MH Note Modification Agreement or Addendum? - Posted by Mel in California

Posted by Dr. Craig Whisler on January 12, 2004 at 20:27:51:

In my opinion you are 100% correct in your assessment of California family law court judges’ lack of fairness and general lack of integrity.

Regards, doc

MH Note Modification Agreement or Addendum? - Posted by Mel in California

Posted by Mel in California on January 09, 2004 at 14:16:22:

I am in the process of re-working a MH Note on which I am the only Lienholder. The purpose is for eliminating a balloon payment by increasing the Payors monthly payment amount and stretching out the length of the term.

I have an “Addendum To Contract” form I could use for this purpose, but I wondered if that would be sufficient (assuming it is agreed upon and signed by both myself and the Payor)or would a “Note Modification Agreement” or some other form be a better choice? This is in the State Of California.

Just want to make sure this gets done up right :slight_smile:

Thanks for any advice,

Mel in California

Re: MH Note Modification Agreement or Addendum? - Posted by Brian MD

Posted by Brian MD on January 10, 2004 at 13:30:42:

I’ve modified a few MH notes in the past couple of years and just use a simple agreement (Note Modification Agreement). It doesn’t even take up half a page. I just lay out the changes, include the sentence"This is not a novation" (not a new note) and have them sign it and thats that.
p.s. Depending on how big of a balloon you have you may want to consider a step payment note to amortize the balloon.

maybe I’m a simpleton, but - Posted by Steve-WA

Posted by Steve-WA on January 09, 2004 at 14:45:08:

It’s not recorded anywhere, so it’s almost moot, unless one must go to court - and in that case, would not a brand new note, superceding the old, suffice? Or the “Addendum To Contract”? Same thing, I’d guess.

But I could be talking through my hat -

You said it, …not me! nt - Posted by Philip

Posted by Philip on January 09, 2004 at 20:38:27:

nt

Re: maybe I’m a simpleton, but - Posted by Mel in California

Posted by Mel in California on January 09, 2004 at 18:12:27:

Steve,

Maybe I am making it more complicated than it needs to be, but I just figure it’s better to ask questions now rather than to find out later that I should have done things in a different way. Better to be prepared and hopefully ward off future problems.

Thanks for your input!

Mel in California

Careful Philip! - Posted by Dr. Craig Whisler

Posted by Dr. Craig Whisler on January 09, 2004 at 23:14:33:

Those great white snarks have lots of teeth. :~)

Steve is right. It doesn’t much matter what you call it. No specific from is the ‘only’ right way. Just write down what you have both agreed upon and both of you sign it.

A contract is just basically and offer and an acceptance with consideration. Consideration is some form of payment. A promise can be consideration. Foregoing to do something that you have a right to do can also be consideration. The amount of consideration is generally irrelevant. A peppercorn has been held to be sufficient consideration for a contract. A peppercorn is what you grind up to make pepper. Both parties must have the capacity to contract, i.e. they generally must be at least 18 years old, and not under the influence of controlled substances, or of diminished mental capacity (how much Champaigne did you have before you said “I do”—maybe you really don’t). The subject matter must be legal. A contract to rub out your nosey neighbor isn’t legally enforceable, even if it would improve the neighborhood. You don’t need fancy legal language. Simple language minimizes misunderstandings.

Get in the habit of writing and modifying you own contracts, business forms and Trust Deeds and notes. That is what a word processor is for. Say what you mean and mean what you say. If a lot of money is involved and you are unsure, sure then ask your lawyer. Buy a book on contracts and study it. Let your lawyer pay for his own trip to the Bahamas next year. Check online for Nolo Press legal books. Written in simple language by lawyers, for simple people (like me).

When you realize how easy modifying contracts can be, you can slip a clause into your trust deed forms (for when you are the buyer) that says “in no event will monthly payments exceed the actual rent collected in any given month.” I do. Noone has EVER noticed it. If a depression hits suddenly, you may lose all of your financed property but I won’t. Of course you can only use your own loan forms when dealing with private parties. Then make up a fun Trust deed with some neat clauses for sellers. I make up all my forms in two sets. One is for buyers and one is for sellers. It is rare that any one reads all of the fine print but in this age of word processors but you should.

Watch out for the ‘incorporated by reference’ short form Trust Deeds. They include all of the terms and conditions listed in a long form Trust Deed that is recorded elsewhere. You never know, the long form may say your grandmother’s cat is also included as consideration for this deal, or in any month containig only 28 days the note that is securred by this Trust Deed is automatically canceled. Read contracts before you sign, or later, read and weep.

If you don’t read and understand contracts you shouldn’t sign them. DON’T let some escrow agent shove 20 pages of documents in front of you, that you haven’t read, and say sign here, here, and here. Say you want to take them home and read them or have your lawyer do it for you. Maybe the person you are doing business with chose that particular escrow agent because of a ‘close working relationship.’

It just isn’t very pracitcal to hire a lawyer to read everything you sign during your lifetime. Learn a little about contracts the same as you should learn about taxes, rather than depend on someone else all of the time.

I have modified some of my forms, such as rental contracts, over 300 hundred times. Every time something goes wrong and I lose a few bucks I add another clause to my rental agreements to prevent it from happening again.

Regards, doc

show me - - - snark (nt) - Posted by Steve-WA

Posted by Steve-WA on January 09, 2004 at 21:22:28:

.

Writing & Revising Contracts and/or Agreements - Posted by Mel in California

Posted by Mel in California on January 11, 2004 at 12:37:40:

Doc,

My first attempt at writing my own Contract/Agreement didn’t turn out as well as hoped, so this is why I am studying up a little further so as not to “make the same mistake twice”.

I’ve tried your previous suggestion of attempting to trade the Note, as-is, for something else of value that I could turn around and sell for cash, then re-invest, but hadn’t gotten any takers. So, it’s on to the next plan of action: Revise the Note, removing the balloon and thus (hopefully) making it a little more attractive to potential investors.

Or…continue holding the new, revised Note myself, with some added peace of mind in knowing the balloon won’t be an issue come the end of next year!

I will be approaching the Payor with my proposal this week, so we’ll give it a shot and see what happens…

Thanks,

Mel in California

Contracts - Posted by Howard

Posted by Howard on January 10, 2004 at 09:30:10:

I would add a few thoughts. I never call my agreements “Contracts.” It just scares some people who have been taken advantage of in the past. I keep it simple and call it an “Agreement.” I have the same experience and modify my agreements for the future every time a new wrinkle comes up. Use of a “peppercorn” for consideration is only a law school construct. I use real money, but a small amount. "Buyer gives Seller ten dollars to give Buyer time to go to bank to get remainder of purchase price. When the laws change relating to usury or other important matter, I usually have a specialized attorney review my forms and comment. I do not have them prepare new forms. If this is a big deal such as purchase of a mobile home park and closing at an escrow agent’s office, have them e-mail you draft copies of all the documents that will be presented at closing. Again, if you are working individual to individual such as purchase or sale of a home, keep it simple.

Howard

I am keeping this with - Posted by Philip

Posted by Philip on January 10, 2004 at 07:37:13:

all the other posts of your’s that I have in a file. It is a nice free education.
Thanks,
Philip
(Don’t tell anyone but I think Steve probably knows a little also)

Re: Contracts - Posted by Mel in California

Posted by Mel in California on January 11, 2004 at 12:10:02:

Howard,

The reason I was using the term “Addendum To Contract” is because the original document I’m re-working is termed as a “Conditional Sales Contract”. I was thinking since it was already termed a “Contract” that it might also be important for me to use that term for the addendum for consistency’s sake if nothing else.

I’m getting ready to approach the Payor with proposal for the new terms, so I wanted to be sure I wasn’t overlooking something that might be of importance in drawing up the revisions. This is a relatively small deal…it’s an individual Mobile Home on a rented Lot within a Park and the Note has a balloon coming due at the end of next year.

My proposal to the Payor is to increase the payment amount slightly and stretch the length of the term out so there is no longer a balloon. This will solve the problem of the Payor having to come up with the balloon amount next year. For a little extra each month, then he won’t have that to worry about and it will give me some added peace of mind as well.

Also, I had previously been looking into the possibility of selling the Note. However, most investors I’d been in contact with mentioned a balloon really isn’t desirable to Note Buyers and I would end up to taking a deeper discount than if the balloon didn’t exist. Some said they wouldn’t even consider a Note with a balloon because of the potential risks involved.

I think I will go ahead and use the Addendum I’ve already got partially completed. I am keeping the revised terms simple and to the point, so I’ll see if the Payor is agreeable and go from there.

Thanks for your insight,

Mel in California

I respectfully differ - Posted by Steve-WA

Posted by Steve-WA on January 10, 2004 at 17:09:04:

I like to use the word “contract” - it implies officialnessocity (my word - I’m a grownup and I can do that), just like it is not a bad idea to get stuff notarized in front of the people with whom you do business. It signifies the gravity of what they are signing, even if it is not necessarily necessary.

Good points but… - Posted by Dr. Craig Whisler

Posted by Dr. Craig Whisler on January 10, 2004 at 11:11:49:

…the use of a peppercorn for consideration is an actual, two hundred year old English commom law case that is followed in the U.S. to the present day. It is however used in law school to illustrate the point that if any consideration is present in a contract, the courts will not usually examine it for adequacy. There are a number of exceptions however. California prenuptial contracts is one of them that comes to mind. If the court feels the consideration isn’t ‘fair’ they simply will not enforce it (rats).

I too usually use the word agreement, instead of contract.

Many people print ‘standard form’ on the top and rationalize doing so because it is THEIR standard from.
I’m not so sure it is a good idea though and I don’t follow the practice myself. I’m just waiting for some judge to rule that if it isn’t standard in the industry and used by many competitors, then it isn’t standard and that it is a 'DECEPTIVE’practice, thereby striking down someone’s entire contract.

I like your idea of having the escrow office just fax me the docs in advance. I’ll do that in the future. I never thought of that. Duh!

I hate it when I go to buy something, such as new tires(for cash), and some 18 year old punk (I mean clerk) shoves a preprinted form in front of me and says sign here (as if, if I didn’t he wouldn’t sell me the tires), and the contract has a paragraph of expremely fine print immediately above where the signature goes, that was prepared by the companie’s lawyers, that forces me to give up lots of important rights. I ALWAYS cross off the entire legal doc part before signing and if challenged I just say that otherwise “I would have to have my lawyer read it first just as you had your lawyer prepare it (to screw me).” People are crazy to sign such nonesense but they always do. Not me. If forced to sign, I just scribble an incomprehensible mark, which I can later prove isn’t my signature. I signed Davy Crockett for a couple of years and noone ever said boo.

Law can be fun. :~)

Or just sign with an X. If they require a full name, and you are Polish, just sign with 3 Xs.

Regards, doc

but just a little! nt - Posted by Steve-WA

Posted by Steve-WA on January 10, 2004 at 17:09:42:

.

Re: Contracts - Posted by Bob

Posted by Bob on January 12, 2004 at 18:43:42:

>However, most investors I’d been in contact with mentioned a balloon really isn’t desirable to Note Buyers
>and I would end up to taking a deeper discount than if the balloon didn’t exist. Some said they wouldn’t even
>consider a Note with a balloon because of the potential risks involved.

You can sell the payments and keep the balloon.

OK Newton. Gravity is good. (NT) - Posted by Dr. Craig Whisler

Posted by Dr. Craig Whisler on January 10, 2004 at 17:22:08:

:~)

Re: Good points but… - Posted by Bob

Posted by Bob on January 12, 2004 at 19:00:29:

>if any consideration is present in a contract, the courts will not usually examine it for adequacy. There
>are a number of exceptions however. California prenuptial contracts is one of them that comes to mind.

“Whatever the wife wants” seems to be the definition of fair used by CA courts. At least, that’s what it seems like. They seem to agree with most any razor thin or outright offensive pretext in order to void a prenup.

Re: Contracts - Posted by Mel in California

Posted by Mel in California on January 12, 2004 at 19:39:07:

Yes, I was aware I can sell just the payments and keep the balloon, but I was wanting to sell the whole Note. This is where I was running into the problem and decided revising the Note might be the way to go.

Mel