Introduction

LOCAL GOVERNMENT PROTECTION

The evolution of mobilehome living from the post-World War II days of “trailers" to current day manufactured housing has seen many changes.  With manufactured housing and mobilehomes now being "immobile", prefabricated homes, and mobilehome park ownership now a lucrative business; homeowners have encountered an increasing need for some kind of local government protection to safeguard their interests. Of all issues faced by mobilehome owners, none is more important than the question of how much space rent a homeowner will be required to pay.

MRL SILENT ON SPACE RENTS

Since 1963, the Golden State Manufactured-home Owners League (GSMOL) has been actively involved in the creation, adoption, and passage of State laws to protect its members. The Mobilehome Residency Law (MRL), as contained in sections 798 et. seq. of the California Civil Code, has been enacted to protect homeowners from unlawful eviction, unlawful rental agreements, or various other unfair business practices by park owners. But it is important to note that State law does not regulate space rents in mobilehome parks. In fact, the MRL is completely silent on the issue of how much rent a park owner can charge. It is left to local jurisdictions, counties and cities, to fill this protection gap.

A UNIQUE NEED

As a direct consequence of shortages of spaces, low vacancy rates, and rapidly rising rents, over 100 California cities and counties have now enacted some form of mobilehome rent stabilization. Many have not enacted other forms of residential rent control, such as for apartment rents. This is further evidence of the mobilehome owner's unique need for protection, which many local governments now recognize and require.

VOLUNTARY PROGRAMS NO SUBSTITUTE

As an alternative to rent regulation, park owners are fond of proposing voluntary programs such as rent subsidies or deferrals for residents who cannot afford rent increases. These may be helpful for a few needy residents, but should not be viewed as a substitute for the protection from unreasonable rent increases that all homeowners require. Unfortunately, park owners cannot be counted upon to voluntarily restrict rent increases to amounts which are fair. Nor can it be assumed that a fair long-term lease can be negotiated to solve the issue.

Source: The GSMOL Mobilehome Rent Stabilization Ordinance Handbook, Second Edition: Guidelines for Drafting and Enacting a Mobilehome Rent Stabilization Ordinance.

Prepared by: Bruce Stanton, Esq. Corporate Counsel
Image courtesy of stockimages at freedigitalphotos.net

A Well-Drafted Rent Ordinance

GSMOL HANDBOOK

Experience shows that in many areas a well-drafted rent ordinance is required if rents are to be truly "stabilized" and homeowners protected from the "economic eviction" which high rents can cause.

As the need for rent ordinances has increased, and more and more local governments have begun to examine the problem, Golden State Manufactured-home Owners League (GSMOL) leaders have devoted increased time to educating and assisting the membership about these issues. The GSMOL Board of Directors commissioned the preparation of THE GSMOL MOBILEHOME RENT STABILIZATION ORDINANCE HANDBOOK, which is designed as a comprehensive tool to aid homeowners, local governments, and local government officials alike. All are key players in the rent stabilization process. 

The discussion will sometimes become unavoidably technical, given the need to explain certain economic concepts and theories. The Handbook is a publication which is "one of its kind", and designed to provide all mobilehome owners with a detailed understanding of the basic who, what, when, where, and whys of rent stabilization.

A LOCAL GOVERNMENT DECISION

Two extremely important points must be understood before attempting to read or apply the contents of the Handbook.

First, it is not the intent of GSMOL to advocate that any existing rent stabilization ordinance be amended or revised by the cities or counties which have already enacted them, consistent with anything said herein. The Handbook should not be interpreted as a criticism of the considerable time and energy which has already been expended by those jurisdictions that have enacted differing provisions. Any decision to change or amend an ordinance must be made by the local government, and only following careful consideration of whether the statute of limitations for park owners to challenge the ordinance would be reopened as a result of any ordinance amendment.

Second, the suggested ordinance provisions contained in the Handbook are designed as a starting point. They should never be used verbatim, but should be placed in the hands of an attorney, economist, city attorney, and/or expert who can help draft an ordinance which fits the needs of the local residents.

CREDITS

GSMOL is grateful to many volunteers and professionals who have contributed to the advancement of mobilehome rent control over the past several decades.  This second edition is dedicated to them, and to mobilehome and manufactured home owners throughout California.

Source: The GSMOL Mobilehome Rent Stabilization Ordinance Handbook, Second Edition: Guidelines for Drafting and Enacting a Mobilehome Rent Stabilization Ordinance.

Prepared by: Bruce Stanton, Esq., Corporate Counsel

Image courtesy of JanPietruszka at freedigitalphotos.net

The Need

A MONOPOLY

Is there a free market economy in the case of mobilehome park space rents? Yes/No/Maybe

The correct answer is No. A free market economy assumes there is freedom of supply and demand. But within our economy there is widespread government regulation of economic relationships where this assumption does not apply.

In the case of mobilehome park space rentals, a type of monopoly exists due to the high costs of moving mobilehomes and the virtual absence of vacant mobilehome spaces in urban areas. As a result, when a rent increase is noticed a homeowner is faced with the alternative of either (1) paying the increase; (2) incurring a high cost to move the home; or (3) simply selling or abandoning the home. Due to cost and unavailability the homeowner can rarely move the home to another space within the same area. As courts have come to recognize, the term "mobilehome" is really a misnomer, since mobilehomes are not really "mobile" at all.

ECONOMIC SERVITUDE

Do park owners have an overriding economic advantage over tenants? Yes/No/Maybe

The correct answer is Yes. The Florida Supreme Court characterized this relationship as a type of "economic servitude," stating that:

"If mobile home park owners are allowed unregulated and uncontrolled power to evict mobile home tenants, a form of economic servitude ensues rendering tenants subject to oppressive treatment in their relations with park owners and the latters' overriding economic advantage over tenants." (1)

NEED OF UNIQUE PROTECTION

Does California law recognize the unique nature of mobilehome ownership? Yes/No/Maybe

The correct answer is Yes. The California Mobilehome Residency Law contains a specific reference to the unique nature of mobilehome ownership, and the need for extension of unique protection of mobilehome owners:

"Because of the high cost of moving mobilehomes, the potential damage resulting therefrom, the requirements relating to the installation of mobilehomes, and the cost of landscaping or lot preparation, it is necessary that the owners of mobilehomes … be provided with the unique protection from actual or constructive eviction." (2)

REFERENCES
1. Stewart v. Green (Fla. 1974) 300 So.2d 889, 892.
2. California Civil Code sec. 798.55(a).

Source: The GSMOL Mobilehome Rent Stabilization Ordinance Handbook, Second Edition: Guidelines for Drafting and Enacting a Mobilehome Rent Stabilization Ordinance.

Prepared by: Bruce Stanton, Esq., Corporate Counsel
Images courtesy of cooldesign and Stuart Miles at freedigitalphotos.net.

Factors Leading to Park Owner's Monopoly

MOVING COSTS VERSUS INCREASED RENTS

A commentary in the publication Urban Lawyer points out:

"Moving costs are typically in the range of several thousand dollars. In addition, there are additional costs of setting up the infrastructure associated with the placement of a mobilehome in its new space, which are typically in the range of $10,000 for a doublewide."

As a result of the impracticality of moving mobilehomes, park owners may obtain 'quasi-rent' in addition to 'competitive' rents. . . . The fact that it is quite costly for a tenant to move after having located in a park gives landlords the opportunity to seek larger rent increases than they would otherwise obtain . . . . Other things being equal, a mobilehome owner is better off paying the additional $100 to $150 per month in space rent to stay in place, rather than moving to an otherwise comparable space in an equally desirable location in another park."(1)

FEW NEW PARKS

The lack of normal bargaining power in the mobilehome space rental relationship is reinforced by zoning regulations in urban areas which severely restrict the supply of mobilehome spaces. In these locations vacant mobilehome spaces may be non-existent because public regulation (zoning) effectively prohibits the development of new parks.  While city regulations do not contain outright prohibitions on new park construction, the combinations of various types of local regulations nonetheless lead to this result, and few new parks have opened for business after 1980.

REFERENCE

1. Baar, The Right to Sell the “Im”mobile Manufactured Home in Its Rent Controlled Space in the “Im”mobile Home Park: Valid Regulation or Unconstitutional Taking? (1992) 24 Urban Lawyer 157, 170-171. Sections of this passage within quotation marks are from Werner Z. Hirsch & Joel G. Hirsch, Legal-Economic Analysis of Rent Controls in a Mobile Home Context: Placement Values and Vacancy Decontrols (1988) 35 UCLA L. Rev. 399.

Source: The GSMOL Mobilehome Rent Stabilization Ordinance Handbook, Second Edition: Guidelines for Drafting and Enacting a Mobilehome Rent Stabilization Ordinance.

Prepared by: Bruce Stanton, Esq., Corporate Counsel
Image courtesy of photostock at freedigitalphotos.net.

It's Real

MOBILEHOME VALUES

Do mobilehome values decrease when space rents go up? Yes/No/Maybe

The correct answer is Yes. The possibility of excessive rent increases in the absence of regulations is not merely theoretical. In some parks, park owners have instituted space rent increases of several hundred dollars per month. 

In such instances, mobilehomes have lost much or almost all of their value and have become unmarketable. An appraiser's rule of thumb is that the value of a mobilehome decreases by $10,000.00 for every $100.00 increase in the monthly space rent.  Some coastal “resort” parks charge rents in excess of $2,500.00.


RENTS IN ANY AMOUNT

Do park owners have free rein to raise space rents? Yes/No/Maybe

The correct answer is Maybe. One aggressive park owner expressed their right to unlimited rent increases, as follows:

"It is important to realize that the Legislature has given park owners free rein to charge any rent they choose; the only exception being local rent control ordinances.  Since park owners are free to set rents in any amount, the formula they use to establish rents is not subject to legal attack. Indeed, a park owner is allowed to set his rent by throwing darts at a dart board, using a Ouija Board, or otherwise." (1)

REFERENCE
1. Ackerman v. Dougher, Orange County Superior Ct. No. 644718, quoting from park owner’s Reply to Memorandum of Points and Authorities filed 6/15/92 at p. 4.

Source: The GSMOL Mobilehome Rent Stabilization Ordinance Handbook, Second Edition: Guidelines for Drafting and Enacting a Mobilehome Rent Stabilization Ordinance.

Prepared by: Bruce Stanton, Esq., Corporate Counsel

Image courtesy of ddpavumba at freedigitalphotos.net.

Unregulated Space Rents

EXCESSIVE RENTS COMMON

Most homeowners are all too familiar with the effects of unregulated space rents. Those who are not should realize what can happen when space rents are not regulated. In the absence of a mobilehome rent stabilization ordinance, experience indicates that excessive rents are common.

REASONABLE OWNERS

Often residents of parks which have not seen unreasonable rent increases will say that the same cannot happen to them because the owner of their park is reasonable. Unfortunately, the reasonable owner is not immortal and there is no guarantee that the next owner will be as reasonable.

GSMOL is aware of many parks where monthly space rents have been increased several hundred dollars during the last few years in the absence of a rent ordinance. If park owners operated in a fair manner, and refrained from seeking additional profits at the expense of their residents, government protection would not be needed.

Source: The GSMOL Mobilehome Rent Stabilization Ordinance Handbook, Second Edition: Guidelines for Drafting and Enacting a Mobilehome Rent Stabilization Ordinance.

Prepared by: Bruce Stanton, Esq., Corporate Counsel
Image courtesy of iStockphoto.com.

Park Owner Solutions?

Park owners commonly offer two alternatives to a rent stabilization ordinance as a way of showing that government intervention is really unnecessary. Their solutions are:

EXECUTION OF A LONG TERM LEASE

The GSMOL Lease Manual should be consulted on this issue. Since leases contain many problems of their own, they could compound, rather than help the problem, by authorizing pass-throughs or hidden rent increases. Unless the lease is truly fair, and is negotiated in a fair manner, this can amount to being no real alternative at all, and can make passage of an Rent Stabilization Ordinance more difficult by neutralizing the voices of those residents on long-term leases.

RENT SUBSIDIES OR DEFERRALS

Another popular park owner solution to high rents is to offer individual rent subsidies or deferrals to those residents who can least afford the increase.  Homeowners should examine these types of hardship programs very carefully, since all or some of the following characteristics are usually present:

• The program is usually discretionary; it can be offered or refused to anyone management wishes, and can be terminated at any time.
• The program will usually apply only to a small group of residents, who must prove entitlement to benefits by disclosing private information.

Many programs "defer" rent, as opposed to "subsidizing" it. The distinction between these two concepts is important. A rent "deferral" program does not necessarily mean that rent is being reduced or forgiven. It may mean that a portion of rent is being deferred for collection at a later date. In the meantime, the park owner may be authorized by the deferral agreement to place a lien on the home which will increase each month. Many homeowners may not understand this, and will be surprised to one day find that the park owner has a sizable lien on their home.

Given these limitations, such a program is often illusory, and hardly a useful solution to the issue of widespread rent increases.

Source: The GSMOL Mobilehome Rent Stabilization Ordinance Handbook, Second Edition: Guidelines for Drafting and Enacting a Mobilehome Rent Stabilization Ordinance.

Prepared by: Bruce Stanton, Esq., Corporate Counsel

Image courtesy of Marcolm at freedigitalphotos.net.