Mobile Home’ in the Age of Innovation

According to Jonathan Douglas v. Five Star Properties, Inc. the CrossMod home is not a mobile home because it is designed to be a permanent structure once placed. It is affixed to a permanent, load-bearing foundation, and experts testify that it is not easily movable once constructed. These factors distinguish the CrossVue home from traditional mobile homes, which are intentionally designed to be transportable.

In Jonathan Douglas v. Five Star Properties, Inc. the Tennessee Court of Appeals at Knoxville discussed the enforcement of restrictive covenants, specifically regarding the development of mobile homes.

The central issue in this case was the ambiguity of the term "mobile home," as neither the plat nor deed restrictions defined it. The key question upon appeal was whether the initial trial court erred in its interpretation of the restrictive covenant.

Originally, the trial court ruled that Five Star Properties’ development of the CrossMod home violated the covenant, mainly focusing on the home’s construction process and its off-site manufacturing (over 70% of the CrossMod is built off-site). The court was initially concerned with the appearance of the CrossMod and its close resemblance to a mobile home.

However, the appellate court took a different approach, focusing on the permanence of the structure. Five Star Properties argued that the trial court had wrongly applied previous cases, (particularly Neas and Napier), and instead should have followed the precedent set in McKeehan v. Price (2022) and Williams v. Williams (Tennessee Supreme Court). These cases reject the idea that homes built off-site should automatically be classified as mobile homes. In McKeehan, the court explained that a "mobile home" refers to a structure designed for transient occupancy or ready transportability, not one intended to be permanent.

They determined that, although the CrossMod home is mainly manufactured off-site, it is designed to be a permanent structure once placed on a foundation. It is affixed to a permanent, load-bearing foundation, and experts testified that it is not easily movable once constructed, distinguishing it from a traditional mobile home, which is typically designed to be easily transportable.

The Tennessee Court of Appeals reversed the trial court's decision, concluding that the CrossMod home should not be considered a "mobile home" as defined by the restrictive covenant.

"Relative" Risks: Untangling Family Ties in Conflict of Interest Transactions

Last month, the Tennessee Court of Appeals addressed the issue of conflict of interest in In Re Estate of Joyce Ann Hendrickson, which involved a transfer of assets. The case centered on an LLC owned by a mother, father, and daughter, which held seven properties. The mother, holding the majority voting interest and serving as the LLC’s manager, transferred most of the LLC’s assets to another LLC, owned by her daughter and son-in-law. The transfer was made without the father’s knowledge. After the mother’s death, her estate sought to recover the transferred assets, arguing that the transactions violated conflict-of-interest provisions under Tennessee law.

In 2021, the administrator of the estate filed a complaint against the deceased mother’s children, asserting that the transactions were invalid due to a conflict of interest. Both parties agreed that a conflict of interest existed, but the defendants argued that the transfers should not be voided under exceptions outlined in Tenn. Code Ann. § 48-249-404(b).

"For purposes of this section, a member, manager, director or officer of the LLC has an indirect interest in a transaction, if, but not only if:

(1) Another entity in which the member, manager, director or officer has a material financial interest, or in which the member, manager, director or officer, as applicable, is a general partner, is a party to the transaction; or 

(2) Another entity for which the member, manager, director, or officer is a member, governor, director, manager, officer or trustee is a party to the transaction, and the transaction is, or should be, considered by the members, managers or directors, as applicable, of the LLC."

The defendants contended that since the deceased mother did not personally receive a "material benefit" from the transfer, the transaction should stand. However, the court disagreed, claiming that this argument ignored the critical statutory language "if, but not only if." The Appeals Court further clarified its position by referencing Holmes Financial Associates, Inc. v. Jones, where the court did not interpret the "if, but not only if" language narrowly, but rather adopted a broader interpretation. This approach was consistent with the court’s view that indirect interests arise in transactions involving family members, given the inherent conflicts of interest that such relationships create.

Additionally, this transfer violated specific regulations regarding the required disclosure of interests to all members of an LLC before transferal. The third and final member was “kept in the dark” about these transactions.

Ultimately, the court found that these transfers violated various Tennessee Codes, including conflict-of-interest rules, and declared them void. This decision underscores the importance of closely scrutinizing transactions involving LLCs, especially when family members are involved, as these relationships can create inherent conflicts.

Rent to Own versus Owner Financing - are you getting a bad deal?

A rent-to-own agreement and a purchasing with a loan (including owner financing) both provide pathways to homeownership but differ in structure, responsibilities, and timelines.

Rent-to-Own Agreement

Historically, “sellers” used rent to own agreements as a way to push the taxes, insurance and maintenance on the renter/buyer, and charge a higher monthly amount. Meanwhile, taking the property back via eviction was fast and cheap compared to foreclosure.

I’m not sure this is the case now for a decently sophisticated buyer. State laws on foreclosure are very lenient to the lender while tenants can fight eviction with a few more tools; you at least get a court date with an eviction. A local attorney can tell you how the local judges handle these things; it truly varies court by court.

Here are a few other details:

1. Ownership Structure: Initially, the tenant does not own the home but pays rent with an option or obligation to buy the property later.

2. Payment: The tenant makes regular rent payments, often with a portion applied toward the future purchase.

3. Purchase Option: Rent-to-own agreements often include a lease term with an option to buy the property at a set price by the end of the lease.

4. Less Commitment: If the tenant decides not to buy, they can typically end the lease without the long-term commitment of a mortgage. However, they might lose any option fees or credits applied to the purchase.

5. Property Responsibilities: The property owner may still handle maintenance and repairs, though that is often the attraction to the property owner: not having to deal with those responsibilities.

Buying with a Loan/Owner Financing

1. Ownership Structure: The buyer owns the home from the start but finances it through a loan secured by the property.

2. Payment: The buyer makes monthly payments on the loan, which include principal and interest, and often property taxes and insurance.

3. Long-Term Commitment: Home loans are typically long-term loans (15-30 years), and defaulting on payments can lead to foreclosure. Owner financing may be quite shorter, with an obligation to refinance after a few years.

4. Building Equity: Each payment builds equity (ownership value) in the home over time.

5. Property Responsibilities: As the owner, the buyer is responsible for all repairs, maintenance, property taxes, and insurance.

Generally, a rent-to-own agreement is a way to work toward homeownership with more flexibility, while a mortgage involves immediate ownership but with a long-term financial commitment and responsibilities.

Is Verbal Authorization to Accept Service by a Roommate a Valid Method of Service?

Last month, a defendant appealed a default judgment saying she was never served.

In TN Farmers Mutual Insurance v. Johnson, a Deputy testified that the Defendant (Ms. Johnson) gave him verbal authorization to leave the documents at her residence with an individual who she identified as James Johnson. Deputy Thompson followed her directions. (Legally, as long as the recipient provides verbal authorization of service, this is a valid method of service). Ms. Johnson said she had no recollection of this authorization. The court ruled that Ms. Johnson should not be considered a reliable witness due to the emotional trauma she endured. Deputy Thompson's recollection of events was considered credible. 

The Appeals Court distinguished another case.

In Watson v. Garza, two separate individuals were served for their equal involvement in an accident. The suit was filed against both Garza and Harber but only Harber was served. Garza appealed because he never received notification of the suit and did not authorize Harber to accept the process on his behalf. No evidence was presented or found against this claim. 

According to the Tennessee Rule of Civil Procedure 4.04(1), service is achieved “by delivering a copy of the summons and of the complaint to the individual personally, or if he or she evades or attempts to evade service, by leaving copies thereof at the individual's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein, whose name shall appear on the proof of service, or by delivering copies to an agent authorized by appointment or by law to receive service on behalf of the individual served.

Verbal authorization by the defendant to leave with a roommate is valid. Although it can well lead to a messy factual dispute.

When do you need a Quiet Title Action?

In short, the answer is when the title insurance company says so. The lender won’t lend you money because of an issue raised by the title insurance company.

A Quiet Title action is typically needed by individuals or entities who have a disputed or unclear title to a property. This legal process helps "quiet" any challenges or claims against the property title, ensuring clear ownership.

Most quiet titles that I’ve handled stem from a tax sale in the chain of title. In Georgia, insurers generally won’t insure for 20 years after a tax sale without an order from a court quieting title. In Tennessee, it’s shorter, around 7 years. These time periods are set by the insurers to minimize risk.

Besides tax sales, quiet titles arise when there are two parties claiming title. I’ve seen this when the same seller has deeded the property to two different purchasers and the first didn’t record the deed. This usually comes form inherited property and situations when there are other issues with title.

Lastly, I see quiet titles when there is unclaimed property and the owner is claiming adverse possession.

In these cases, a Quiet Title action helps the property owner confirm clear, undisputed ownership, enabling them to sell, mortgage, or enjoy the property without legal concerns.

I handle a lot of these in Tennessee and Georgia. Please contact me if you need counsel.

Al Roker and Gaining Ground

Al Roker (yes, that Al Roker) is the executive producer of a new documentary on heirs property. Heirs property refers to property owned by the descendants of the deceased persons listed on the deed, where the estate was never probated or administered. This land very often involves substantial title issues impeding selling the land for value or borrowing against it.

Gaining Ground: The Fight for Black Land tells the story of land loss among black farmers since the Civil War. One study showed that black farmers lost $326 billion worth of land in the 20th Century.

One of the proposals to ameliorate and correct this loss is the Uniform Heirs Property Act.

You can read my article in the Tennessee Bar Journal about Tennessee’s implantation of the Act.

Georgia Quitclaim Deed with possible forms

Here’s how to prepare a quitclaim deed in Georgia.

At the very top you must have the address for where to return the deed to after it’s recorded. The clerk will often return it if you don’t have this.

The deed must identify the seller whose name goes first. The seller is often identified as the Grantor or Party of the First Part. This seller should be all the owners, all the names listed as buyers on the prior deed. Use the full name of the seller (and the buyer) including Jr., Sr. etc.

The buyer’s name goes next. The buyer is often identified as the Grantee or Party of the Second Part

 THE MOST OFTEN SCREWED UP PART is the legal description. You can’t just put the address. If you do, the deed will likely have to be redone or a court action will have to be filed to clear up the property.

Most often, you can use the legal description from the prior deed. It usually begins “all that tract or parcel of land…”

After the legal description, do everyone a favor and identify the previous deed by deed book and page number. This also helps identify the property if there is an error in the legal description.

Below (sometimes above) the legal description, language indicates that the seller is transferring what interest she has (if any) in the property. There is no “warranty” language so the seller is not promising she necessarily has an interest in the property.

The Seller (not the buyer) must sign at the bottom in the presence of a witness and notary public.

When you file this deed, you must file it with a PT-61. Go here to do this. You will need the addresses for the buyer and seller as well as the county tax parcel number. Print this form out and take or mail it with the deed to be filed. It currently costs $25 throughout the state to file a deed.

Below are links for quitclaim deeds approved by some county clerks. These aren’t the forms I use, but are similar and should work state-wide.

https://www.maconbibb.us/wp-content/uploads/2020/05/FILLABLE_QUIT_CLAIM_DEED.pdf

https://www.cobbsuperiorcourtclerk.com/wp-content/uploads/2017/07/Approved-Quit-Claim-Deed-e.pdf

A quitclaim deed is very handy for a lot of purposes. However, there are definitely times it should not be used. Contact a real estate lawyer for help.

How to Get Access to Deceased’s Cell Phone

Apple wants a court order from a probate court giving them authority to provide access to a cell phone. The order requires

§  The name and Apple ID of the deceased person.

§  The name of the next of kin who is requesting access to the decedent’s account.

§  That the decedent was the user of all accounts associated with the Apple ID.

§  That the requestor is the decedent’s legal personal representative, agent, or heir, whose authorization constitutes "lawful consent.”

§  That Apple is ordered by the court to assist in the provision of access to the decedent’s information from the deceased person's accounts. The court order should be addressed to the relevant Apple entity.

 See more information here.

It’s also quite easy to add a “Legacy Contact” in your phone that grants access to your phone after your death. this only requires a death certificate instead of a court oder.

Go to settings, tap your name, tap “Password & Security” then tap “Add Legacy Contact” and go from there. Again, go here for more information.

OTHER: Information about how to access a Google account can be found here.

Tennessee: A “residential use only” restriction on restrictive covenant prohibits short term rentals, like AirBNB

In the April, 2022 decision, Pandharipande v. FSC Corp, the Tennessee Court of Appeals held that the real property was subject to a declaration of restrictions and an amendment. The first prohibited non-residential renting and the amendment prohibited leasing for less than 30 days.

The case relied on an older case where a real property was being used like a hotel; that was stipulated to. The Court said this distinction didn’t matter.

The case is likely to be appealed to the Tennessee Supreme Court.

The case is here and you can watch the oral argument here.

Remote Video Notarization in Georgia was good while it lasted

Although I didn’t use remove video notarization very much, I found it really helpful at times. I hoped that it would be a reform that would last past the COVID era.

It looks like the Emergency Order from the governor of Georgia is going to end as of April 15, 2022 and with it, the end of remote video notarization.

Per the State Bar of Georgia:

On Monday, March 21, Gov. Kemp issued a final renewal of the State of Emergency for Continued COVID-19 Economic Recovery (Executive Order 03.21.22.01), which will terminate on April 15, 2022. Accordingly, the provisions of the State of Emergency for Continued COVID-19 Economic Recovery – Regulatory Suspensions, Executive Order 09.20.21.02, will terminate on April 15 as well.

As you may recall, Executive Order 09.20.21.02 includes suspension of or revised requirements for compliance with statutes related to notarization (page 5), attestation (page 6), surety bonds (page 8), oaths for grand juries (page 9), attendance for grand juries (page 10) and the renewal of weapons carry licenses (page 10). Please be advised of these areas impacting the judicial system and begin to prepare for these suspensions to be lifted.

View Executive Order 03.21.22.01 here.
View Executive Order 09.20.21.02 here.

For your reference, all Executive Orders may be accessed on the governor’s website.