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HomeMy WebLinkAboutD-1 Staff Report - Mobilehome Rent Ordinance DiscussionD-1 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: NICO DE ANDA-SCAIA, DEPUTY CITY MANAGER MARCO A. MARTINEZ, CITY ATTORNEY DATE: JULY 18, 2022 SUBJECT: DISCUSSION: ARTICLE XI, CHAPTER 18 OF THE AZUSA MUNICIPAL CODE: CITY OF AZUSA MOBILEHOME RENT STABILIZATION REGULATIONS BACKGROUND: At recent City Council meetings, residents have complained that mobilehome park owners have significantly increased rents in violation of the City’s mobilehome rent stabilization regulations (“MRSR”). The ordinance is codified in Article XI, Chapter 18 of the City’s Municipal Code and was originally adopted in 1992 as Ordinance No. 92-04. While the original staff report for Ordinance No. 92- 04 was unavailable, the Ordinance did include recitals that hinted at the reasons for its adoption. These included the following: “A. The City of Azusa has heard comment on the issues surrounding mobilehome park tenancies in 1990 and has mediated certain disputes within the community. B.Despite progress by the City, unresolved disputes exist and the City finds it necessary to exercise its police powers. C.Mobilehome park tenants are in a poor bargaining position with park owners because of substantial investments in their mobilehomes, the high cost of relocation and a lack of alternative sites within Azusa and the region. D.Unregulated mobilehome park rents will be a hardship on vulnerable portions of the City's population, including the elderly, the disabled, and those of low income, forcing these persons to leave the City or divert a disproportionate amount of income to housing.” SCHEDULED ITEM APPROVED PROVIDED DIRECTION CITY COUNCIL 7/18/2022 Discussion: Azusa Mobilehome Rent Stabilization July 18, 2022 Page 2 Ordinance No. 92-04 generally created a tiered system for allowing rent increases. The largest proposed increases required approval by a City Mobilehome Park Rent Review Board. However, such a board does not currently exist and has not existed for many years. Other components of Ordinance No. 92-04 are likely outdated. Given the complaints that have been voiced and the current status of Ordinance No. 92-04, the City Council requested we agendize discussion of this matter to receive direction concerning the issues faced by tenants and the continued need for mobilehome rent stabilization regulations. DISCUSSION: State Laws Approximately 100 cities and counties in California have some type of mobilehome rent control or rent stabilization ordinance. These ordinances restrict the amount of rent increases that can be required, and some limit the initial rent that can be charged. (See Civil Code §§ 798.17(a) and 1947.8). However, there are exceptions. A mobilehome park space is exempt from local rent control if the space was newly constructed and initially held out for rent after January 1, 1990 (Civil Code Section 798.45). With certain specified exceptions, the mobilehome space is also exempt if it is not a principal residence of the homeowner and the homeowner has not rented the mobilehome to another party (Civil Code Section 798.21). These exceptions are also contained in the MRSR. A summary of state mobilehome laws is attached to this report. Summary of Current Azusa MRSR The Azusa MRSR contains the following major provisions: 1. Annual License Tax (Division 1) The existing regulations require operators and managers of automobile trailer camps and mobilehome parks to pay an annual license tax of $24.00 for the first three spaces, and $12.00 for each additional space. The existing regulation also requires these businesses to comply with the mobilehome rent stabilization regulations. 2. Mobilehome Rent Stabilization (Division 2) The MRSR establishes a formula for rent increases, and creates a process for rent review and adjustments to ensure fair and reasonable rents for park owners and residents. The current ordinance also sets forth permissible rent following the transfer or sale of a mobilehome and space, permissible reasons for terminating or refusing to renew a tenancy not subject to the state Mobilehome Residency Law, and remedies and penalties for violations of the MRSR. A. Permitted Rent When first enacted, the existing ordinance set an initial base rent for each space at two specific mobilehome parks and all remaining parks effective as of certain dates. The Azusa Mobilehome Park initial base rent was set at $215, and the Sylvan Villa Mobilehome Park was set at $5 less than the rent in effect on December 1, 1991. All other parks were to set at an initial base rent equal to the rent in effect on December 1, 1990. If, however, a space was rented at $150 or less as of the effective date of the ordinance, the base rent was to be the rent charged as of such effective date. If there was an exempt existing Discussion: Azusa Mobilehome Rent Stabilization July 18, 2022 Page 3 lease at the time of the ordinance’s effective date, the base rent was to be to the actual monthly rent for the last month of the lease prior to its expiration. B. Park Owner Permitted Rent Increases Under the existing ordinance, Park owners are prohibited from demanding rent exceeding the initial base rent unless authorized by the MRSR. Permitted increases are of three types: increases permitted without active city approval (AMC Sec. 18-772); increases based on mediation (AMC Sec. 18-773); and increases based on rental review board approval (AMC Sec. 18-774). C. Rent Increase Permitted Without Active City Approval To increase rent without active city approval, a park owner is required to provide written notice to affected tenants and file a statement with the city showing the increase meets several enumerated conditions. Park owners may not increase rent greater than the sum of (i) the increase in the Consumer Price Index for Wage Earners (CPI-W) for the 12-month period ending 90 calendar days before the date of receipt of the statement by the city (not to exceed 7% or $10, whichever is greater) plus (ii) the space’s proportionate share of an increase due to a land lease binding upon owner and tenant existing as of December 1, 1991 and/or an increase in a city special tax, benefit assessment, or service charge. The rent increase goes into effect on the anniversary date of the space as established by the park. The increase may exceed the amount automatically permitted if the owner sends written notice to affected tenants and the statement filed with the city shows that at least 51% of affected tenants approves the increase. Similarly, the owner may pass through capital improvement costs (which the MRSR treats as the rent) if notice is given to affected tenants and a minimum of 51% of them approve. D. Rent Increase Based on Mediation An owner may request mediation to increase rent for a space(s) over the amount authorized by right. To do so, the owner must mail notice to affected tenants and the department of community development (the “department”). The notice must state the proposed increase amount and the basis for the increase. Within 10 days of the notice, a park mediation committee must form. The five-member committee is composed of two representatives selected by the owner, and two representatives selected by the affected tenants, and a mediator appointed unanimously by the other four members or, if no consensus is reached, a professional mediator named by the City Attorney. The committee is then required to negotiate a proposed increase, and when decided, the affected tenants must vote whether to approve the increase by secret ballot. If less than 67% of the affected tenants vote in favor of the increase, the increase is disapproved. The owner may then apply with the rental review board for the proposed increase. E. Rent Increase Based on Review Board Approval The five-member rental review board is composed of two homeowners in parks in the city, two owners of parks in the city, and one member of the public that is neither a homeowner or park owner. The board is tasked with hearing rent adjustment applications. A park owner must file an application with the department to initiate board review. The department is responsible for mailing a notice in Spanish and English to affected tenants of the proposed rent increase, including, among other information, the owner’s justification for the request and the affected tenants’ rights to submit statements or other documentation in opposition to the application within 30 days of when notice was mailed. Within 60 days after the Discussion: Azusa Mobilehome Rent Stabilization July 18, 2022 Page 4 owner’s application is deemed complete, the review board must hold a noticed public hearing on the application. Within prescribed time limits, the board must approve the rent increase if it determines the increase is just, fair, and reasonable, taking into consideration several factors enumerated in AMC Sec. 18-774(g). Extension of the board’s time limitations to act and board approval of an interim rent increase are permitted if certain conditions are met. F. Rent Decrease Request by Tenant to Review Board Tenants may seek review board approval for a rent decrease. The tenant must file an application with the department to initiate board review. The department is responsible for mailing notice of the proposed rent decrease to the affected park owner, including, among other information, the tenant’s justification for the request and the affected park owner’s rights to submit statements or other documentation in opposition to the application within 30 days of when notice was mailed. Within 60 days after the tenant’s application is deemed complete, the review board must hold a noticed public hearing on the application. Within prescribed time limits, the board must approve the rent decrease if it determines the decrease is just, fair, and reasonable, taking into consideration several factors enumerated in AMC Sec. 18-775(g). Extension of the board’s time limitations to act and board approval of an interim rent decrease are permitted if certain conditions are met. G. Rent Based on Arbitration If the review board denies a rent increase by a park owner or rent decrease by a tenant, the owner or tenant may file an application with the department for arbitration on the requested rent adjustment. The city must select an independent arbitration who is a member of the American Arbitration Association. The arbitrator must provide notice of the application to the affected owner and tenants and hold a noticed public hearing on the application. Within prescribed time limits, the arbitrator must approve the rent adjustment if he or she determines the decrease is just, fair, and reasonable, taking into consideration several factors enumerated in AMC §§ 18-774(g) and 18-775(g). Extension of the arbitrator’s time limitations to act are permitted if certain conditions are met. The determination of the arbitrator is final. The arbitrator may also grant an interim rent adjustment if certain conditions are met H. Rent After Sale or Transfer of Mobilehome When a tenant sells his or her mobilehome to a new tenant and the new tenant enters into a rental agreement for the space occupied by the mobilehome, the park owner may not increase rent above 8% of the immediately preceding rent. When the park owner sells a mobilehome he or she owns in the park, the base rent to the buyer that leases the space must be the average of the current rent charged for similar spaces in the park. A rent increase on a vacated space is not allowed, however, for: (1) a transfer to a conservator, estate, or heir of the tenant; (2) a transfer which takes effect upon the death of a spouse; (3) a transfer to a spouse or former spouse in connection with a settlement agreement or a decree of divorce or legal separation; or (4) the creation, transfer, or termination of interests in a space between spouses. I. Permissible Reasons to Terminate or Refuse to Renew Tenancy California’s Mobilehome Residency Law (“MRL”) limits the grounds for termination or nonrenewal of tenancies of mobilehome owners. (See Civil Code §§ 798.55 and 798.56). The MRSR extends many of Discussion: Azusa Mobilehome Rent Stabilization July 18, 2022 Page 5 these protections to tenants who do not own the mobilehomes that occupy park spaces. Under the MRSR, these tenants’ space leases may only be terminated or not renewed for the following reasons: • Failure of the tenant to comply with laws relating to mobilehomes within a reasonable time after the tenant receives notice of noncompliance from a government agency • Conduct by tenant on the park premises constituting a substantial annoyance to other tenants • Failure of the tenant to comply with a reasonable rule or regulation of the park after tenant has been given written notice and opportunity to comply • Nonpayment of rent, utility charges, or incidental service charges • Condemnation of the park • Change of use of the park, provided the owner (a) gives 12 months’ written notice of the proposed change to the tenant and (b) gives any proposed tenant whose tenancy will commence within 12 months of the proposed change written notice before the start of the tenancy J. Remaining Provisions: Remedies and Prohibited Acts The MRSR’s remaining provisions require a decrease in rent if the park owner reduces or eliminates services and prohibits certain fees against tenancies not regulated by the MRL. Tenants may refuse to pay rent in excess of the maximum permitted amount and to state as an affirmative defense in a nonpayment eviction action that the unpaid rent is in excess of the MRSR’s limit. Further, other provisions make it unlawful for owners to take retaliatory action against a resident for exercising his or her rights or for any person to fail to comply with an order of the review board. A person from which rent in excess of the maximum limit is collected has a right to bring a civil action against the violator and for damages equal to treble the amount collected. All other violations of the MRSR are misdemeanors. STAFF PROPOSED AMENDMENTS Staff has reviewed and supports an updated MRSR with the following new key features: • Annual registration of spaces plus annual registration fee (50% can be pass-through) • Max annual rent increase to be the greater of (1) 75% of the change in cost of living measured by CPI-W or (ii) 3% of rent charged at time of increase; in no event over 8% • A two-level rent adjustment approval process using a hearing officer instead of a board • New rent controls after a space is vacated or sold • New rent controls when mobilehome is sold or transferred without vacating space (i.e., “in-place” transfer) • Providing state’s mobilehome space rent ceiling (AB 978) apply if lower than MRSR max • Bar rent increase while civil action or abatement proceeding against owner is pending • Prior City approval before owner can pass through 50% of capital improvement costs • Owner to provide potential tenants MRL and notice of their rights when reviewing lease • Owner to provide notice in rental agreement if space is exempt from MRSR • Increased or clarified penalties for MRSR violations • Authority for City to contract with community organizations to inform public of MRSR Discussion: Azusa Mobilehome Rent Stabilization July 18, 2022 Page 6 RECOMMENDATION: It is recommended that the City Council discuss these provisions and provide direction concerning any changes and its enforcement. FISCAL IMPACT There are significant but unknown fiscal impacts. These will depend upon how the ordinance is amended and how the City decides to enforce the rental review components. As noted, a Rent Review Board does not currently exist. Thus, creation and staffing of such a board will have significant fiscal impacts to both create, staff and administer such a Board. Alternatively, come cities use the services of a neutral hearing officer. These costs may be lower than staffing a board. CEQA COMPLIANCE: Not applicable. Prepared by: Reviewed and Approved: Marco A. Martinez Nico De Anda-Scaia City Attorney Deputy City Manager Reviewed and Approved: Sergio Gonzalez City Manager Attachment 1) Mobilehome Rent Stabilization Laws Attachment 1