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HomeMy WebLinkAbout11/10/1992, 1 - PROPOSED AMENDMENTS TO THE MOBILE HOME PARK RENT STABILIZATION ORDINANCE CONCERNING EXEMPTIONS FOR PARKS WITH 66.67% OF SPACES UNDER LEASE AGREEMENTS AND PARKS WITH CONDOMINIUM OWNERSHIP illl�liy�l''III�II„I N I MEETING DATE: _ 1 IWIIII= II' city o� San Luis OBISPO 11-10-92 ITEM NUMBER: J COUNCIL AGENDA REPORT FROM: Jeffrey G. Jorgensen, City Attorne SUBJECT: Proposed Amendments to The Mobile Tiume Park Rent Stabilization Ordinance Concerning Exemptions for Parks with 66. 67% of Spaces Under Lease Agreements and Parks With Condominium Ownership CAO RECOMMENDATION: Receive a Report Regarding Proposed Amendments to the Mobile Home Park Rent Stabilization Ordinance, and Provide Staff with Direction as to any Preferred Amendments. Two Ordinances are Included for Council Consideration. BACKGROUND: At the October 20, 1992 Council meeting, the City Council passed to print Ordinance No. 1226 reinstating vacancy control provisions in the Mobile Home Park Rent Stabilization Ordinance. In addition, the Council continued consideration of proposed amendments to the exemptions for parks with 66. 67% of spaces under lease agreements and parks with condominium ownership to November 10, 1992 for further review. DISCUSSION: 1. Lease Exemption. The City has received two letters dated September 14, and October 16, 1992 from the law firm of Swanson and Ddwdall, on behalf of the owner of Creekside Mobile Home Community, objecting to the deletion of the exemption from mobile home park rent stabilization for parks in which at least 66. 67% of the spaces are governed by a long term lease. (Copies of the September 14 and October 16, 1992 letters are attached for your information. ) The basis of the objection is as follows: "Our client has qualified for this exemption by offering a long-term lease to Creekside residents which include substantial economic concessions by our client. ” (These leases were, in fact, negotiated by our client with the residents. ) Those concessions were made in reliance upon the present 'safe harbor' exemption. Thus, our client's right to have this exemption is vested and any attempt to withdraw - that exemption would constitute an invalid impairment of an established economic/property interest without due process of law. " (Page 2 , paragraph 3 , 9/14/92 . ) I Agenda Report Page Two Palacio de Anza v. Palm Springs Rent Review Commission, 209 Cal.App. 3d 116 (1989) is cited as authority for this position. In Palacio, the California Court of Appeal considered a provision in the Palm Springs Rent Control Ordinance which allowed for the inclusion of certain interest payments as costs allowable for the purpose of calculating "net operating income. " The plaintiff purchased an apartment building in reliance on the provision and subsequently applied for a hardship rent increase based on interest payments made to purchase the apartment building. The rent increase was denied by the Rent Review Commission. Subsequently, the rent control ordinance was amended to eliminate the provision. The court held that the interest provision: 11. . . created land-use property rights which became vested in Palacio when the financing of the apartment purchase was undertaken in reliance on the existing rent control laws. In this sense, Palacio enjoys a situation or status analogous to that of one who has established the right to pursue a nonconforming use on land following a zoning change. (City of Santa Barbara v. Modern Neon Sign Company, 189 Cal.App. 2d 188 (1961) . Any attempt to retroactively apply the repeal of the guidelines debt financing cost allowance to Palacio's vested rights would constitute an invalid impairment of an established economic/property interest without due process of law. " (Id. at p. 120. ) While the facts of the Palacio case are different from those before the Council, the reasoning of the decision may nevertheless be applicable in the event the Council chooses to delete the lease exemption entirely and detrimental reliance can be proven. The Council also received comments at the October 20, 1992 meeting from tenants who expressed concern that those who chose not to enter into a lease could be treated unfairly if they received no protection at all, and even if afforded the same rights as tenants under long term leases, inequities would result if there were multiple leases with different terms in effect within a park. In an attempt to address these concerns while recognizing the economic interests of the park owner, a proposed amendment to the exemption is set forth in the ordinance attached as Exhibit "A" . The exemption for parks in which at least 66. 67% of spaces are governed by a long-term lease would remain, but would only apply to parks which qualified for the exemption prior to October 20, 1992 . The practical effect would be to limit the exemption to Creekside Mobile Home Community -- the only park which has established an exemption to date. All other parks within the City would be subject to the Mobile Home Rent Stabilization Ordinance with respect to spaces not covered by long-term leases. In addition, the exemption would only apply if the exempt spaces were afforded Agenda Report Page Three at least as favorable terms and conditions of tenancy as those initially offered to tenants who entered into long-term leases to first achieve the 66. 67% exemption. This provision should address the concerns expressed where there may be different leases within a park. (For reference, a copy of the June 15, 1988 Creekside lease which was relied upon to obtain the exemption is attached. ) 2. Condominium Ownership. Very little comment was received on the issue of deleting the exemption for condominium ownership, and it does not appear that significant legal issues would be raised by doing so if applied prospectively. However, rather than simply deleting the exemption, it is suggested that the exemption should be amended to make it clear that it would apply only when the dwelling unit and the underlying interest in the space it is located upon are the same ownership. Thus, in the case of a park conversion where• a coach owner chooses not to purchase the condominium interest, the rent stabilization ordinance would apply. Conversely, if a coach owner chose to purchase the condominium interest and subsequently rented the unit, it would not be subject to the rent stabilization ordinance since it would be for all practical purposes equivalent to a conventional condominium, single family residence, or apartment, none of which are regulated. OPTIONS: Option 1: If the Council wishes to amend the lease exemption provision as discussed above, pass to print the attached ordinance (Exhibit "All) . In light of the issues raised in the Palacio case, this is the staff recommended alternative. Option 2 : If the Council wishes to delete the lease and condominium exemption provisions entirely, pass to print the attached ordinance (Exhibit "B") . Option 3: Take no action and leave the exemptions as currently written. Coupled with the Council's concurrent action to reinstate vacancy control, this would maintain the ordinance as originally adopted by the voters in 1988 . Option 4: If the Council has additional concerns or proposed revisions not considered in the report, continue this item with additional direction to staff. FISCAL IMPACT: If the Council decides to delete the lease exemption entirely, it should be recognized that there is a high probability of litigation, and a corresponding commitment of time and money. The /3 Agenda Report Page Four costs of any such litigation are too speculative to predict at this time. Attachments: Ordinance (Exhibit "A") Ordinance (Exhibit "B") Letter dated September 14 , 1992 Letter dated October 16, 1992 Palacio de Anza v. Palm Springs Rent Review Commission Creekside Lease Exhibit A ORDINANCE NO. (1992 Series) An Ordinance of the Council of the City of San Luis Obispo Amending Chapter 5.44 of the San Luis Obispo Municipal Code to Amend Exemptions 5.44.03OF and G Regarding Mobile Home Park Rent Stabilisation. BE -IT ORDAINED by the Council of the City of. San Luis Obispo: SECTION 1. Section 5.44.030 Exemptions, is hereby amended to amend subparagraphs F and G of the San Luis Obispo Municipal Code so that the new Section 5.44.030 shall read as follows: 5.44. 030 Exemptions. The 'provisions of this chapter shall not apply to the following tenancies in mobile home parks: A. Mobile home parks spaces rented for nonresidential uses; B. Mobile home parks managed or operated by the United States Government, the state of California, or the County of San Luis Obispo; C. Tenancies which do not exceed an occupancy of twenty days and which do not contemplate an occupancy of more than twenty days; D. Tenancies for which any federal or state law or regulation'specifically prohibits rent regulation; E. Tenancies covered by leases or contracts which provide for a tenancy of more than a year, but only for the duration of such lease or contract. Upon the expiration of or other termination of any such lease or contract, this chapter shall immediately be applicable to the tenancy. No rent increases other than that allowed under the provisions of the lease shall be allowed during the duration of such a lease or contract. F. Spaces in a mobile home park in which at least 66. 67% of said spaces are governed by a lease with an initial term of more than one year, and where a claim of exemption has been established pursuant to Section 5.44. 040 prior to October 20, 1992 . Provided; however, this exemption shall not apply unless at least as favorable terms and conditions of tenancy shall be irrevocably applied to all tenants of exempt . spaces as were initially offered and accepted by tenants of comparable spaces in order to first qualify for this exemption. EXHIBIT "A" /-s Ordinance No. (1992 Series) Page Two G. Spaces in a mobile home park which sells lots for factory-built or manufactured housing, or which provides condominium ownership of such lots, but only when the dwelling unit and the underlying interest in the space it is located upon are in .the same ownership. SECTION 2. This ordinance, together with the names of council members voting for and against, shall be published once in full, at least three days prior to its final passage, in the Telegram Tribune, a newspaper published and circulated in this City. The ordinance shall go into effect at the expiration of 30 days after its final passage. INTRODUCED AND PASSED TO PRINT by the Council of the City of San Luis Obispo at its meeting held on the day of , 1992, on motion of , seconded by and on the following roll call vote: EYES: NOES: ABSENT: Mayor Ron Dunin ATTEST: .City Clerk, Pam Voges . APPROVED: City dministrative Officer A t me Community De 1 pment Director L-!P LEGISLATIVE DRAFT OF SAN LUIS OBISPO MUNICIPAL CODE SECTION 5.44.030 5.44 .030 Exemptions. The provisions of this chapter shall not apply to the following tenancies in mobile home parks: A. Mobile home parks spaces rented for nonresidential uses; B. Mobile home parks managed. or operated by the United States Government, -the state of California, or the county of San Luis Obispo; C. Tenancies which do not exceed an occupancy of twenty days and which do not contemplate an occupancy of more than twenty days; D. Tenancies for which any federal or state law or regulation specifically prohibits rent regulation; E. Tenancies covered by leases or contracts which provide for a tenancy of more than a year, but only for the duration of such lease or contract. Upon the expiration of or other termination of any such lease or contract, this chapter shall immediately be applicable to the tenancy. No rent increases other than that allowed under the provisions of the lease shall be allowed during the duration of such a lease or contract. F. Spaces in a mobile home park in which at least 66. 67 percent of said spaces are governed by a lease with an initial term of ....................... .... . ............................................................. more athan one x e att auart .. t►n 5 .43 f prier tai Ll tc b. E�.F 1 9�. +a ded f h w ve � e mpg on s: riat agp3y finless at east:: .:. aorble terms anc : ;:a;:::i ; Eed:::71t 7tt :::::: 0.:.. _• C :<: 7GRntS c '<€tea""`` ab �'<s:::.::.was:::=<:•.:.` <:::::.: :::.::::::>>::,.. < .." .;:.::.:':>>`.,:.,:.":><•>;:..":: > �' '> '."' arse ::...................:..:..:.:......:....:..:.:......:....:..:...,n....:......:.::......:.... :........... ..... ......................................... ......... e home parks which self lots for`'factory-built or manufactured housing, or which provide condominium ownership of such lots, ewes if ene er meLce heses in the develepseet are. reated��ed neGomm <; >:: s;>:l.ocat Exhibit B ORDINANCE NO. (1992 Series) An ordinance of the Council of the City of San Luis Obispo Amending Chapter 5.44 of the San Luis Obispo Municipal Code to Delete Exemptions 5.44.030F and G from Mobile Home Park Rent Stabilization. BE IT ORDAINED by the Council of the City of San Luis Obispo: SECTION 1. Section 5.44.030 Exemptions, is hereby amended to delete subparagraphs F and G of the San Luis Obispo Municipal Code so that the new Section 5.44.030 shall read as follows: 5.44.030 Exemptions. The provisions of this chapter shall not apply to the following tenancies in mobile home parks: A. Mobile home parks spaces rented for nonresidential uses; B. Mobile home parks managed or operated by the United States Government, the state of California; or the county of San Luis Obispo; C. Tenancies which do not exceed an occupancy of .twenty days and which do not contemplate an occupancy of more than twenty days; D. Tenancies for which any federal or state law or regulation specifically prohibits rent regulation; E. Tenancies covered by leases or contracts which provide for a tenancy of more than a year, but only for the duration of such lease or contract. Upon the expiration• of or other termination of any such lease or contract, this chapter shall immediately be applicable to the tenancy. No rent increases other than that allowed under the provisions of the lease shall be allowed during the duration of such a lease or contract. SECTION 2. This ordinance, together with the names of council members voting for and against, shall be published once in full, at least three days prior to its final passage, in the Telegram Tribune, a newspaper published and circulated in this City. The ordinance shall go into effect at the expiration of 30 days after its final passage. EXHIBIT "Brr Ordinance No. (1992 Series) Page Two INTRODUCED AND PASSED TO PRINT by the Council of the City of San Luis Obispo at its meeting held on the day of , 1992, on motion of , seconded by and on the following roll call vote: EYES: NOES: ABSENT: Mayor Ron Dunin ATTEST: City Clerk, Pam Voges APPROVED: City Adm' istrative Officer t ey o� Community Deve o ment Di7rgctor �- 9 LEQISLATIVE DRAFT OF SAN LUIS OBISPO MUNICIPAL CODE SECTION 5.44.030 5.44 . 030 Exemptions. The provisions of this chapter shall not apply to the following tenancies in mobile home parks: A. Mobile home parks spaces rented for nonresidential uses; B. Mobile home parks managed or operated by the United States Government, the state of California, or the county of San Luis Obispo; C. Tenancies which do not exceed an occupancy of twenty days and which do not contemplate an occupancy of more than twenty days; D. Tenancies for which any federal or state law or regulation specifically prohibits rent regulation; E. Tenancies covered by leases or contracts which provide for a tenancy of more than a year, but only for the duration of such lease or contract. Upon -the expiration of or other termination of any such lease or contract, this chapter shall immediately be applicable to the tenancy. No rent increases other than that allowed under the provisions of the lease shall be allowed during the duration of such a lease or contract. at least 66. 67 pereent e£ said spaees aLce geverned by a—lease with arm-initial—tem e€ mere G. Mebi l e home narks whieh sell lets lets, eves #€ eee er mere hemes In the develepment are rented-er!eased-eQt. SEP 14 192 16:=0 SWANSON AND DOWDRLL 695 P03 SWANSON AND DOWDALL C. 6RENT sw^A ScN ' T[sRY R. CO•+CALL ATTORNEYS AT LAW OIESCR A..Of[L lCra CC..W.!6J P. O. sox l50A LINDA J. LtSTCR Jim P. mA.IACCII nVTT.ON CENTRE CRIVC MAUR£EN A MATCPLLL LEVINE SUITC 200 •CeERT 0. WILLIAr50N. JR. _ 4ATNRTN L. OwV•.M1A1 CA.ITA A�IAI C.^LIROP.IJIA ��/ 1"17-ry,[f�d YY• fILO •.8. RCBIN O. EIeLER TEL[►nONE 17141 TES-1500 CA.rN [. JCnN§ON rACCIWILE 17141 764-1505 m YLENE ••: D. CNC"+ AO+I•••f T.ATCR -. September 14 , 1992 City Council City of San Luis Obispo 990 Palm Street San Luis Obispo, California 93401 Re: Arguments In Opposition to Proposed Amendments to the Mobilehome Park Rent Stabilization Ordinance Dear Mayor and Members of the City Council: Our firm represents the owner of the Creeks ide Mobilehome Community. The purpose of this letter is to provide basic reasons as to Why the Council should reject the proposed amendments to the City's Mobilehome Park Rent Stabilization Ordinance. Please understand that because the City did not notify our client and the other park owners of the City's consideration of these proposed amendments, it was not possible for me to prepare and transmit this letter earlier. Since the points made in this letter explain the significant risk and expenses which the City will incur if the proposed amendments are adopted, I would hope that each of you would nonetheless find time to give serious consideration to what follows. su m my of REAsoNs 1. Historically the Ordinance has worked without problems and the City cannot point to abuses by park owners: At the meetings this past geek between San Luis Obispo park owners and members of the City Council and the City's staff, it was clear that the present ordinance is operating without problems and the City is unable to point to abuses by park owners. Thus, the proposed amendments are unnecessary. 2. The City faces significant litigation expenses and risks if the proposed amendments are adopted: The City Attorney's report to the Council clearly identifies that there is a high probability the City will be sued if these amendments are adopted. That same report explains that these litigation expenses will be .' very substantial and the City Will run the risk of substantial exposure to damages. SEP 14 992 16:40 SLI4NSON RND DOWDRLL 695 PO4 City Council/City of San Luis Obispo September 14, 1992 Page 2 3 . The elimination of the "Safe Harbor" exemption is illegal: The present ordinance provides, in effect, that if a park owner obtains- the voluntary consent of two-thirds or more of his residents to a long-term lease, the entire park is exempt from the ordinance. Our client has qualified for this exemption by offering a long-term lease to Creekside residents which includes substantial economic aan0000iona by our olLant. (Thcaa lcaocn wcic, in Ia", negorlaLea by cur client with the residents. ) These concessions were made in reliance on the present "safe harbor" exemption. Thus, our client's right to have this exemption is vested and any attempt to withdraw that exemption would constitute an invalid impairment of an established economic/property interest without due process of . law. 4. The procedures the City is utilising to consider adoption of the proposed amendments are unfair: The absence of any notice to park owners of- the City's consideration of these amendments is unques- tionably unfair. DETAILED DISCUSSION OF ISSUES . What follows is a detailed discussion of the four issues outlined above. As will be seen from what follows, your decision to reject the proposed amendments not only makes imminently good common sense; you really have no alternative in today's recessionary environment which is adversely affecting the City's budget. THE ORDINANCE NOW WORKS It is my understanding from my discussions with our client that in the mootinga ho and othor par]c awnato had wl-Lh m=snbwa o of tho Cvuaa,.11 nail the City's staff this past week, no one connected with the City was able to identify any significant problem or reason as to why the present Ordinance was not functioning properly. No abuses by park owners of the present vacancy decontrol provision were identified. Nor were any substantive reasons given to support the amendment which would eliminate the "safe harbor" exemption. The fact that the Ordinance is functioning properly iq further supported by the absence of any information to the contrary in' the report by the City Attorney to the Council. Another key fact to be remembered is .that the Ordinance was negotiated with the City's assistance by the park owners and the residents. LITIGATION EXPENSE AND RISK The City Attorney's report to the Council makes this point far better than I ever could. The City Attorney clearly puts the. Council on notice that the legal issues connected with the proposed amendments are unsettled and will likely not be resolved for several years until a case SEP 14 192 16:41 -'NSON RNID DOWDALL - 6.95 P05 City Council/City of San Luis Obispo September 14, 1992 Page 3 reaches the United States Supreme Court. The City Attorney also warns the City Council of the "high probability of litigation" if. these amendments are adopted. That same report points out that litigation of this type is extraordinarily - expensive; in my experience and in the experience of other attorneys representing park owners throughout California, the City will spend several hundreds of thousands of dollars litigating the "taking" and other issues which will result from adoption of the amendments. A current audit of rent control administrative and litigation expenses in the City of Escondido discloses that, to date, that city has spent more than $1 million on mobilehome park rent control. The City's Attorney's report makes yet another important point. Specifically, other cities and counties throughout California have and are making the decision not to adopt similar amendments because of the expense and risk connected with the inevitable litigation. What they are doing is making a smart business decision to sit back and wait until these issues are decided in the Courts. ELIMINATION OF TEE SAFE HARBOR EXEMPTION IS ILLEGAL Several years ago, our client offered long-term leases to all residents. That offer was deliberately designed to take advantage of the Ordinance's "safe harbor" provisions. This lease was extensively negotiated with our client's residents. Our client structured the lease to include a number of significant economic concessions so that a suffi- cient number of residents would be induced to sign the lease and Creek- side would fall within the safe harbor provisions. One major concession in the lease was to limit "vacancy decontrol" rent increases much more than allowed by the Ordinance. Over 70% of the homesites in Creekside accepted the lease, thereby qualifying all of the homesites in Creekside for the safe harbor exemption. The illegality of eliminating the safe harbor provisions is best des+onstrated by a recent case involving an apartment purchase which was $object to the City of Palm Springs rent control ordinance. That case is known as Palacio de Anza v Palm 'Springs Rent Review Commission ( 1989) 209 Ca1.App.3d 116, 120. In the Palacio- de Anza decision, the California Court of Appeal dealt with a situation where an apartment was purchased at a time when the Palm Springs rent control ordinance provided for rent adjustments based on certain operating expense increases. That rent control ordinance was later amended to eliminate those provisions. The Court of Appeal held the apartment owner's rights to rent adjustments under the repealed provisions were "vested. " Therefore, the apartment owner was still entitled to receive those rent adjustments as to do otherwise would constitute. an invalid impairment of an established economic/property interest without due process of law. SE? 14 192 16:42 Sl 'SON AND DOWDALL 695 FOG City Council/City of San Luis Obispo September 14 , 1992 Page 4 Substantively, the a1aci_ Ae Anza facts are identical to those of our client. In alacio de An a, a decision to purchase an apartment was glade based upon the allowability.of certain operating expenses under the Palm Springs rent control rent nadjustment limitations ance. our client made a in his similardecision by locking himself into our client depended on the safe harbor lease. In making that decision, adjustmentsent _ 6e arae elimintionof hem the provisions allowing him to obtain thesafe residents who did not sign the harbor provisions has P acio de Aeffect on our client as they di on the apartment owner in of rent er Further` in ch azeient's lease are a essentially the same asmallowed by the aordinance provisions whichto uately and are necessary to provide for Thus, el minatiincofethe safeharbor maintain and operate Creekside. , the value of the homes provisions will have the effect of depreciating of all Creekside residents and 'making Creekside a much less desirable place to livefac than their neighborso that 7o% of the residents will pay more rent creates unacceptable conflicts. TEt CITY'S PROCEDURES ARE UNFAIR Failing to disclose the City's consideration oflsamendaentse . t in e Ordinance to the park owners cannot logically be concerned the City knew the park owne s wouoreb non-disclosure is unjustif ed=.y amendment to the Ordinance; CONCLUSION Your City is one of the few in California which has enacted mobilehome. park rent control and substantially escaped the trauma, expense and risks many, many .other cities and counties ou=v ordinancenwas . There is negotiated really quite a simple reason for this . :between the park owners and residents and attempts to take somewhat of a ad31e ground. Adoption of these amendments will dramatically change V,o �roaoat aituAt.inn_ This is true because, as shown above, the expenditures and risks connected . with these amendments cannot ye justified under any conceivable set of d trimentally i pacted in. The fact is that mobilehome residents are not being significant way by the Ordinance as it now operates . Thank you very much for your kind* attention and consideration of the points made in this letter. Please understand that if our client or SEP 14 '012 16:43 _..ANSON AND DOWDRLL 695 P67 City Council/City of San Luis Obispo September 14 , 1992 Page 5 may be of further assistanIrm ncil or the City's staff , we would be more than pleased . ou s, CBS:sj: 009LT55 City Attorney cc: Jeffrey G. Jorgensen, Ed Evans David Evans - WFA OCT 16 '92 12:26 SWANSON AND DOWDALL 993 P02 . C. BRENT SWANSON SWANSON AND DOWDALL MAN DIEGO TCRRT R. OOWDALL ATTORNEYS AT LAW .ae CAMINO DCL RIO MOUTH T r10MA9 r, GIEMCR A MIOFESOICHAL CORFCAATIO" 6LIITC IOI P. O. BOX COCA MAN DIEGO, CAL1►ORNIA 22106 LIN OA J. LCMTCI7 TELCPHONC (610) 600.0100 JIM O. MAMACCR 4 MUTTON CCNTRE DRIVE FACSIMILE 1019) 45GO-6105 MAURCCN A. NATCI.CLL LCVINC ROBERT O. WILLIAMSON. JR. BUITC COO KATNRVN L. ORUNNCR SANTA ANA, CALIFORNIA 92707-0504 REPLY TO DAWN C. JONNSON • TCLC►NONC (7101755-3500 FACSIMILC )7141 768-3808 OUR FILC NO. October 16, 1992 VIA FACSIMILE AND U.S. MAIL City Council City of San Luis Obispo 990 Palm Street San Luis Obispo, CA 93401 Re: Additional Arguments In Opposition To Proposed Amendments to "Safe Harbor" Exemption ,Dear Mayor and Members of the City Council: This letter provides additional information on behalf of our client, the owner of the Creekside Mobilehcme Community ( "Creekside" ) , as to why the elimination or substantive revision of the "safe harbor" provisions of the City'a Mobile U-ZEne nark RcajL 0La1j1114= !vla 0a.L111aaaaL:o ( "Oa.L1111a111:e" ) would not only be unlawful, but also unreasonable. This information is intended to supplement the points made in my earlier letter to you of September 4 , 1992. As other representatives of the City's park owners will address other issues relating to the proposed amendments to the Ordinance, I will not duplicate those comments here. Please understand, however, that our client concurs in and supports the positions taken by these other park owner representatives. SUMMARY OF REASONS WHY THE ELIMINATION OR SUBSTANTIVE REVISION OF THE SAFE HARBOR PROVISIONS WOULD BE ILLEGAL AND UNREASONABLE In my earlier letter, you were advised that our client had qualified for the safe harbor exemption by offering a long-term lease to Creekside residents which included substantial economic concessions by our client. These leases were negotiated by our client•.with the residents and the concessions were made in reliance on . the safe harbor exemption. Further, our client has expended approximately $200, 000 and made other economic commitments in reliance on the safe harbor provisions. Thus, an elimination or substantive revision of those provisions would be unlawful for the reasons cited below and in my letter of September 14, 1992. OCT 16 '92 12:27 SWANSON AND DOWDALL 993 P03 City Council City of San Luis Obispo October 16, 1992 Page 2 My earlier letter also drew your attention to several practical reasons why the elimination or substantive revision of the safe harbor provisions would be unreasonable. One such reason would be that there would be insufficient income to adequately maintain and operate Creekside. Thus, the value of the residents, homes would depreciate and Creekside would become a much less desirable place to live. Further, such action would result in seventy percent of the residents paying more rent than their neighbors; an obvious unacceptable conflict. Other practical reasons supporting those submitted earlier are discussed below. THE NEGOTIATED LEASE PROVISIONS ARE BETTER THAN THOSE FOUND IN THE ORDINANCE As will be shown from what follows, our client made a number of economic concessions in the lease the residents signed which provide more protection to the residents than that provided by the Ordinance. For example, the term of the lease is for ten years; therefore, it will continue to apply even though the Ordinance may be changed or eliminated. A good example of the protection afforded in this respect is' the fact that the rent increase to a buyer of a mobilehome owned by a resident who had signed the lease is limited. Thus, during that period when the Ordinance allowed unlimited vacancy decontrol, residents signing the .lease benefited substantially. The Consumer Price Index portion of the rent adjustment formula in the lease is also more advantageous to the residents than the one found in the Ordinance. For example, the lease contains a provision which limits the CPI rent adjustment to the most recent increase in the Cost of Living Adjustment ( ^COLA" ) for Social Security benefits. In addition to the above, the lease provides that the rent of a buyer of a mobilehome can only be increased once during the initial 10-year term of the lease. At the time the lease was offered, the Ordinance provided for a 10% increase every three years in these situations. If amended as now proposed, this same limitation .will be reactivated in the Ordinance. The Ordinance also provides for rent increases based on a whole variety of operating expense increases. The lease limits such rent increases much more severely than the Ordinance. For example, no rent increase may occur unless the increase in operating expenses. for property taxes and government services and improvements (a very broad term including such things as utilities and other governmentally-driven operating expenses) increases by more than the increase in the CPI. This means that if the CPI increases in any one year by, for example, 5$, and these operating expenses increase by 5% or less, no rent adjustment is made for the increased operating expenses. If the increase exceeds the CPI, /- /% OCT 16 '92 12:28 SWANSON AND DOWDALL 998 PO4 City Council City of San Luis Obispo October 16, 1992 Page 3 only the increase above the current year's percentage increase in the CPI may be added to the rent. " Another example of the lease severely limiting operating expense rent adjustments is the limitations found on capital improvement expenses. Firct, any i•mri.tal imrrovarnant seat ovor ;10, 000 hme be bo opprovod by a majority vote of the residents before it finds its way into a rent increase. Also excluded from capital improvement costs were such things as the rehabilitation and preservation of streets and driveways which occurred within two years of the original date of the lease, the redecorating of the clubhouse, repair of the jacuzzi roof, and the rebuilding of the carwash. Again, had our client operated under the Ordinance, all of the above items could have been included in the residents ' rent. The lease also excludes from rent increases virtually all of the other operating expense increases our client will normally experience. The Ordinance, however, allows these other operating expenses to be used for rent increase purposes. Our client's lease also gives the residents the right of first refusal to purchase Creekside. This right is not provided for at all by the Ordinance. Indeed, under the Gregory v. City of San Juan Capistrano decision by the Fourth District Court of Appeal, it would be an unconstitutional taking of our client's property for the Ordinance to attempt to give such rights to the residents. Because our client made these substantial lease concessions in order to qualify for the safe harbor exemption, our clients' right to have those provisions remain as they are have vested. There is no substantive legal difference between the reliance of our client on the safe harbor provisions of the Ordinance than there was in the Palacio de An2a case, where the purchaser of an apartment house relied on certain provisions found in the Palm Springs rent control ordinance at the time the apartment house was purchased. Further, there is no valid regulatory purpose for the proposed amendments to the safe harbor provisions. Therefore, this too is another reason why said amendments are unlawful . OUR CLIENT HAS SPENT SUBSTANTIAL MONIES AND COMMITTED HIMSELF TO ECONOMIC PLANS FOR CREERSIDE IN RELIANCE ON THE SAFE HARBOR PROVISIONS From a legal standpoint, a person can acquire the right to prevent government from changing the provisions of an ordinance because they have acted in some substantive way in reliance on existing provisions in OCT 16 '92 12:28 SWANSON AND DOWDALL 990 P05 City Council City of San Luis Obispo October 16, 1992 Page 4 the ordinance. This "vesting" of rights results not only from reliance such as shown above but also from making certain economic commitments' which cannot now be changed. This too is another reason why the safe harbor provisions may not be eliminated or substantively changed with respect to our client. In our client's lease he made a commitment to perform a number of major items of maintenance and repair in Creekside. Part of that commitment was that he would not seek reimbursement of those normal operating expenses from the residents: This was done even though our client could have recovered those operating expenses under the terms of the Ordinance if the lease had not been entered into with the residents. In addition to the substantial maintenance and repair items our client committed to in the lease, he also, in fact, made a number of other improvements to Creekside. In total, the money spent on these efforts approximates $200,000. In making these economic commitments, our client depended on the safe harbor provisions of the Ordinance continuing to operate in the future. This because if .these provisions of the Ordinance were changed so residents not signing the lease received a lower rental rate than those who did sign, there would be insufficient money to justify these very substantial expenditures. In effect, our client's recovery of this approximately $200,000 will only occur over a long period of time and only if rents for non-leased spaces continue as presently provided by the Ordinance. In addition to the actual commitment of the approximately $200,000, our .client budgeted for the future operation of Creekside to include the same rent for all of the spaces in Creekside as permitted by the safe harbor provisions. This commitment means our client's hands are tied as to the future operation of Creekside. Thus, if the income from the non- leased spaces diminishes because of a change in the safe harbor provisions, our client will be injured. THERE ARE A NUMBER OF PRACTICAL REASONS WHY IT WOULD BE UNFAIR AND UNREASONABLE TO MODIFY THE SAFE HARBOR PROVISIONS Creekside residents have benefited from our client's lease for a number of reasons. One is that Creekside remains by far the nicest of all of the major mobilehome communities in the City, while at the same time its rents are clearly among the most reasonable. Data submitted on Creekside to the Council indicates that resales of residents' mobilehomes have remained very high over the past number of years and the value of those mobilehomes has approximately doubled. Thus, as this 1- �Q OCT 16 '92 12:29 SWANSON AND DOWDALL 990 P06 City Council City of San Luis Obispo October 16, 1992 Page 5 experience has continued since 1988 when the lease was signed by Creekside residents, it cannot be said that our client's actions have had a detrimental effect. Indeed, it should be obvious from the earlier description of the severely limited rent increases provided for by the lease that residents will continue to benefit in the future with a corresponding benefit in the value and increased salability of their mobilehomes. Eliminating or making a substantive change to the safe harbor provisions will have the practical effects of reduced maintenance, reduced mobilehome values and pitting one resident against another; all of which have been noted earlier. The practical detrimental effects of these results are obvious. SUMMARY I am aware from discussions with your City Attorney and others that there is a belief our client has not complied with the safe harbor provisions. This results because in approximately half a dozen cases our client asks new residents who were purchasing mobilehomes from residents who had not signed the lease to sign a different lease which provided for slightly different rent terms. Respectfully, it is my opinion that the Ordinance does not preclude that differential in treatment, particularly as I understand all or substantially all of these instances occurred when there was unlimited vacancy decontrol. I have also known our client and been his attorney for the better part of 12 years. I can assure you based on that knowledge that it was not our client's intention to behave inconsistent with the Ordinance. Despite these factors, if it is the Council's intention that all purchasers of mobilehomes in Creekside be treated the same, I do concur that a clarification of the Ordinance is appropriate. I can also assure you that our client will not object to such a clarification. I would submit, however, that a clarification of this nature needs additional discussion and should not be dealt with at the upcoming Council meeting where the other proposed revisions to the Ordinance are to be considered. In part this is because our client is the only park owner in the City who presently qualifies for the safe harbor exemption. Therefore, as our client is presently out of the state and will not return until after October 20, 1992 , it is appropriate to wait until he can participate in these discussions and provide all the information the Council needs to reach a decision. l —i OCT 16 '92 12:30 SWANSON AND DOWDALL 998 P07 City Council City of San Luis Obispo October 16, 1992 Page 6 Thank you very much for your kind attention and consideration of the foregoing. Please understand that because of my various trial commitments, I was unable to provide tko formation for the Council's consideration any earlier. trs, C. RE For the rm CBS:llt:001LT6 cc: Jeffrey G. Jorgensen, City Attorney Client Dennis Law, Esq. David Evans, WMA �-a - DE ANZA v. PALM SPRINGS RENT REVIEW COM'N 121 r 209 CalApp3d 117 Cite as 257 CaLRptr. 121 (CalApp.4 DIAL 1989) of the condition- "And what you're going to need to find by i,div;dual defers- a preponderance of the evidence, that the 209 Ca1.App.3d 116 3yout first mak- defendants need to prove before that im- _W6PALACIO DE ANZA, etc., et ai., ascertain the 4: munity applies, is the following: Plaintiffs and Appellants, bnrdzn on this r _ V. instruction left the fifth element, if these gentle to resolve _ men acted with malice, [the] privilege PALM SPRINGS RENT REVIEW tithe concept of doesn't apply. So even if you should find COMMISSION, Defendant and Subdivision (b) all of the other elements are there, if you Respondent, the statute determine that they acted with malice, it TENANTS AT PALACIO DE ANZA �6Qly has no doesn't matter. The law is not going to APARTMENTS, Real Parties In Id� question allow these entlemen to walk away after° - B Interest and Respondents. ed immuni- they have done something wrong, when �rtion of the their conduct has been deemed to be in the No. E004109. the jury that conscious disregardof Jeanne Gannon's roving the Court of Appeal, Fourth District,: P rights, and they willfully and deliberately Division 2. the second failed to avoid those bad consequences to fk defendantsher." (Emphasis added.) In his rebuttal March 3, 1989. their conduct argument plaintiffs counsel added, "It is Certified for Partial Publication.': . their burden of establishing that each . Landlord brought action for adminis- concluded and every one of the elements that 1 dis- trative mandamus to compel city rent re- prove the cussed before is present before a privilege view commission to reconsider and grant eats which - or a qualified immunity applies, and its request for hardship rent increase. The efit of the let's not be confused about that." (Em- Superior Court of Riverside County, Frank s earlier phasis added.) Contrary to the assertions l3Moore, J., denied the writ and landlord .7, subdi- by plaintiffs counsel, we are convinced his appealed. The Court of Appeal, Campbell, defen- argument created prejudicial confusion in they were the minds of the jurors. The instruction PJ., held that repeal of rent control guide- were of - erroneously injected the question of Degli- line prior to final trial court judgment did that all = = Bence into the equation and suggested the, not moot landlord's action. burden to defendants had the burden to negate mal- Reversed with directions. effort to ice and the other factors which would pre- to - whichclude application of section 43.7, subdivi- Mandamus X16(1) ed]in rea- _ sion (b). The closing argument of plain- Repeal of guideline for hardship rent Taken by tiffs counsel only compounded the error. increase concerning purchase-money fir known." The judgment is reversed,and the matter . Dancing interest payments prior to entry of oa the is remanded to the trial court for further judgment in landlord's action for writ of .m telling - proceedings, consistent with the views ex- administrative mandamus to compel city en of pressed in this opinion. Because the de- rent review commission to reconsider land- 0 V. fense substantially contributed to the er- lord's request for hardship rent increase supra' rors we have identified, the parties shall did not moot landlord's action, but rather .3d bear their own costs. guideline created land-use property rights 4pp.3d which became vested in landlord when & _ SCOVILLE, P.J., and SONENSHINE, Dancing of apartment purchase was under- erbat. J., concur. taken in reliance on existing rent control tiffs laws. West's Ann.Cal.C.C.P. § 1094.5. ' 67.7 at w had to O Sll1 NYMB111TSTEM T dozen _U11Allen 0. Perrier, Palm Springs, for this plaintiffs and appellants. ,and ued, _ 'parts II, III and N are not published; they do rained in rule 976(b),California Rules of Court. not meet the standards for publication con. mbd. 2-) = = . ,s 122 . 257 CALIFORNIA REPORTER 209 Cal.App.3d 117 =, No appearance for defendant and respon- forestall a constitutional challenge to the dent. initiative rent-control ordinance. Ordi. Joan Baumgarten, Palm Springs, for real nance No. 1117 supplemented the Initiative parties in interest. Ordinance by creating a Rent Review Com- mission and providing for hardship increas- y' OPINION es in rents over and above those allowed by CAMPBELL, Presiding Justice. the Initiative Ordinance in certain limited This case involves a dispute between the circumstances. landlords of a Palm Springs apartment On November 18, 1983, the Commission complex ("Palacio") and the Palm Springs conveyed a written recommendation to the Rent Review Commission ("Commission") City Council that the City Council adopt concerning the proper application of Palm "Guidelines For Hardship Rent Increases". Springs' initiative rent-control provisions to ("Guidelines'l. The Guidelines set forth a the rents to be charged at sthat apart- very specific format and procedure for ment complex. The real parties in interest evaluating landlord applications for hard- 71 are the tenants of the apartment complex ship rent increases. In accordance with the ("Tenants"). Commission's recommendation, the City Palacio appeals from a judgment of the Council adopted the Guidelines by resolu- trial court denying Palacio's petition for a tion on December 7, 1983. writ of mandate to compel the Commission On January 18, 1984, the Palm Springs to grant Palacio a hardship rent increase. City Council adopted Ordinance No. 1213. This ordinance was intended to simply re- FACTS state and codify (as part of the municipal Oa Apnl 8, 1980, the citizens of the city code) the provisions of the prior rent-con- of Palm Springs adopted an initiative rent- trol ordinances, not to supersede or repeal control ordinance. In general terms, this any of those provisions. Initiative Ordinance: (1) limited rent in- creases to rates of no more than three- - May 31, 1985, having inquired into fourths of the percentage increase in the andd directly relied upon the re provisions then in effect in Palm Springs, Consumer Price Index ("CPI") over any Palacio purchased the rental complex at Period of time in question; (2) prohibited rent increases from being imposed more issue in this case. On April 29, 1986, Pala- frequently than once a year, (3) did not cio petitioned the Commission for a hard- contain a "hardship increase" provision for ship rent increase. This petition was op- landlords other than a provision which de- posed by Tenants. The Commission con. clared the ordinance to be non-applicable to ducted an extensive evidentiary hearing as those rental properties as to which the ini- to whether Palacio qualified for a hardship tiative ordinance would operate in a "con- rent increase under the provisions of the fiscatory" manner, and (4) required that a Guidelines and the several ordinances. On determination as to. whether such a confis. June 13, 1986, the Commission denied Pala- catory impact had occurred in any one par- cio's petition. Central to the Commission's ticular case be made by the courts. The decision was the Commission's determina- Initiative Ordinance also permitted the City tion that the provisions of the Guidelines Council of Palm Springs to "supplement". relied upon by Palacio were invalid as be- the Initiative Ordinance "so Long as Palm ing inconsistent with the Initiative Ordi- Springs in no way diminishes any protec- nance. tion which this ordinance affords to ten- On July 30, 1986, Palacio petitioned the ants" (Initiative Ordinance, § 10.) trial court for a writ of administrative man- On October 1, 1980, the Palm Springs damus (Code Civ.Proc., § 1094.5) to compel City Council adopted Ordinance No. 1117. the Commission to reconsider and grant This ordinance apparently was adopted to Palacio's. request for a hardship rent in- - I DE ANZA v. PALM SPRINGS RENT REVIEW COM'N 123 209 CalApp.3d 121 Cite as 257 Cal.Rpir. 121 (CalApp.4 Dim 1989) crease. Following extensive. briefing and DISCUSSION argument, the trial court denied Palacio's I petition for a writ of mandate on Novem- ber 24, 1986. The trial court held that the MOOTNESS Commission had not the power to declare Tenants contend that the City Council's the Guidelines invalid, but that the Com- adoption of Resolution No. 16072 prior to mission had been free to disregard the the entry of judgment in this case, repeal- Guidelines inasmuch as they (the Guide- ing the Guideline provision upon which Pa- lines)were not mandatory in nature. Judg- lacio relied most heavily in petitioning for a ` ment was entered pursuant to the trial hardship rent increase, has mooted this en- l court's ruling on December 16, 1986. tire case. In support of their position,Ten- ants cite the general proposition that a Just one day prior to the entry of judg- right of action which has been created sole- ment in this case, on December 15, 1986, ly by statute is destroyed by the repeal of i the Palm Springs City Council had adopted that statute (absent.a savings clause) prior Resolution Aro. 16072. Resolution No. to the right's being reduced to final judg- j 16072 repealed that portion of the Guide- ment (See, e.g., Graczyk v. Work. Comp. lines which had served as the primary basis App. Ed. (1986) 184 Cal.App.3d 997, 229 of Palacio's request for a hardship rent Cal•Rptr. 494.) However accurate that increase—the inclusion of purchase-money general proposition might be as a state. financing interest payments in costs allow- ment of California law, it has no application able for the purpose of calculating."net to the case,at hand. operating income" ("NOI").1 The Guidelines and rent-control ordi- nances did not create a statutory "right of Palacio thereafter moved the trial court action" in Palacio. Rather, those enact- for an order granting a new trial. The trial ments created land-use property rights court denied Palacio's motion and Palacio , which became vested in Palacio when the {t thereupon filed the instant appeal. • financing of the apartment purchase was {{ On appeal, Palacio makes the following undertaken in reliance on the existing rent- 1 principal contentions: (1) The Commission control laws. In this sense, Palacio enjoys was bound to follow the Guidelines; (2)The a situation or status analogous to that of Commission's decision was not supported one who has established the right to pursue a nonconforming use on land following a by substantial evidence; and (3) the Com- zoning change. (City of Santa Barbara v. _ mission's decision improperly denied Pala- Modern Neon Sign Co. (1961) 189 Cal. ") cio a just and reasonable return on its App.2d 188, 11 Cal.Rptr. 57.) Any attempt property. In response, the Tenants argue to retroactively apply the repeal of the that the entire case was mooted by 1yzothe Guidelines'debt financing cost allowance to i City Council's adoption of resolution No. Palacio's vested rights would constitute an }t 16072 and that the Commission did in fact invalid impairment of an established eco- �!. have the authority to declare the Guide- nomic/property interest without due pro- lines invalid. cess of law. As set forth in greater detail below, we Notwithstanding the adoption of Resolu- agree with the substance of Palacio's con- tion No. 16072, Palacio continues to enjoy ;l tentions. However, because of the poten- the benefit of the Guidelines' debt fmanc- ing cost allowance provisions which were in f.l tia]1y dispositive character of the issue, we effect.when Palacio assumed its purchase first address the issue of mootness. debUalobligation. It now remains to.ana- Additional facts will be referred to, as lyze the Commission's application of those needed, in the discussion which follows: provisions in this case. j:� } 1. An"adequate"NOT is central to Palm Springs for the purpose of calculating NOT, the smaller ..i concern that landlords be able to receive a fair the NOI itself will be—thus making it more 1 return on their rental holdings. The greater the likely that a hardship rent increase would be number, amount and types of costs "allowed" allowed. .I i-syr 124 257 CALIFORNIA REPORTER 209 Cal.App3d 121 MITI p9 CaI.APp- II-IV" events conducted for charitable purposes & e Corpor and for various .types of organizations: have appeal V Movie theater owner/operator/managers the City 0 DISPOSITION brought action for declaratory and injunc. Cr..:tcher, Ci tive relief regarding constitutionality of the lively defen The judgment is reversed. The trial tax. The Superior Court, San Bernardino ;Ovr:,rg a tr courtis directed to.conduct further pro-. County, William Pitt Hyde; J., entered ac6on for di ceedings in this matter consistent with this judgment in favor of city and its director of related to th opinion. In particular, the trial.court is finance, and theater plaintiffs appealed. ad nissions t directed to issue a writ of mandate compel- The Court of Appeal, McDaniel, J., held ling the Commission to reconsider Palacio's that tax, whose burden fell disproportion• application for a rent increase with a di- ately upon businesses engaged in protected In October rection to apply the Guidelines strictly to speech—two theaters and two adult book passed Ordin the facts adduced in support of that appli= stores with viewing booths—was unconsti- article 5 to cation' Appellants shall have their costs tutional as applied to theater plaintiffs. tfontclair Mt on appeal. Reversed with directions. krticle 5, k Law of the f McDANIEL and HOLLENHORST, Constitutional Law X90.4(4), 228.5 ti JJ.; concur. six percent Theaters and Shows X3.20 sion ticket for City ordinance imposing tax on admis• any event he o ernMunot�srsreM sion tickets was unconstitutional as applied Events are r to theaters, where the burden of the tax in theatrical per reality fell disproportionately upon busi- ances, operas, nesses engaged in protected speech—two of art or hanc theaters and two adult book stores with speeches, fair viewing booths, notwithstanding the broad-. eries, or any 209 CalApp.3d 2a5 ly worded applicability of the tax. U.1 which an adn _asUNITED ARTISTS COMMUNICA- C.A. Const.Amends. 1, 14. privilege of v TIONS, INC., et al., Plaintiffs . t;oa 3-5.503(2; and Appellants, -McHose &Charles and Barry J. Events cond V. London and Michelle M. Marchant, San itable purpose CITY OF MONTCLAIR, et al., Francisco, for plaintiffs and appellants. the benefit of Defendants and Respondents. Demchuk, Krueger & Robbins and Den- gious, charita nis A. Krueger, Chino, for defendants and military, state No. E005085, respondents. nirations or as Court of Appeal, Fourth District, James K. Hahn, City Atty., City.of Los long as no pro Division 2. Angeles, Pedro B. Echeverria, Sr. Asst. any individual. City A Richard A. Dawson, Asst. Ci The Purpose March 10, 1989. Atty., � ':as declared Atty., and Michael L. Klekner, Deputy City As Modified March 31, 1989. Atty., as amici curiae on behalf of defen= assist in cove Review Denied May 23, 1989. . . dants and respondents. municipal sen• Certiorari Denied Oct 16, 1989. covered under See 110 S.Ct. 280. OPINION The plaintiff: McDANIEL, Associate Justice. as managing ar City passed ordinance imposing tax on United Artists Communications, Inc.,Vis located in Cita. emas, other bt admission tickets, but.excepting from tax to Theaters, Inc., and General Cinema The Bally subject **See footnote •, ante ante of certain management fees and an as� Holiday Skatin 3. In light of our requirement that the Commis- sumed annual increase of 10 percent in overall Gr'8nd Prix R. sion reconsider Palacio's application, we have operating costs. These are issues which the taurants which declined to address the "allowable expense" is- Commission should be allowed to consider in sues raised by Palacio with respect to the allow- light of the directions we give in this opinion. I• Or the integr: T:"_ DE ANZA v. PALM SPRINGS RENT REVIEW COM'N 121 ♦Dot 1989) 209 Ca1.App.3d 117 Clte u?s7 Cal.Rptr. ISl (CalApp."And what ou're oin to need to find by yv. condition- Y g Bdefen- a preponderance of the evidence, that the209 Ca1App.3d 116 P f �16PALACIO DE A�tiZA, ete., et t►i., gyout fast mak- defendantsneed to rove be ore that im- r,ai❑ themunity applies, is the following. Plaintiffs and Appellants, „-n on tris ..... v. t ., the fifth element, if these gentle [the] privilege PALhi SPRINGS REA'T REVIEW to resolve - men acted with malice, COMMISSION, Defendant and � �e concept of doesn't apply. So even if you should find Respondent, !71 1!4 (b) all.of the other elements are there, if you 701 "z statute determine that they acted with malice, it TENANTS AT PALACIO DE ANZA Fly has no doesn't matter. The law is not going to APARTMENTS, Real Parties in 'old question allow these gentlemen to walk away after Interest and Respondents. . :ed immuni- = they have done something wrong, when on of the their conduct has been deemed to be in the No. E004109. t;e jury that conscious disregard of Jeanne Gannon's Court of Appeal, Fourth District,- - proving the rights, and they willfully and deliberately' Division 2. Lie second failed to avoid those bad consequences to �e defendants March 3, 1989. her. (Emphasis added.) In his rebuttal t:Z conduct argument plaintiff's counsel added, "It is Certified for Partial Publication.': their burden of establishing that each . Landlord brought action for adminis- n concluded and every one of the elements that I dis- trative mandamus to compel city rent re- prove the cussed before is present before a privilege view commission to reconsider and grant as which or a qualified immunity applies, and its request for hardship rent increase. The eft of the let's not be confused about that." (Ern- Superior Court of Riverside County, Funk s earlierphasis added.) Contrary to the assertions Moore, J., denied the writ and landlord 43.7, subdi- by plaintiffs counsel, we are convinced his appealed The Court of Appeal, Campbell, defen- argument created prejudicial confusion in PJ., held that repeal of rent control guide- they were 7 the minds of the jurors. The instruction line prior to final trial court judgment did fancdons of r erroneously injected the question of negli- not moot landlord's action. iod that all = = genre into the equation and suggested the. rec Reversed with directions. burden to defendants had the burden to negate mal- _ ale effort to ice and the other factors which would pre- to which elude application of section 43.7, subdivi- Mandamus 4=16(1) ed]in rea- - sion (b). The closing argument of plain Repeal of guideline for hardship rent ;taken by tiffs counsel only compounded the error. increase concerning purchase money fi- lulown•11 - The judgment is reversed, and the.matter nancing interest payments prior o entry of on the is remanded to the trial court for further judgment in landlord's action for writ of �a telling proceedings, consistent with the views ex- administrative mandamus to compel city beden of = pressed in this opinion. Because the de rent review commission to reconsider land- 0 V. fense substantially contributed to the er- lord's request for hardship rent increase nPra, rocs we have identified, the parties shall did not moot landlord's action, but rather 535; bear their own costs. guideline created land-use property rights pp-3d which became rested in landlord when fi- SCOVILLE, PJ., and SONENSHINE, nancing of apartment purchase was under cerbat. J., concur. taken in reliance on existing rent control rtiif's laws: West's Ann.Cal.C.C.P. 43.7 at p SctreuMeusnttM had tor 3 dozen �r;Alien 0. Perrier, Palm Springs, for �2d this plaintiffs and appellants. and `iiued, _ California Rules of Court. 'Parts II, III and IV are not published; they do tained in rule 976(b), not meet the standards for publication con- _ 122 257 CALIFORNIA REPORTER 209 Czl.App.3d 117 .X No appearance for defendant and respon- forestall a constitutional challenge to the dent _ initiative rent-control ordinance. Ordi- Joan Baumgarten, Palm Springs, for real nance No. 1117 supplemented the Initiative partes in interest Ordinance by creating a Rent Review Com- ~` mission and providing for hardship increas- t OPINION es in rents over and above those allowed by CAMPBELL, Presiding Justice. . the Initiative Ordinance in certain limited This case involves a dispute between the circumstances. y landlords of a Palm Springs apartment On November 18, 1988, the Commission complex ("Palacio") and the Palm Springs conveyed a written recommendation to the Rent Review Commission ("Commission") City Council that the City.Council adopt concerning the proper application of Palm "Guidelines For Hardship Rent Increases" — Springs' initiative rent-control-provisions to ("Guidelines"). The Guidelines set forth a the rents to be charged at that apart- Very specific format and B J�F p procedure for a meat complex. The real parties in interest evaluating landlord applications for hard- are the tenants of the apartment complex ship rent increases. In accordance with the ("Tenants"). Commission's recommendation, the City Palacio appeals from a judgment of the Council adopted the Guidelines by resolu- trial court denying Palacio's petition for a tion on December 7, 1983. writ of mandate to compel the Commission On January 18, 1984, the Palm Springs to grant Palacio a hardship rent increase. City Council adopted Ordinance No. 1213. FACTS This ordinance was intended to simply re- � state and codifypart of the municipal s. (as • Ori April 8, 1980, the citizens of the city code) the provisions of the prior rent-con- of Palm Springs adopted an initiative rent- trol ordinances, not to supersede or repeal control ordinance. In general terms, this any of those provisions. Initiative Ordinance: (1) limited rent in- creases to rates of no more than three- ,,U190n May 31, 1985, having inquired into fourths of the percentage increase in the and directly relied upon the rent control Consumer Price Index ("CPI") over any provisions then in roviso purchased effect the rental complex crin algt Period of time in question; (2) prohibited rent increases from being imposed more issue in this case. On April 29, 1986, Pala- frequently than once a year; (3) did not cio petitioned the Commission for a hard- contain a "hardship increase" provision for ship rent increase. This petition was og landlords other than a provision which.de. Posed by Tenants. The Commission con- - clared the ordinance to be non-applicable to ducted an extensive evidentiary hearing as those rental properties as to which the ini. to Whether Palacio qualified for a hardship tiative ordinance would operate in a "con- rent increase under the provisions of the fiscatory" manner, and (4) required that a Guidelines and the several ordinances. On determination as to whether such a confis- June 13, 1986, the Commission denied Pala- tory impact had occurred in any one par cio's petition. Central to the Commission's ticular case be made by the courts. The decision was the Commission's determina- Initiative Ordinance also permitted the City tion that the provisions of the Guidelines Council of Palm Springs to "supplement" relied upon by Palacio were invalid as be- the Initiative Ordinance "so long as Palm ing inconsistent with the Initiative Ordi- Springs in no way diminishes any protec. nance. tion which this ordinance affords to ten. On July 30, 1986, Palacio petitioned the ants."' (Initiative Ordinance, § 10.) trial court for a writ of administrative man- On October 1, 1980, the Palm Springs damus (Code Civ.Proc., § 1094.5) to compel ; City Council adopted Ordinance No. 1117. the. Commission to reconsider and grant This ordinance apparently was adopted to Palacio's request for a hardship rent in- 2 DE ANZA v, PALM SPRINGS RENT REVIEW CO.M'N 123 209 Cal.App.3d 121 Cite as 237 CO.Aptr. 121 (Ca1.App.4 Dist. 1959) crease. Following extensive. briefing and DISCUSSION argument, the trial court denied Palacio's I petition for a writ of mandate on Novem- ber 24, 1986. The trial court held that the MOOTNESS Commission had not the power to declare Tenants contend that the City Council's the Guidelines invalid, but that the Com- adoption of Resolution No. 16072 prior to i mission had been free to disregard the the entry of judgment in this case, repeal- Guidelines inasmuch as they (the Guide- ing the Guideline provision upon which Pa- i e lines)were not mandatory in nature. Judg- lacio relied most heavily in petitioning for a I ` ment was entered pursuant to the trial hardship rent increase, has mooted this en- i court's ruling on December 16, 1986. tire case. In support of their position, Ten- ants cite the general proposition that a Just one day prior to the entry of judg- right of action which has been created sole- ment in this case, on December 15, 1986, ly by statute is destroyed by the repeal of the Palm Springs City Council had adopted that statute (absent a savings clause) prior Resolution No. 16072. Resolution No. to the right's being reduced to final judg- 16072 repealed that portion of the Guide- ment. (See, e.g., Graczyk v. Work Comp. ; P lines which had served as the primary basis App. Bd. (1986) 184 Cal.App.3d 997, 229 of Palacio's request for a hardship rent Cal.Rptr. 494.) However accurate that increase—the inclusion of purchase-money general proposition might be as a state- financing interest payments in costs allow• ment of California law, it has no application able for the purpose of calculating."net to the,tae at hand. operating income". ("Nor).' The Guidelines and . rent-control ordi- nances did not create a statutory "right of Palacio thereafter moved the trial court action" in Palacio. Rather, those enact- for an order granting a new trial. The trial ments created land-use property rights court denied Palacio's motion, and Palacio which became vested in Palacio when the thereupon filed the instant appeal. financing of the apartment purchase `) :1 On appeal, Palacio makes the following undertaken in reliance on the existing rent- t principal contentions: (1) The Commission control laws. In this sense, Palacio enjoys , was bound to follow the Guidelines; (2)The a situation or status analogous to that of one who has established the right to pursue Commission's decision was not supported 1 a nonconforming use on land following a by substantial evidence; and (3) the Com- zoning change. (City of Santa.Barbara v. ;1 mission's decision improperly denied Pala- Modern Neon Sign Co. (1961) 189 Cal. cio a just and reasonable return on its App.2d 188, 11 Cal.Rptr. 57.) Any attempt property. In response, the Tenants argue to retroactively apply the repeal of the that the entire case was mooted by .Lpthe Guidelines'debt financing cost allowance to City Council's adoption of resolution No.. Palacio's vested rights.would constitute an ,is± 16072 and that the Commission did in fact invalid impairment of an established eco- have the authority to declare the Guide- nomic/property interest without due pro- ±1 lines invalid. cess of law. As set forth in greater detail below, we Notwithstanding the adoption of Resolu- tion No. 16072, Palacio continues to enjoy agree with the substance of Palacio's con- ,•<�� the benefit of the Guidelines' debt finane- , tentions. However, because of the poten- tially dispt?sitive character of the issue, we Ing cost allowance provisions which were in Y . effect.when Palacio assumed its purchase first address the issue of mootness. debtLUrtobligation. It now remains to ana- ;21 Additional facts will be referred to, as lyze the Commission's application of.those needed, in the discussion which follows: provisions in this case. 1. An-adequate NOI is central to Palm Springs' for the purpose of calculating N01, the smaller i concern that landlords be able to receive a fair the NOI itself will be-thus making it more ' return on their rental holdings. The greater the likely that a hardship rent increase would be number, amount and types of costs 'allowed' allowed. x,101 � 124 257 CALIFORNIA REPORTER 209 Ca1.App3d 121 L,MITE 209 Cal-APP-3 II-IV" events conducted for charitable purposes s.L-e Corpor and for carious tapes of organizations; Lave appeale V Movie theater owner/operator/managers the City 01 brought action for declaratory and injunc• C-:u}er, Cit DISPOSITION tive relief regarding constitutionality of the &Ely delenc -' The judgment is reversed. The trial tax. The Superior Court, San Bernardino )0tri.g a tri court is directed to conduct further pro- County, . William Pitt Hyde, J., entered argon for de ceedings in this matter consistent with this judgment in favor of city and its director of related to the opinion. In particular, the. trial.court is finance, and theater plaintiffs appealed; a .-.issions t directed to issue a writ of mandate compel- The Court of Appeal, McDaniel, J., held ling the Commission to reconsider Palacio's that tax, whose burden fell disproportion. application for a rent increase with a di- ately upon businesses engaged in protected In October rection to apply the Guidelines strictly to speech—two theaters and two adult book passed Ordin the facts adduced in support of that appli- stores with viewing booths—was unconsti• a_icle 5 to cation 3 Appellants shall have their costs tutional as applied to theater plaintiffs. lontclair Mt on appeal. Reversed with directions. I_ icle 5, k Law of the ?.kcDANIEL and HOLLENHORST, Constitutional Law x90.4(4), 228.5 - six percent to concur. Theaters and Shows X3.20 sion ticket fol City ordinance imposing tax on admis• azy event he o E�trMurstesnttr sion tickets was unconstitutional as applied Events are r to theaters, where the burden of the tax in Lheatrical per reality fell disproportionately upon busi- races, operas, nesses engaged in protected speech—two of art or hani theaters and two adult book stores with speeches, fair viewing booths, notwithstanding the broad-. eries, or any 209 CalApp.3d 245 ly worded applicability of the tax. U.S: which an adr _1145LTITED ARTISTS COMML-NICA- CA. ConstAmends. 1, 14. privilege of v TIONS, INC., et al., Plaintiffs ton 3-5.503(2 and Appellants, �6Ltllick McHose &Charles and Barry J. Events coni V. London and Michelle M. Marchant, San ?able purpos( CITY OF DiONTCLAIR, et al., Francisco, for plaintiffs and appellants. the benefit of pious, ,staff; Defendants and Respondents. Demchuk, Krueger & Robbins and Den- nis A. Krueger, Chino, for defendants and military, statE No. E005085. respondents. 121mtions or a! long as no prc Court of Appeal, Fourth District, James K. Hahn, City Atty., City of Los any individual Division 2. Angeles, Pedro B. Echeverria, Sr. Asst The purpos March 10, 1989. City Atty., Richard A. Dawson, Asst City 11� declared Atty.;and Michael L. Klelrner, Deputy City As Modified March 31, 1989. t in covt Atty., as amici curiae on behalf of defen- al sen c muniip Review Denied May 23, 1989. . .. dants and respondents. municipal under Certiorari Denied Oct 16, 1989. See 110 S.Ct. 280. OPINION rhe plaintiff McDAA'IEL, Associate Justice. as managing a • kited in Cit• City passed ordinance imposing tax on United Artists Communications,Inc.,Vis- located other b admLesion tickets, but.excepting from tax to Theaters, Inc., and General Cinema The- t><]ly subject •*See footnote •, ante ance of certain management fees and an zs= Holiday Skatit sumed annual increase of 10 percent in overall _ Gr-and prix p 3._ 1n light of our requirement that the Commis- operating costs. These are issues which the s. sion reconsider Palacio's application, we have taurants whiel Commission should be allowed to consider in declined to address the allowable expenseis. light of the directions we give in this opinion. 1• Or the int sues raised by Palacio witth respect to the al)ow• ev i l � t GrccA,4)vidc revised 06-15-88 LFASg ACfZF9VQ . RAM OF eaSIDERT(S): _� .._ SPACE NUMBER: This lease is entered into as of the below date of execution by and between Park as Lessor, and the Resident as Lessee. For Purposes of clarity, the Lessor is referred to as Park and the Lessee as Resident. The California Civil Code Section 798.17 authorizes this notice; this lease will be exempt from any ordinance, rule, regulation . or initiative measure adopted by any local government entity, which establishes a mn.Ima.w amount that the Park may charge Resident for rent during the term of this lease. Park and Resident recognize the Creekside Homeowners Association as the Resident representative on specified issues described herein. The Association will be formed and exist pursuant to Section 798 of the California Civil Cede. 1. DESCRIPTION OF 711E PRET LSEe AND FACT 7Ti9e: Park leases to the Resident and Resident hires from Park the space indicated above within above mobile home park which is to be used as a residence by Rezident and for . no other purpose during the term of chis lease. Park and Resident may mutually agree on other purposes. Park is responsible for providing and maintaining the existing services and physical improvements in good working order and condition. The following 1s a dascription of the physical facilities, which Park will continue to provide: A. Recreation building: features include meeting room, kitchen, card room (ping pang) and pool room, including furniture and equipment. B. Heated swimming pool and jacuzzi, including furniture. C. Common Areas:. includes streets, guest parking, street lights, park area, lawn areas, driveways and perimeter fences. D. Laundry Facilities. E. All underground utilities but not limited to: gas system, electric system, sewer system, water system, fire hydrants and associated water valves and cable 3V. F. Park shall promptly restore any of the services articulated in paragraphs a, B, C, D and E above in the event of a failure. In addition, Resident shall have the right to use common area facilities including swimming pool, clubhouse and laundry facilities, at reasonable hours as may be posted at Na facility. Also, subject to availability, the Park provides storage facility in the Park for Residents. Use of this storage area is governed by a separate agreement and fees for such use are not included in spare rent. 2. 133tH: The term of this lease shall be for the period indichced in the space provided below, commencing on the first day of January 1988 and ending: Initial December 31, 1993 • December 31,-1998 The term of this Lease may be extended pursuant to the AUTOMATIC RENEWAL PROVISIONS in Section 25 of this Lease. The Lease Anniversary Date will be January 1st of each year during the term of this Lease, including any extensions per section 25. Beginning on Resident's 1989 Lease Anniversary Date, the then current rent will be adjusted each year based on increases or decreases in the Consumer Price Index and the pass throughs noted in sections 4 through 8 below. 3. RENT: Resident'shall pay to Park S. __ per calendar month as the new base rent. The rent shall be payable in advance on the first day of each calendar month comm acing on the first day of October, 1988. All rent shall be paid at the office located within the Park without any offset or deduction whatsoever. Should the rent not be paid by the Sch day of the month, a late charge of 510.00 may be charged to cover Park's costs for additional accounting, office and collection expenses. Additionally, a handling charge of 55.00 may be required for all checks returned by the bank due'to insufficient funds in the Resident's account or for any ocher reason. This provision shall not be construed as a waiver by the Park should the Park fail to enforce any provision hereof after any default on the part of the Resident. Furthermore, the acceptance of payments shall not constitute a waiver of any breach of rule, regulation or any covenant of this Lyase agreement or Park regulations, nor shall such acceptance affect any notice, demand or suit hereunder, where the Resident Is already in default. It is the intent of this Lease to provide a formula that allows rents to maintain a level that keeps up with inflation without putting 'undue financial burden on the Resident. Should rent be increased in excess of the percentage increase of the Social Security Cost of Living Adjustment (COLA) benefits, Park will at its sole option, upon individual application by those persons receiving Social Security benefits or eligible for Section 8 Rental Assistance on a ease by case basis, extend hardship consideration based upon evidence of such need. 4. ADJUSIEBRfT OF RERT BY L....aIMER PRICE IRDEB: Each year on the (case Anni_ _,ary date, the then current rent will be adjusted by the following formula: 100%of. the Consumer Price Index (CPI) from 0% to 5%and 7A of any increase over 5%. If the rent in effect on January 1, 1988, for example, was 5200.00 and the CPI increase was 7%, this portion of Resident's rent adjustment would be 51 plus 1.5% (75%of the excess 2t), or 6.5%--making a total rent of S213.00 in this instance. Me CPI used will be the one published by the Bureau of labor statistics, All Urban Consumers, los Angeles, Anaheim and Riverside (1982-84100). _. On the )ease Anniversary dates for 1989, 1990, 1991 and 1992 there.wtll be an additional rent adjustment equal to 2% of the rent in effect on January 1, 1988. If that rent was 5200.00, an additional S+.00 would be added to the rent. In the example above, the rent on January 1, 1989 would then be S217.00. In calculating the additional 2%, the 1988 base figure would be used, limiting the increase in the example above to $4,00 in each of the years specified. Should the CPI (not including the additional 2% factor) adjustment allowed under this section exceed 8%, the full increase will be permitted so long as the percentage of increase above 8% does not exceed the percentage increase of the Cost of Living Adjustment (COLA) for Social Security benefits during the most recent COLA period. In other words, if the CPI rent adjustment allowed by this section were 10% and the most recent increase in COLA were 8 1/2t the maximum rent increase would be 8 1/2Y plus, if applicable, the additional 2Y.. Decreases in the CPI will result in rent decreases using the same formula for rent increases provided in this section. In the went of a national catastrophic economic event the parties may mutually agree cc renegotiate this lease. The percentage increase or decrease in the CPI will be calculated by comparing the most recent month of August with the CPI for the August of the previous year. If the Index is discounted or revised during the term of this Agreement, such other governmental indices or computations with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the index had not been discounted or revised. In the went a local Sen Luis Obispo index were to be established by the Bureau of Labor Statistics, Resident and Park may mutually agree to amend this section. 5. ADJUSTKEKr OF REED: FOR REAL PROPERLY TAUS: If the cost of property taxes increases or decreases by an amount equal to or less than the actual percentage increase or decrease in the CPI, which is designated in section 4 above, no amount will be added to the current rent. Io determine if property taxes have increased, the most recent property tax bill actually received by Lessor will be used (i.e., it will be compared with the property tax bill for the mediately preceding property tax year to determine if property taxes have increased from one property tax year to the ocher.) If the cost of property taxes increases or decreases by an amount greater than the actual percentage increase or decrease in the CPI, then the rent shall be adjusted based on the increase or decrease in the Park's property taxes. This adjustment shall be prorated equally to each spate. For example, if real property taxes increase by 5200.00 in excess of the amount allowed by the above CPI limitation, and if there are 200 spaces in the Park, each space would be charged S1.00 additional rent for the following Lease year. Property taxes are defined as all general and special real estate taxes; personal property taxes, bonds, fees charges and surcharges and assessments or other charges made in lieu of real property taxes (whether actually paid or unpaid at the time of the rent increase) levied upon or payable in connection with the land, fixtures and improvements constituting the mobilehome park. They also include any tax or excise on rents or any other tax, however is may be described, which is levied or assessed against the Park as direct substitution, In whole or in part, for any real property taxes. 6. ADJL'SDOM OF REKr FOR COVERNMENr SERVICES AND IPPROV6 UM: Examples of such items are utilities, fire protection, paramedic services and ocher services and new or changed services or improvements. Resident's rent will also be increased or decreased because of increases or decreases in existing, the requirement for new or changed, improvements, services or fees charged cc the Park or required by government bodies or others. Increase or decreases under chis section will be billed separately as additional rent on your monthly rent statement so chat the CPI increases in section 4 herein do not apply. Any added cost incurred by the Park for improvements shall be reimbursed by the Resident to the Park on a prorated basis or equal allocation for each space as provided under uninsured losses in sections 7(a) and 7(b). if the cost of government services and Improvements increases or decreases by an amount equal to or less than the actual percentage increase in the CPI referred cc in section 4 above, then no amount will be added to or subtracted from the rent. 7. ADJL'SI?= OF RM FOR URLCSORED LOSSES: if the Pork has suffered a property loss not actually compensated by insurance and not caused by the tortious conduct of Park or its scants or employees, the Park may Increase rent in addition to other adjustments to rent provided herein. Any increase In rent based on uninsured losses shall be calculated as follows: (a) The uninsured loss shall be spread over a number of years based on the amount of the loss.' The number of years shall be computed in accordance with. the following schedule: UNINSURED LOSS YEARS U -S 5,000 2 0 - 10,000 3 0 - 25,000 5 0 - 55.0,000 8 0 - 75,000 10 575,000 and over 15 (2) 06/88 M the uninsured loss be divided by the number of years in the s� .le set forth above and the quotient of that computation shall be divided by the total number of spaces in the Park, which quotient shall in turn be divided by 12, and the total shall reflect the dollar increase in the monthly rent payment. (c) The uninsured loss is defined as the total restored to "prior design and function condition" repair or replacement of any property loss for which the Park is net actually compensated by insurance. In addition, if the Park finances repair and replacement of such uninsured losses, the cost of financing shall also be considered an 'uninsured loss." (d) The 'uninsured loss" provisions shall be applicable only to those losses not covered in section (e) below or for which there is no insurance available to the Park at competitive prices from companies rated A-X or better authorized to do business in the State of California and listed in the most recent edition of Best Key Rating Guide to Insurance. Park will use due diligence in attempting to locate such insurance. Resident shall not be subject to any increases in rent as a result of any insured losses. (e) Park will maintain subject to availability as provided in section (d) above the following insurance coverage for the benefit of Creekside: Basic Park Package: *Broad form and Comprehensive General Liability. *Property Coverage--All Risk/Replacement Cost excluding flood and earthquake. *Flood and Earthquake (DIC). Difference in Conditions Policy including earthquake and flood with S1,000,000 stop loss limit on property and loss of rents. The property coverage will be maintained at current replacement values used for the Parks 1987 insurance policies as adjusted for inflation by the full amount of. the CPI. Park will be responsible for Oe deductible portion of all insured losses or the first 5%or $20,000 of all uninsured losses, whichever is greater. Loss of rents is not included in losses under this section. (f) Increases under this section will be billed separately as additional rent on your monthly rent statement, so chat the CPI increases in section 4 herein do not apply. Once the cost of an uninsured loss has been completely recovered from Resident by payment of Increased rents, the additional rent charged for that uninsured loss will be discontinued. Uninsured losses are not subject to prior approval by Resident(s). Park shall provide Resident information regarding any rent increase allowed under this section. (g) An example of the computation or uninsured losses is as follows: Uninsured Loss Example Assume a flood occurred during the year. If it cost the Park 531,750.00, including financing, to remove mud and rocks from streets the cost to be passed through to the Residents would be Calculated as follows: 531,750.00 less (5%) S1,750 " $30,000.00 530,000.00 divided by 8 years - S3,750.00 5'3,750.00 divided by 300 spaces " S12.50 $12.50 divided by 12 months " S1.04 per space (monthly share of repair cost) for 8 years (h) Insurance policies included in subsection (e) above shall be made available to residents or Creekside Homeowner's Association Board of Directors for review to assure residents that adequate Coverage is maintained to minimize any uninsured losses. 8. CAPITAL IROVEHEXM ADJUMM Q: "Capital Improvement" means those improvements in the park that materially al0' add to the value of the property and appreciably prolong its useful life or adapt is to new uses, and which may be amortized over the useful life of the improvement provided in accordance with the Internal Revenue Code and regulations. Rent may be increased for any capital improvements made by Park, only if made in accordance with this section. The total effective cost to Park for capital improvements will be'veriffed by a statement from Park's accountant that these are the total costs. Ilse "cost" of capital Improvements shall Consist of the actual cost of the improvement, including legal and engineering fees related to said improvements, plus all interest, points, and ocher costs and charges relating to the borrowing of any sums by Park to make such capital improvements. All Capital improvement costs over S10,000.00 shall be subject to a majority vote of Residents (one vote per space) who have signed this Lease or the approval of Creekside Homeowners Association. Charges to Residents shall be made equally to Residents in accordance with allocations provided in Sections 7(a) and 7 M. The cost of any item of improvement up to 510,000.00 shall be at the sole expense of Park under this section. Improvements required by government under section 6 of this lease will not be subject to a vote. Park agrees that rehabilitation and preservation of streets and driveways will occur within two years of the original date of this Lease. Park further agrees to redecorate the clubhouse, repair jacuzzi roof and rebuild the carwash- The costs of such rehabilitation and redecorating will be paid by Park and will not be passed through to Residents. 9. UTILITEEc AND 07MR nMRGES: Utilities and other charges are additional rent. Resident shall pay utility charges at the prevailing races set by the serving utility companies which the Park is authorized to charge Residents for Cha following utilities: natural gas, electricity and sewer, water will be included in the base rent for a maximum monthly allowance of 800 cubic feet. Resident will pay monthly the prevailing rates for all water used in excess of 800 cubic feet. Should the government require metering of water, rents will be reduced on a prorate basis by averaging the Creekside historical annual metered usage for all single and double spaops over the prior three years' period. Resident will then, after the reduction in rent, Pay for the actual metered water used based upon the then prevailing commodity charge. • In addition, Park shall furnish crash (» 06/88 1 ! ?n disposal. Resident shall pay the Park directly for cable television: the charge shall not exceed the residential consumer charges of the "servicing" cable company in the San Luis Obispo area. mese charges shall not be subject to the CPI adjustments set forth in Section 4. 10. R9CTDWIS OPTM M TO TERKMAZZ IP14E:. This lease and Resident's tenancy may be terminated'at the option of the Resident on 50 days written notice providing the Residen;. moves from the Park and removes the mobilehome from the Park or by assignment of this Lassa as provided in Section 10. 13- USE PRONIR=: Resident shall noc permit the leased premises or any part thereof to he used for any purpose than as a residence for the persons listed above without prior approval. No other person may reside at the premises without the Park's prior written permission. Such permission shall not be unreasonably withheld. Guests are permitted under the terms of the Community Guidelines and the Mobilehome Residency Rao. In exceptional circumstances, for reasons of "hardship" Park may grant special written permission to allow others. to occupy residence during an extended absence. Park shall not unreasonably deny such requests but Park has sole discretion regarding such requests. Resident shall &same full responsibility for substitute Resident(s) . to Park in any such ease. 12. CUID 7T— AND PARK RECOIATfOKS: During the term of this lease, Resident shall comply with all the Park "Community Cuidellnesn, a copy of which is attached hereto and by this reference made a part hereof, which may be 'changed from time to time pursuant to the terms of Section 798.25 of the California Civil Cede. The Park will meet and confer with Resident and Creekside Homeowners Association prior to amendment of any such rules. 1.7. MAIIMlANGY OF 774: IDlIESIZE PREKL1SS. The Park may charge a reasonable fee for services relating to the maintenance of the land and premises upon which the mobilehome is situated in the event that Resident fails to maintain such land or premises in accordance with the rules and regulations of the Park. Park may levy . charges for failure to maintain the premises only after Park has notified the Resident in writing of such failure and Resident has not complied within 14 days. The written notice shall state the specific condition to he corrected and an estimate of the charges to be imposed If the Resident does not correct the condition and the Park or its agents perform this service. 14. ABANDMO Aft PRORIBXXM: Resident shall not vacate or abandon the premises at any time during the term hereof. If Resident shall abandon, vacate or surrender their premises, any personal property belonging to Resident left on the premises shall be deemed to be abandoned at the option of Park. I.S. PARK'S RICA OF ZNM: Resident shall permit Park and the agents and employees of Park to enter into and upon the leased premises (space only) ac all reasonable times for the purpose of inspecting the same and for the purpose of posting notices of non-responsibility for alterations, additions or repairs without any rebate of rent and without any liability to Resident for loss of quiet enjoyment. The Park or its agent may enter a mobilehome without prior written consent in ease of abandonment of the mobilehome or an emergency. 16. A=MNEy'S pEFS AND == COSTS: if any action at lav or equity shall be brought to recover any rent, utility fees or other charges due under this lease or on account of any breach of, or to enforce or interpret any of the covenants, terms or conditions of this lease or the rules attached hereto or for the recovery of possession of the leased premises, the prevailing parties shall be entitled to recover from the other party as part of the prevailing party's costs, reasonable attorney's fees and costs, the amount of which shall be fixed by the court and made a part of any judgment or decree rendered. In the event of a dispute regarding calculation of rent increases or decreases the Park and the Board of Directors of the Creekside Homeowners Association shall meet and confer in good faith in an attempt to resolve the dispute. In the event the dispute is not resolved the Park and the Creekside.Homeowners Association shall submit to arbitration using an arbitrator and the rules propounded by the American Arbitration Association. The provision shall in no way be construed as a waiver of Park's right to enforce the agreement in unlawful detainer proceedings where the Lav would otherwise allow. 17. WAIVER: The waiver by Park of the failure of Park to take action in any respect by any breach of any term, covenant or condition herein contained, shall not be deemed to be a waiver of such term, covenant or condition or subsequent breach of same, or any other term; covenant or condition herein contained. 'The subsequent acceptance of rent by Park shall not be deemed to be a waiver of any proceeding by Resident of any term, covenant or condition of this Jesse other than the failure of Resident to pay the particular rent so accepted, regardless of Park's knowledge of such proceeding breach ac the time of accepting such rent. 18. ASSICHMM AND amrrrrrM Resident shall have neither the right nor power to sublet the leased premises, or any portion thereof, or any mobilehome located thereon and any such subleasing shall be void. Resident shall not assign this lease without first obtaining the approval of the Park. Such approvaL•may be withheld if the Park is not notified in advance of the proposed assignment and approval or disapproval shall be governed by Civil Code Sections 796.77 and 798.74. Further, any and all buyers/transferees of the mobilehome shall execute an assignment of this Lease and, failing to do so, shall have no rights of tenancy. Because the beginning rent in this lease to existing Residents is below reasonable market levels, Park may increase rents upon the sale or other transfer of the mobilehome or subletting, should subletting ever become allowed, to a level which reflects a more reasonable value of the space, services and amenities the Park provides. This value is the New Lease Rent, which of the commencement of this Lease is S _ per month. Only.one such adjustment shall occur during the initial term of this LeLe ase. The New ase Renf will be adjusted each year under the terms of Sections 4 through 8 and other provisions of this Lease. (4) 06/88 -� i 0 V In the event of the s, r transfer of the mobilehoma during any eat n term, defined as any five year teem by which the initial lease may be extended, rents may be increased no more than once by an amount not to exceed 10% of the New Lease Rant in effect at the and of the preceding lease term as further adjusted under Sections 4 through 8 and other provisions of this lease. The minimum reasonable market rants will be the New Lease Rent as adjusted annually under the terms of this lease. transfers to spouses, children, parents or the'purchase by Resident of another mobilehome in Creekside which is to be used as their primary residence are exempt from such increase. 19. RESPONSIBILITY OF PARS: the Park shall have the responsibility to provide and maintain the physical improvements in the common facilities, described in section 1, in good working order and condition. A reduction in the level of services or facilities provided by the Park will be offset by a reduction in rents. any reduction in service will require the approval of the majority of residents (one vote per space) or the approval of the Homeowner's Association. 20. NICE OF'CHAAGE IN RniEe AND RECULAXIORS: Park management shall, after having been provided by Resident with ac least 10 days prior written notice of the matter cc be discussed, meet and consult with Resident either individually or collectively on the following matters regarding general operations of the Park: 20.1 Amendments to the Park Community Guidelines, which are the rules and regulations attached hereto. 20.2 Standards for maintenance and construction of physical improvements in the Park. 20.1 Additions, alterations or deletions of services, equipment and physical improvements. 20.4 Rental agreements of Lasses offered per California Civil code section 798.17. Any change in the Park Community Ouidelinas shall not be construed as a change in this Lease agreement. Any such change in the Park Community Guidelines shall comply with the terms and conditions of the California Civil Code as amended from time to time. 21. TRANSFER OF PARK'S IMERE4: In the .event Park transfers its interest in the Park or any portion thereof, Park shall be automatically relieved of all obligations hereunder accruing after the date of such transfer. Such obligations under this lease shall be binding on the now owner pursuant cc the laws of the State of California. 22. GOVERN11C LW: this lease agreement shall be governed by and construed pursuant to the laws of the State of California. 23. AMNE1 1TS: Any amendments to this lease agreement shall be in writing, signed by the Park and the Resident. 24. INCORPORATION OF RUIM A® LW: Park and Resident hereby acknowledge that the rules and regulations "Community GL_idplinas" of this mobilehome park, as amended from time to time, are incorporated herein by this reference. In addition, the contents of Sections 798 through 799.6 of the California Civil Cade, as amended from time to time, are incorporated in this lease as though fully sat forth. Should this Lease conflict with chs present or future provision of the California Civil Code sections known as the Mobilehome Residency Lav, ' those provisions of the California Civil Cade shall prevail in the appropriate interpretation, and the balance of this lease agreement shall remain in full lo-ice and affect. 25. AUlOMA'IIC vTn,E.,AT OF ffiS LYASE: UNLESS PARK NOTIFIES RESIDENT IN WRI27M AT LEAST 120 DAYS IN ADVANCE OF THE TDLPLRATION OF =M IN$AL TERMS OF 'ISIS tEAL.'E, THIS LEASE WILL ALMDMATIru Lv RE EMMMED SO A TERM OF AH'AMMONAL 60 MONW. THIS IS AN "EXTENSION MN'. TEE AVID A3=c REM;AL OF THIS LEASE MAY CONTINUE FOR TWO (2) ADDITIONAL SUCCFMIVE 60 MONTH ETLT'ENSION TERMS UNTIL. THIS LEASE HAS BEEN AUXO LUCALLY RENEWO FOR A PERIOD OF 1NA MUM. TEE ONLY EXCEPTION IS IF PARI: NOTIFIES RYSIDENIS IN WRITING AT LEAST 120 DAYS IN ADVANCE OF TSE BEGINNING OF ANY ONE OF THESE ADDITIONAL rrrpmSION MCM TH&T TATS LYASE IS NOT BEING Q®®. ALL OF THESE AUTOKAXLC RENEWALS WILL BE ON THE SAME TERMS AND CONDITIONS AS PRESERMY FOUND IN TIS LEASE. IF TIM THIRDS OF MEE SPACES WHO HAVE SIGNED THIS LEASE GIVE WRITTEN NOTICE THAT THEY DO NOT WANT THIS LEASE AUTOMATICALLY RENEWED, THIS PROVISION WILL LAS BE APPLICABLE. THIS NOTICE MAY ONLY BE GIVEN BY RESIDENT BMME N THE 3.200 DAY AND THE 9ME DAY MCEDIIA THE EFFEL'[IVE DATE OF E= OF THE AUTOMATIC RENEWALS. IF RESIDENT CONTINUES To LIVE 1N TREERSIDE AFTER THE INITIAL TERM OF THE LEASE HAS E10LIRED (OR AFTER ANY E>07ZNSION OF THE ra xiAL gm) THE TOMB OF THIS "MANGY, INCLUDING THE AMOUNT OF THE INITIAL RENT, UTILITIES, PASS Tvm=, An OTHER m RGES REBID w v= PAY PARS, WILL BE TT@ AMOUNT CURRENTLY BEING PAID AT THE END OF T]IS LEASE AS THEY MAY BE INR' M ADJUSTED BY PARS ON WRIZffiN NOTICE To RESIDENT OR. AN AMOUNT WHICTI, PARK IS LEGALLY AUTHORIZED TO CRARGE. THIS LYASE IS OFFERED TO RESIDENT FOR A PERIOD OF UP To TEN YEARS WITH OPPORTUNITY FOR UP TO TUREE(1) ADDITIONAL 60 MOM 17(4ASIONS. PARK AGREES TO CONTINUE TO OPERATE AS A MOBILE HOE PARS FOR THE TERM OF THE LEASE PLUS ANY E13INSIONS 1I0OOF. 26. ACKNOWLEDGEMENT: Park and Resident agree that this Lease, together with matters incorporated herein, contains the entire agreement between the patties relating t0 the lease of said space in this mobile home park, and that this lease agreement may only be altered as allowed by lav or herein above provided. This Lease supersedes all prior and contemporaneous agreements, representations and understandings of Resident or the Park. the Resident acknowledges that he or she has received copies of the California Civil Code Sections 799 through 799.6 and the Park rules and regulations which are called Community Guidelines which are referred to above and incorporated by reference. The Resident further acknowledges that he or she has received a copy of (5) 06/88 this lease Agreement and all attachments thereto and agrees to be bound by the terms set forth. Resident further acknowledges that he or she has received a copy of San lois Obispo City Rent Stabilization Ordinance and has had an opportunity to read this ordinance before signing this (ease. 27. EMIN@Q DOMAIN: The rights of Resident and Park shall be deterplined by the California fav of Eminent Domain. 28. ZONING Alm USE PERMIT I1d RMA32ON: The nature of the toning which the Park operates under is: R-2-S. The Conditional Use or other permits required to operace the Park are not subject to expiration or renewal. The land on which the Park is located is not leased from someone else. ' 29. RIMIT OF FIRST REFUSAL:- In the event Park receives an offer to purchase which it intends to accept, or intends to make an offer to sell the Park, then before accepting or making any such offer, the Park shall first give to the Creekside Homeowners Association a right of first refusal. The Park shall give to the Association a written notice describing the terms and conditions of the prospective sale. The Association may elect within forty five (45) days thereafter to purchase the Park an the terms and conditions described. In the event the Association fails to elect to purchase within the time provided, then the Park is free to sell the park on the terms and conditions described so long as the sale takes place within eighteen (18) months. In the event it does not, then a new notice must be given to the Association as provided above. This first right of refusal is given to the Association only, and is not granted to any individual resident within the park. This right of first refusal does not apply to transfers to any member of Park owner's family or to any entity in which the Park owner retains a controlling interest. ' 30. PARTIAL. INVALIDITY: If any part of this Lassa or any document referred to in this Lease is, in any way, invalid or unenforceable, the remainder of this Lease or the other document shall not be affected, and will be valid and enforceable to the fullest extent permitted by law. The same is true if the application of any part of this Lease, or any document referred to in it is, in any way, invalid or unenforceable to any person or circumstance. 31. DATE THIS LFASE BEOM P3 EFFECTIVE: If this lease is not accepted by two-thirds of the Spates in Creekside by August 1, 1988 (and these Leases are not canceled per Civil Code 798.17), Creekside will have the option, in its sole discretion, not to be bound to this Lease. Creekside will have a reasonable period of time after the deadline date to notify Resident whether Creekside has received the required number of Leases or has elected to accept a lesser number. 32. EXECUTION: This Lease is signed by you at +k .4 .m., on — _ 19_ PLEASE NOTE: SECTION 25 OF THIS LEASE CONMLIKS AN AIfTONMO' RDIEWAL. PROVISION. Residm- Reside. Resident Resident NOTICE: IF YOU ARE THE PERSON(S) WHO ORIGIN&LY SILTED THIS LEASE, YOU MAY CANCEL TILS LEASE BY NOMYINC PARK IN WRITING WITHIN 72 HOURS OF THE TIME YOU SICRE•D THIS LEASE. THIS WRIZZIN NOTICE DOES NOT APPLY TO PERSONS TO WHOM aflS LEASE IS ASSICNIM. This lease is signed by us on , 19_ CREEKSIDE MOBILEHOOMME COMMUNIT Y Bl' Autho ted Agenc COPIES TO: ❑.Dmotes Acto i ❑ FYI L O ElCDDDIR. MEETING AGENDA tom' ❑ .Rf.DIX TTIM� oDR DATEZL1,0 ITEM # San !1(. 0/.uspo1 CA T,"cLl=RxiOPIG. ❑ POLICaCx. Aovemben 6, 1992 uu MGMT.T Iod [J REC DIX — ❑ C READ FILE ❑_ LrGIL DIR. EW To: r'la fox Durr in and Cowici-tmembezc,o Z b. Y lie: Stag nepoAt'on LeWe 6x,9-3tiono, patiticulan.[y Cneeloide Dun pa,%k oamen, A4. Cvarw has not come betorce the couw-U to aoh he coutd Aw:ze /Eenth in hi.e pante, but has u� the oq-en vL 3 di�'f eAent .tea seb to ,canoe the arta [n Cneehotde. We .five in a mobile hone and pacj 8238.48 Pe-4 month baee vent. Ul have never ziyt eco' a .Letree. The di ff-"ence in our hent_ and #haze. that have oigned .Leased iA $49.95 pea month. Thio .i,e a viabie neaeon ron 1,4jing under the Rent Stabl t_pt i.on Ordinance .inotead orP 6ignirzo a tea6e. The double-wide mobile homee have a di4f-eAence 4 S55.OJ pec month. Those that have not eianed .the .Lease r e X263.57. Those that sirarred the Zeahe ane pwjLw, aas much ao ;318.57. Moet oA the time t- ti the intent o� the .faro that everyone .should be treated cquat. Our etate C.ivi t Code 798.3 clea2by .atateo ner(t cordAot ondinanceo that aLlory paee thnouaha ane in v station oA the Civil Code. Thus etatute .stated that "haneaunene Mary onby be chunaed fon rent, uti t i fie o, and oe•t- vi.ce.6 actuaLlry pnovided.'r ((]n. Lvano c6aW evenryone $8.84 1xroethnougA and or9.00 oanitation A". This io anotheA uxuy to incAeaoe the hent. These .us afro a etatute that cCe� etate � mobilehomeopt ,6tgU aDy hlo eivi .waht4 the docent io ndvoEd. 9t i6 aleo aaainat the C.tvit Code to 6i-7a .Lease that extendo mane than 5 yea". Thio u heo aa the teaoeo .that ince oven 5 yeano nutL and void even thoto the hvmearrnen had viand the .Leaee. ThankZV jou in advance fvvn your convidenation o� the above-mentioned vtate- mente Sincere Cyl Leola i ubottom I�II� / YI4MlW� NOV - 6 1992(�(N/,,/n/ J CITY CLERK V V SAN LUIS OBfSPO,CA ,_, w 1 t y L.. 4.- 1 .O,p. w .n .n 'Ce....,,.,,, ..•1: ♦.w y . . •p G. ,� U C = •� •:, •0C '� 1 1 G A �.^C G pU O yyj p S C a) U 7 = 7 pCq .0 N COS w '0 yy 'y�•Q O`�` G O �'" ea.r4 �4 y G'•�.�.. p_p�C v S 3 e aoi ^ o aai .e a g o eg=.g.. :c o= C v csi cOko � .0 �.:04).e. c 2: .61. N y': y .-� y w a U p O p .ed U tJ �a0v°10 ° SooEocsn co 4) yacv.-oE..m ':°.Qaoo '` � dIL) o � U c7 O w 'i p 3 a'S.. 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IECEIVEG oPDF 'Adim ❑ FY, 'TING AGENDA NOV - 5 1992 XAO C1 M.DR a� r NEY q FIN DEIL CITY CLERK F 1tRK/ORIG ❑ POLICECii SAN IISOBISPO,CA ❑ MGMT.MW G RMDR, November 5, 1992 City Council 22_91�wa City of San Luis Obispo San Luis Obispo, Ca. 93401 Dear Mayor and members of the City Council: After reading the arguments from the law firm representing Creekside park in regard to the proposed changes in our rent ordinance, and also the changes in exhibit"A" and "B" I would like to make the following comments. Setting aside the .threats of suits for monetary losses, the r park owner claims to have made a great financial sacrifice in Yth offering the lease. That lease provided for automatic 2% increases in addition to the C.P.I. adjustments, and also was loaded with other pass throughs that gave the Park owner considerable financial gain. Those signing the lease felt that it was worth paying this increased cost to get out from under yearly controversy over the rent increases. As for the degree of happiness in this park during the years since that lease was put into effect, the Creekside Homeowners Association has spent approximately $3000.00 of their members money litigating with the park owner over what they considered improper interpretations of the lease conditions. The fact that these differences have not been brought into a court trial or hearing is matter of financial ability to pay the cost and not lessee' s satisfaction. It was those inconsistencies as well as the fact all obligations were heavily slanted to give the park owner unfair control that kept the 30% or more who did not sign the lease from accepting it. The right to sign or not sign such an agreement is and should be a constitutional right as well as a time honored principle of fairness. Exhibit A is in our opinion not acceptable. It makes no provision for the rights of those not under lease to appeal to city council or for a hearing officer, or any other protection given to the homeowners in the city who are now under the City Ordinance. The phrase in paragraph F " at least as favorable terms and conditions of tenancy" sounds like something written by the park owner' s attorney. Such a description of rights is subject to endless interpretation. Also the term "comparable spaces" is again a matter of evaluation and not explicit. That such language can be construed to mean many things has been proven in attempting to require adherence to a lease. It has no j.u:stification in this ordinance. Exhibit B on the other hand is clear and concise and fair to all . Yo truly_ ar-d R. 3960 S. Higuera # 49