Mobile home park owners have one job and it’s right there in the title. They provide space for homes. They do not provide space for businesses. That’s a different game, and one that opens a whole can of liability worms. Have a no-tolerance policy on home based-businesses and enforce it. Tenants might own their homes, but you own the park.
“Own” is a loosey-goosey term in the mobile home park industry. Just because your tenants own their homes doesn’t mean they can do whatever they want with them. Can a tenant run a business from your property? Well, you own the land underneath that home and you have the right to protect yourself and your park. Know the mobile home zoning laws in your area and keep an eye out for home-based businesses so you can shut them down before they hurt your bottom line.
Can a Tenant Run a Business From My Property?
First, know what qualifies as a business. By business, I mean they’re using the home as a storefront to sell products and services. Take a daycare, for example. It’s a pretty lucrative business these days, and the occasional stay-at-home parent might try to open up shop in your park. Generally, the following are signs that your tenant is running a business, daycare or otherwise:
- Increases in traffic: A lot of cars coming and going, especially at specific times of the day, is a good sign that your tenant is running a business in their home. If ten cars are showing up every morning at 8 and again in the evenings at 5, it’s a business.
- Noise complaints: That increase in traffic is going to increase the noise coming from your tenant’s property, and even more so if they’re running a daycare with a handful of kids.
- Tenant complaints: It’s not uncommon for an angry neighbor to be the one who reports an in-home business. Listen when there are tenant disputes in your mobile home park, and follow up when residents make complaints.
- Listed sources of income: If you’re doing your income verifications right, then you should know what that tenant does for a living. If they say they make their money as a childcare provider, and have ten kids in their house every day of the week, it’s not hard to tell what’s going on.
Now, I don’t have a problem with the occasional babysitting job or the independent contractors who just work from home on the computer all day. My problem is when someone uses their house as a storefront. That increases my liability. I don’t like that and my insurance company doesn’t like it either.
Mobile Home Zoning Laws Make Home-Based Businesses in Your Park a Bad Idea
Businesses increase your traffic, the number of strangers in your park, and, with that, your liability. Think of it this way: Your tenant is running a home-based daycare. One day, they take all the kids to the on-site park. One of the kids falls off the monkey bars and breaks his arm. Now who do you think is getting sued? If you guessed your mobile home park, you nailed it.
When you get a liability policy for your park, that insurance company is going to cover you for the standard use of a mobile home park. They’re not providing insurance for your tenants’ businesses. So, when that playground accident happens, they’re going to wash their hands of the thing—and you.
The next thing you need to think about are zoning issues. Every county has them. Some areas are for residential use, some are for commercial use. You can’t just open a business in a residential area, and you can’t rent out commercial space for residential use. If you’re running a mobile home park, you’re zoned for residential use, not business. If a tenant is running a business in your park, you need to put a stop to it before the zoning people come calling.
What to Do When a Tenant Is Running a Business
The lease your tenants sign is a residential lease. That residential lease is going to include something to the effect of “premises are to be used by the tenant for residential, non-business, private housing purposes only.” The daycare problem is so widespread that your lease might even note that any kind of daycare or child-sitting arrangements are prohibited. Using a lease template from a mobile park association can help you with the wording here.
You have that lease for a reason. Use it. If someone’s running a business, send them written notice of the lease violation, along with a copy of the specific language of the lease provision that they’re violating. Mediate tenant disputes if you can. But if they don’t curb the behavior, move forward with eviction, starting with the notice to quit.
I guarantee that when you confront someone about running a business in your park, you’re going to get some pushback. In the case of a daycare, they might say, “Oh, I don’t charge. I’m just watching the kids for a friend.” Go with your instincts on that one. No one is watching ten kids, every day of the week, for free. If their excuse seems unlikely to you, then it’s probably not true. If they want to stick with that story, then they can tell it to the judge during the eviction proceedings. If you’ve correctly set up your lease, the court’s going to rule in your favor.
Just don’t let it slide. If you ignore the problem, it isn’t going to go away. It’s only going to get worse. Keep an eye out for the red flags of a business and let your tenants know upfront that it’s prohibited. That will limit your liability, protect your park, and keep your other tenants happy.
Not everyone wants to be a business owner. That’s often true of those who got into the mobile home parks business as an investment, and learned it’s more of a full-time career. A lot of the parks I buy are from people who find that too much time investment is needed to make their park pay off. If you’re feeling that way, give me a call or shoot me an email to get a fair offer on your park.