Hershner Hunter Attorneys

Manufactured Structures

TO:	Clients and Other Friends of the Office

FROM:	Hershner Hunter, LLP Creditors’ Rights Practice Group

DATE:	April 14, 2005

RE:	New Law Relating to Perfection of Security Interests in Manufactured Structures

	download pdf version

What is Happening and When?

The law in Oregon regarding the manner in which creditor’s perfect security interests in manufactured structures will change effective May 1, 2005.

What is the Definition of a “Manufactured Structure?”

The term “manufactured structure” includes:

(a) a manufactured dwelling;

(b) a prefabricated structure that is relocatable and more than 8 ½ feet wide; and

“Manufactured structure” does not include a mobile modular unit or an implement of husbandry.

Primarily, a “manufactured dwelling” includes (a) residential trailers used for residential purposes and constructed before 1962, (b) mobile homes used for residential purposes and constructed between 1962 and 1976, and (c) manufactured homes (or structures used for residential purposes and constructed in accordance with federal standards).
“Prefabricated structure” is defined as a building or subassembly that has been in whole or substantial part manufactured or assembled using closed construction at an off-site location to be wholly or partially assembled on-site.
“Recreational vehicle” is defined as a vehicle with or without motive power, which is designed for human occupancy and to be used temporarily for recreational, seasonal, or emergency purposes.

What Did the Old Law Require in Order to Perfect Security Interests in Manufactured Structures?

Before May 1, 2005, a security interest in a manufactured structure, with some exceptions, was perfected by applying to the Oregon Department of Transportation’s Department of Motor Vehicles (“DMV”) to have the security interest noted on the manufactured structure’s certificate of title.

What is Required Under the New Law for Perfecting Security Interests in Manufactured Structures?

Effective May 1, 2005, DMV will no longer be handling the process for perfecting security interests in manufactured structures. The Building Codes Division (“BCD”) of the Oregon Department of Consumer and Business Services will now handle that process.
Manufactured structures will no longer be considered “vehicles.” Under the new law, ownership of a manufactured structure, with some exceptions, will be evidenced by an “ownership document.” A security interest in a manufactured structure will be perfected by notation of the interest in the manufactured structure ownership document records. That interest will also be noted on the ownership document itself. ORS 446.611 will govern the process for perfecting a security interest in a manufactured structure.
The exclusive means for perfecting a security interest in a manufactured structure (other than a manufactured structure held as inventory) will be by application for and notation of the security interest in the manufactured structure ownership document records of BCD. A new security interest in a manufactured structure held as inventory will still be perfected by filing a financing statement with the Secretary of State.
The application to have a security interest noted is not the same as an application for issuance of an original ownership document. However, the application to have a security interest noted may be included as part of the application for issuance of an original ownership document. The security interest is perfected upon BCD’s entering the security interest in its records.
After entering the security interest in its records, BCD will note the security interest on a new or updated ownership document and send the document to the holder of the earliest perfected unreleased security interest. If the debt is satisfied or assigned, the holder of the security interest must notify BCD. If the secured party is in possession of the ownership document for the structure, the holder must return the document to the department. The department will then revise the ownership document to reflect the satisfaction or assignment and send the revised ownership document to the new holder of the earliest perfected unreleased security interest or, if none, to the owner of the structure.

What is the LOIS system?

The LOIS system is a computer system designed by BCD that will maintain location, ownership, and security interest information for manufactured structures located in Oregon. The system should be operational at least by May 1, 2005, the date when the new law goes into effect.
All users of the LOIS system must first become a registered system user. To do so, contact Sherry Mitchell at Sherry.D.Mitchell@state.or.us or (503) 373-1309. If you would like to test the system before May 1, 2005, contact Ms. Mitchell to get an access number, download the required software, and try out the system at www.or-mfg-housing.info (click on “LOIS System” at the top of the page). For more information about the LOIS system, visit that part of BCD’s website devoted to “Manufactured Home Ownership” at www.cbs.state.or.us/external/bcd/lois/index.html.
Depending on the type of authorized user (e.g., manufacturer, dealer, park owner, transporter, lender or security interest holder, or title company), the user may be able to submit an application on-line, search for ownership and security interest information, or purchase and print trip permits online.
The application for an ownership document and/or to note a security interest, and other forms, are expected to be available on BCD’s website (www.cbs.state.or.us/external/bcd/lois/forms.html.) by April 15, 2005. Those forms will also be made available at each county assessor’s office.

What if the Person Owns Both the Manufactured Structure and the Land and Wants to “Detitle” the Manufactured Structure?

If an owner of a manufactured structure also owns the land on which the manufactured structure is located, the owner may apply (on an application form approved by BCD) to the county assessor to have the serial number, a description of the real property where the manufactured structure is located, and the other information contained in the BCD records recorded in the county deed records. If the county assessor determines that the manufactured structure qualifies for “de-titling” then that information will be recorded in the deed records.
The deed records must also contain information regarding any unreleased security interest in the manufactured structure, and if an ownership document has been issued, the owner must submit the ownership document to the assessor along with the application to have the structure recorded.
When BCD cancels an ownership document because the manufactured structure is recorded in the deed records of a county (a process similar to “de-titling” under the old law), BCD will notify the county assessor of any unreleased security interest recorded in BCD’s records. The county assessor will then record the security interest information for the manufactured structure in the deed records. No other paperwork, such as a financing statement for a fixture to real property, needs to be filed.
For manufactured structures that have been “de-titled” in the county deed records before attachment or perfection of a security interest, a creditor’s recording of the interest in the county deed records will satisfy the requirement that the security interest be recorded.
If a manufactured structure ceases to be exempt from the ownership document requirement because the owner no longer owns the land or the leasehold interest has expired, upon recording the termination of the exemption in the deed records, the county assessor will notify the department of any unreleased interest shown in the deed records for the manufactured structure. The BCD will then note the security interest information on the ownership document.

What is the Effect of the New Law on Security Interests that were Perfected Under the Old Laws?

The changes in the law regarding perfection of security interests in manufactured structures will not affect the rights or remedies of a creditor who properly perfected a security interest in a manufactured structure before May 1, 2005. If BCD issues an ownership document for a manufactured structure that was previously issued a certificate of title by DMV, BCD will be required to record in its records and note on the ownership document any security interest that was noted on the certificate of title.
A creditor who properly perfected a security interest in a manufactured structure before May 1, 2005 will not have to apply to BCD to have its security interest noted if its security interest was noted on the certificate of title. The security interest will retain its original perfection date. The creditor will then have the rights and remedies available under ORS 446.611(1). The rights and remedies available under ORS 446.611(1) are virtually the same as those under the old law.
The transferring of a noted security interest from the certificate of title to the ownership document and records will be carried out by BCD. BCD’s regulations interpreting the new law are still in draft form and, as of the date of this memorandum, have not been promulgated. The most recent draft (which is not binding) of the regulations does not contain a provision similar to that in the old DMV regulations placing responsibility on the secured party to protect its interest but the final binding version will need to be closely reviewed.

CREDITORS’ RIGHTS PRACTICE GROUP:

Nancy K. Cary

Patrick W. Wade

This Memo Alert provides general information and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. If you have specific legal questions, you are urged to consult with counsel concerning your own situation.