Vacancy Control Litigation

HALL V. CITY OF SANTA BARBARA

The initial case dealing with this issue was the Federal District Court case of Hall v. City of Santa Barbara (1986) 833 F.2d 1270.  In Hall, the mobilehome park owners challenged the City of Santa Barbara's mobilehome rent control ordinance, which contained a provision for vacancy control. The park owners argued that the ordinance transferred to each tenant a possessory interest in the land on which his mobilehome was located. 

The Court agreed, and held that the substantial premium paid for mobilehomes in parks subject to the ordinance constituted the transfer of a valuable property right to occupied spaces in mobilehome parks at below market rates, which amounted to a "physical" taking of their property. As a result, many California cities inserted "vacancy decontrol” provisions in their ordinances, which allowed unlimited increases when a mobilehome was sold "in place."

YEE V. CITY OF ESCONDIDO

On April 1, 1992, the United States Supreme Court issued its decision in Yee v. City of Escondido (1992) 503 U.S. 118, which rejected the decision in Hall by a 9-0 vote. The Court held that Escondido's vacancy control provision does not amount to a "physical" taking. The "physical" taking theory is now dead, and many jurisdictions therefter reinstituted vacancy control protection for their residents.

REGULATORY TAKING

After Yee, park owners shifted to a theory that vacancy control constitutes a "regulatory" taking; i.e. that such a provision does not substantially advance any legitimate governmental interest. 

In Sandpiper v. City of Carpinteria (1992) 10 Cal.App.4^th 542, the California Court of Appeal specifically disposed of this issue, holding that Carpinteria's ordinance did not constitute a regulatory taking on its face. The U.S. Supreme Court refused to hear the case, which is now the unchallenged law in California.  

Recently, two important Federal Court decisions were rendered in the case of Guggenheim v. City of Goleta and MHC Financing Limited Partnership v. City of San Rafael.  Each upheld a mobilehome ordinance containing a vacancy control provision.

THREATS OF LITIGATION

Local governments should know the law in this area, so that they are not intimidated by park owner threats of litigation and can be confident about adding this important protection to the ordinance.  If complete vacancy control is viewed as too risky, the ordinance might adopt a percentage standard, such as 10%, to at least limit the amount of resale rent increases.  Remember that for every $100.00 rent is increased, the home’s equity decreases by $10,000.00.

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