by Robin M. Barefoot
The following article was originally published 1 . n the April 27, 1992 edition of the
North Carolina Lawyers Weekly. The author is a title attorney at a title insurance company
in Chapel Hill, North Carolina. The article is reprinted herewith her permission (with
minor modifications to address issues pertinent to real estate licensees).
Real estate agents sometimes encounter a transaction in which a mobile or manufactured
home 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 or personal property.
What follows is intended to guide real estate agents through an understanding of the
issues raised in these transactions.
Definition
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. Department of Housing and Urban 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 homes, 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
though 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 homes." The North Carolina General
Statutes also include the term "manufactured home" when it is used 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 manufacturer'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 the filing of a 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 implications 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 from the owner or his attorney addressing these
points is recommended.
When the m/in home is new and placed directly on a lot foundation by the manufacturer and
not sold by a retailer, there will likely be a manufacturer's Certificate of Origin but no
Certificate of Title. While recognizing that it is the intention of the new owner to treat
the m/in home as real estate, it is nonetheless recommended by the Registration Section of
the DMV that the new owner apply for a Certificate of 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 be transferred together by deed and any loan
can be secured by a 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 or 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 purchase 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 to 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
Cancellation of the title is effectuated by writing the following information on the face of the Certificate of Title: "This home has been placed on a 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 to the property where the home is to be located, evidenced by a note and deed of trust). Satisfaction or 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 27697
(919) 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.
Conclusion
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 the 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.
Commission Comments
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 is 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 or sales contract, a real estate license is required. Similarly, when a mobile
home's 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.