HomeMy WebLinkAbout07/19/1994, 2 - PROPOSED AMENDMENT TO THE MOBILE HOME PARK RENT STABILIZATION ORDINANCE CONCERNING AUTOMATIC ADJUSTMENTS TO RENT. �IllM�l����ulllll��l II -� � MEET c DaTE:
� IIUI ti o San tuts OBISpo TEM NUMBER::
COUNCIL AGENDA REPORT
FROM: JEFFREY G. JORGENSEN, CITY ATTORNEY'��
SUBJECT:. PROPOSED AMENDMENT TO THE MOBILE HOME PARR
RENT STABILIZATION ORDINANCE CONCERNING
AUTOMATIC ADJUSTMENTS TO RENT.
CAO Introduce an Ordinance to Print Amending
RECOMMENDATION: Section 5.44.060 (E) of the Mobile Rome Park
Rent Stabilization Ordinance to clarify that
automatic adjustments to rent shall not be
included in base space rent for the purpose of
determining CPI increases.
DISCUSSION:
At the June 7, 1994 City Council meeting, the City Council
considered a communication item from Leola Rubottom requesting
deletion of Section 544 . 060 (E) of the Mobile Home Park Rent
Stabilization Ordinance, which allows for automatic adjustments of
rent based on " . . . increases in expenses for common area utilities,
new government mandated services, garbage service and cable
television . . . . " Previous analysis from the City Attorney's Office
dated May 18, 1994 , and December 22 , 1993 , is attached for your
information.
As an alternative to the complete deletion of all automatic
adjustments under Section 5.44 . 060 (E) , the Council directed staff
to return with an ordinance amending Section 5.44 . 060 (E) to clarify
that automatic adjustments to rent shall not be included in base
space rent for the purpose of determining CPI increases, but shall
be considered as additional rent. The effect of such an amendment
would be to still allow automatic adjustments, while avoiding
compound rent increases, which may be perceived by mobile home
tenants as unfair. The proposed ordinance will carry out the
Council's intent.
OPTIONS:
Option 1: If the Council wishes to amend the automatic adjustment
provisions as discussed above, pass to print the attached ordinance
(Exhibit "A") . This is the staff recommended alternative.
Option 2: -If the Council wishes to delete automatic adjustments
entirely, pass to print the attached ordinance (Exhibit "B") . In
light of the previously submitted analysis of May 18, 1994 and
December 22 , 1993 , this is not recommended.
Option 3: Take no action and leave the automatic adjustments as
currently written. 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 adopts the ordinance as recommended, it should have
no fiscal impact on the City. It may result in a slightly lower
overall rate of rent increases to tenants in the future depending
upon the unique circumstances of each case.
JGJ/sw
Attachments:
Letter from City Attorney (5/18/94)
Legislative Draft, SLOMC § 5.44 . 060 (E)
Exhibit A
Exhibit B
�.�-z-
MEMORANDUM
FROM THE OFFICE OF THE CITY ATTORNEY
May 18, 1994
TO: City Council
FROM: Jeff Jorgensen, City Attorney
SUBJECT: Mobile Home Park Rent Stabilization
Automatic Adjustments Pursuant to 5. 44 . 060 (E)
At the April 19, 1994 City Council meeting, the attached
communication item from Leola Rubottom was referred 'to staff for an
analysis and response. Leola has requested the deletion of
Section 5.44 . 060 (E) of the Mobile Home Park Rent Stabilization
Ordinance, which allows for automatic adjustments of rent based on.
"increases in expenses for common area utilities, new government-
mandated services, garbage service and cable television. . . . " The
apparent reason given for this request is that the owner of
Creekside Mobile Home Park has offered long term leases which do
not include automatic adjustments as set forth in 5. 44 . 060 (E) . The
inference is this constitutes a "discriminatory practice. "
A previous inquiry, which asserted that the automatic rent
adjustments allowed by 5.44 . 060 (E) are in conflict with the Mobile
Home Residency Law (Civil Code § 798 . 31) was submitted in December,
1993 . (Attached for your information is the analysis of that
previous correspondence. )
CONCLUSION
The City Council has the authority to delete Municipal Code
§ 5. 44 . 060 (E) provided an adequate mechanism remains in the Rent
Stabilization Ordinance to ensure a "fair return on investment. "
The fact that a park owner offers long-term leases with provisions
different from the provisions of the Rent Stabilization Ordinance
is not a "discriminatory practice. " Therefore, should the Council
wish to consider deletion of § 5. 44 . 060(E) I it should do so on some
basis other than an alleged discrimination.
ANALYSIS
1. Does the City Council have authority to delete the automatic
adjustment provisions of § 5.44. 060 (E) ?
The Mobile Home Park Rent Stabilization Ordinance was adopted by
" voter approval as an initiative measure in 1988. However, the City
Council specifically retained the authority to amend the ordinance
a�3
by majority vote (§ 5.44 . 141) . Therefore, the City Council clearly
has the authority to delete § 5.44 . 060 (E) should it choose to do
so. However, it should also be noted that the validity of a rent
control ordinance will rest upon whether the ordinance permits the
landlord to earn a "just and reasonable return. " A long line of
court decisions support this fundamental requirement. Birkenfeld
v. City of Berkeley, 17 Cal. 3d 129 (1976) ; Carson Mobile Home Park
Owners Assoc. v. City of Carson, 35 Cal. 3d 184 (1983) ; Palos Verde
Shores Mobile Estates, Ltd. v. City of Los Angeles, 142 Cal.App. 3d
362 (1983) ; Fisher v. City of Berkeley, 37 Cal. 3d 644 (1984) ; West
Hollywood Concerned Citizens v. City of West Hollywood, 232
Cal.App. 3d 486 (1991) . While no case has concretely defined the
term "just and reasonable return, " one court has described it as
one which ". . . is high enough to encourage good management, reward
efficiency and discourage the flight of capital and is commensurate
with returns on comparable investments, but not so high as to
defeat the purpose of preventing excessive rents. " San Marcos
Mobile Home Park Assoc. v. City of San Marcos, 192 Cal.App. 3d 1492
(1987) . Conversely, a denial of a just and reasonable return
constitutes an unconstitutional taking of property which requires
compensation. Birkenfeld v. City of Berkeley, 17 Cal . 3d 129
(1976) . The City's rent stabilization ordinance recognizes the'
need for balance by including in the Purpose and Intent section,
the following provision:
"Because of the high cost and impracticability
of moving mobile homes, the potential for
damage resulting therefrom, the requirements
relating to the installation of mobile homes,
including permits, landscaping and site
preparation, the lack of alternative home
sites for mobile home residents, and the
substantial investment of mobile home owners
in such homes, this Council finds and declares
it necessary to protect the owners and
occupiers of mobile homes from unreasonable
rent increases while at the same time
recognizing the need of park owners to receive
a suitable profit on their property with
rental income sufficient to cover increases in
costs of repair, maintenance, insurance,
utilities, employee services, additional
amenities, and other costs of operation, and
to receive a fair return on their investment."
(§ 5.44. 010 (C) . Emphasis added. )
Most rent control ordinances allow an annual increase based on the
percentage change on the consumer price index or a portion thereof
(in the case of San Luis Obispo, 100% of the CPI up to 5% and 75%
of the CPI in excess of 5%) . However, even with an annual increase
provision, a procedure must be provided by which an owner can seek
an increase on the grounds the annual increase is not sufficient to
2
any
provide a just and reasonable return. Thus, the San Luis Obispo
ordinance also provides for an application for rent adjustment over
and above the CPI increase, and any automatic adjustments, when
appropriate to assure a fair and reasonable return on investment.
(§ 5A4 . 070. )
Some cities provide for automatic adjustments in their rent control
ordinances. Others do not. The potential advantage of automatic
adjustments is the ease of administration which may result. The
disadvantage is that the adjustments may result in slightly higher
rents than a more complex and staff intensive hearing procedure.
The difficulty with simply eliminating the automatic adjustment
provisions of Section 5. 44 . 060 (E) is that while it may provide for
a modest reduction in rent increases in the short term, it may also
simply result in shifting requests for rent increases to the formal
application process set forth in Section 5.44 . 070. I am unaware
of any formal rent adjustment hearings having been held by the City
since the rent stabilization ordinance was adopted in 1988 . Given
the extremely contentious, time consuming, and litigious hearings
held in many other cities, this may be an enviable record. In
light of this, the Council may wish to determine whether there are-
significant reasons for changing the current balance in the
ordinance prior to taking any action on this matter.
2 . Does the fact that a park owner offers long-term leases with
provisions different from the provisions of the Rent Stabilization
Ordinance constitute a "discriminatory practice"?
Whether a park owner decides to offer a long term lease, and
whether a tenant decides to accept such a lease, is a purely
private, voluntary decision between the parties which has nothing
to do with discrimination and is largely beyond the ability of the
City to regulate. A park owner is not obligated to offer a long
term lease, but has a right to, and if such a lease otherwise
complies with the provisions of Civil Code § 798. 17 (G) the owner
" shall be exempt from any ordinance, rule, regulation, or
initiative measure adopted by any local government entity . . . . "
(Civil Code § 798 . 17 (A) . ) The owner's decision may be motivated by
a number of reasons (such as stability and predictability) , but
generally will be based upon the perceived economic- benefit of a
lease as opposed to the Rent Stabilization Ordinance. On the other
hand, a tenant is not required to enter into a long term lease, and
may opt for the protection of the Rent Stabilization Ordinance if
the tenant perceives a greater economic benefit in doing so. It
depends upon the relative value of benefits offered in the lease.
In both instances, it is a matter of choice based upon the terms
and conditions of the entire agreement. To call such a process of
negotiation a "discriminatory practice" does not seem to be a
supportable premise. Further, to single out one provision of a
long term lease as a reason for amending the Rent Stabilization
,, Ogdinance to delete automatic adjustments would essentially
3
penalize owners for offering long term leases that do not exactly
mirror the ordinance, and may take away incentives to offer such
leases at all.
RECOMMENDATION
Based upon the above analysis, it is respectfully recommended that
§ 544 . 060 (E) not be deleted based upon an unsupported notion of
"discriminatory practice. " Issues which might properly support
such a deletion would include whether the automatic adjustments
have resulted in excessive rent increases or have been abused. I
am unaware of any such instances having been brought to the
attention of the City.
JGJ/sw
cc: John Dunn
Deb Hossli
Attachments:
1. Leola Rubottom Letter, dated April 18, 1994
2 . Jeff Jorgensen Memo, dated December 22, 1993
3 . California Civil Code § 798 . 15, et sea.
4
.5an Lui4 Ubc.bpo, Cd
ilp,%zt 18, 19y4
HonaRab.te lr)acyon %Iinnand and C.i.tr4 CourccU II)embene o4
San Lui4 Obi,6po, Cil
Re: %he�° thnoufh4 beiruj added .to the ba4e nerLt .n.
`A"ide Mobitehvme %aAh
ticcondcna .to a "!S xbi-Dart' Notice oA a Rent 9nuceabe'dated Oct. 23, 1993)
Cneeh4 ' nenteA4 that have not bigned teabee uu.0 have .the. 1993 pa"
thicouglw ti.4.ted 6epa,=tejj on the nent Atatement and mi U be included
.in .the ba4e hent.
The paha tlucvugh4 tlut rcwAe Li,o ted and eA6ective Yaruraiu,j 1, 199 4 uwne
ba4ed on .the cobt 04 common area utd-iti,e4, new govvument mandated
4e2vf ce4, yaicbaye 4eavice, etc. .to .the path oan,en.
The new 1994 babe neat conbi6ted o4 the cunicent )tent .in 1993 p&4
the C.P.9. .enc Aeabe v4 27 and the currnent 1993 pa44 #hnowl4.
%he 1995 C.i'.9., PE thobe not on Zea.4e4, wiU be ba4ed on the new
hent P4uge poo anrj new pa44 .thicourih4.
We ne4pec jLU-y neque i the deCeti.on o4 (C.) becti An oA 5.44.050 o4
the Rent Stab.i l-i ptivn Undirraiuz Avn San Lui4 Obibpo that
attow &x thi4 dibcvciminatorui pnacti.ce.
Sincezelr�,
Leo-Ca Rubot;&=
3960 South hi gue w, Space 21
San Luiz 0bi4po, Ctl 93401
Cnctobed: Sixtij Day Notice o4 Rent 9ncAea6e fan th04e not on Leabeb.
Sixty Uay Nat.,Lce oA Rent .9nacea4e pA thaee on Lea4e4.
ATTACHMENT 1 ��
Space: Ow a
CREEKSIDE MOBILEHOME COMMUNITY
3960 S. HIGUERA STREET
SAN LUIS OBISPO, CA 93471
October 31, 1993
SIXTY DAY NOTICE OF RENT INCREASE
Dear Resident :
The Lease provides for rents to be adjusted annually on January 1st. This letter
is notice of s;;ch adjustment. From A.;gust, 1992 to August, 1993 the Consuser• Price
Index applicable :a the Lease moved from 434. 1 to 442. 8 which is a 2. 0% increase.
Therefore, your- r': .t will be increased by 15. 47 to $27a.79.
The _ease further provides for pass thrus of costs related directly to the park
costs as further adjusted for inflation. rhese costs include utilities, government
services and fees, which this year affects electricity, gas, water, trash and
government fees. All increases and decreases listed have been adjusted for the CPI.
Park use of electricity has risen slightly and the commodity cost has again
risen, resulting in an overall increase. Therefore, last year' s pass thru of 51.86'
will increase by 4. 35 to 52.21.
While the cost of gas has increased this year, the park' s consumption of gas to
heat the recreation building, swimming pool and spa has again decrease-J. Your prorata
share of this decrease is a 3 1.24 per month reduction for a new pass thru of 42. 27.
Thii year both .rater consumption and the commodity cost have increased
dramatically. Your prorata share of this increase is $4. 35 per month for a total
water pass thru of M 6.
The cost for dump fres will increase an additional f1. la for a total pass thru of
Sc.06. The permit to cper•ate fee this year remained the same. Adjusting last year' s
cost for CPI results in a prorata decrease of i . 01 for a total Government fees pass C�
thr+. of f. 32. The property tax assessments will remain at $1.02. D rS v
Your pass thra:gh, effective Jan:. ar•y 1, 1994 will be 113. 54 and will be listed
se0arately on your ren'. s-ate&ent and will not be subject to CPI increases. All of
the above pass thrus reflect actual cost increases and do NOT include utilities and
other, charges biked directly to you. DocumEntatlan for, the pass tnrds is available
at the park office.
This notice applies to all residents under- the MmmppM provisions of the San
suis Obispo Rent Control Ordinance. The Base Rant becomes effective for January 1,
11994 and will remain so through December 31, 1.94.
Sincerely,
Pat Fleming,
Manager_
Spacer *'
1X+ILEr.0 cor;riUr';: Y
RA
t_rl jam•,Lrl
SIXTY DAY NOTICE OF RENT INCREASE
Dear fiesident :
Oity of San Luis Obispo "lobile Home park Rent Stabilization Ordinance, Chapter
5. 44 alloys for rEnts to be adjuStEd annually. This letter is notice of such
adjustment. From August, ;992' to August, 1993 the Consumer price Index moved from
� s4. 1 to 44c. 8 whici is a c. WY• increase. Therefore, your c1.lrrEnt 'rent will be
Del 4
� 4 increased by $4. 95 which is the increase in the CFI.
1 )1 -he 1993 Nass thr•u of ic. 99 currently listed beparately on your rent statement
will be included in your new base rent.
In ad�':tion, 2Ecti3n 5. 44. 060, paragraph E. allows "Space rent may be
automatically adjusted based on increases in expenses for common area utilities, new
guver.-.mcnt mvndated services, garbage service. . . ". In addition, Section `... 4'i. 0607
Paragraph E. further states, "The space rent may be adjusted by dividing the total
increase in any such expanses incurred during a twelve—month period by twelve, less
the percentage in the CPI index for the twelve—month period. The quotient shall be
a;loc'atEd to the space ren; for each space in the pari; based on the amount the space
rent relates to total space rent for the park. " The additional park costs under this
Section are as fo! 1L:i::
Pare( cost for vlectricity :pereabtJ by i9W'5. 90.
1 '
r°dl'n _vii. �. .Y G.t EI aiit_1 :c.e Eu ;j . .., Cl.a1•. it.
.:c roar"k cost `L)' :;ump tees in•=pei52:_; by ac, 8co. oL.
T'.1•a "v '::...a. .icl•E rof ' i,` I :il:I-ediQ erf ct.ve Ja(n.:' i✓� , C city i, . 'J':1 .•ill be J. .vv.
.1e a:1Lve ir,creaie r2f;ic.:tb act,al ,7a:` cost increases an: dues NST _riC:u_e Ut:lit:eb
v. i_ _ ...:i ...u.'•5?: _ _ _..'C.. . J . . ... Uti_ l: it: 1•... . . d':�•. a•._.0 3. c Vic. -
:..tr Ntiee a _.ci :L c.;l :`eD 1...erlG_ �Ub;_c: to L-e i'. _lis
_�.�r .. 1i.15 afli�=. ly I.rr. a :Y (::..i .'?'iL, Mril: :i'i ..1 r1]. �'. . •J' J _ ... _ .. .. X11., ti'.f
t_"�_
44.W-t�4, .•. a. uc +.:k.l•. r.. li'�ie uilallyn I:+cUVdlcb 2i _[tilYl' Jd.,�al'y :, 179•f dr1G
will remain so t;;rough December 31, 1994.
�:ncrrEly,
'a. Fl E6.in1 ,
If u-_
MEMORANDUM
FROM THE OFFICE OF THE CITY ATTORNEY
December 22, 1993
TO: City Council
FROM: Jeff Jorgensen
SUBJECT: Mobile Home Ren Stabilization
I have reviewed the attached letter dated December 7, 1993 from
Leola Rubottom, which asserts that the automatic rent adjustments
allowed by Municipal Code Section 5.44 . 60 (E) [5. 44 : 0.60 (E) ] are in
conflict with the Mobile Home Residency Law, and therefore invalid.
CONCLUSION
Municipal Code Section 5.44 . 060 (E) is not in conflict with the
Mobile Home Residency Law and is a valid subject of municipal
regulation.
ANALYSIS
It is correct that the Mobile Home Residency Law, Civil Code
Section 798 . 31, requires that, "a homeowner shall not be charged a
fee for other than rent, utilities and incidental reasonable
charges for services actually rendered. " However, what constitutes
rent, particularly under a rent control ordinance, is not preempted
by state legislation and is left to the broad discretion of the
local agency. Gregory v. City of San Juan Capistrano, 142 CA3d 72 ,
191 Cal.Rptr. 47 (1983) . In addition, in the absence of a rent
control ordinance, rent can be established at whatever level the
park owner determines, subject only to market forces.
The only case addressing the issue raised by Leola's letter is
Karrin v. Ocean-Aire Mobile Home Estates, 1 Cal.App.4th 1066, 2
Cal.Rptr. 2d 581 (1991) . The Karrin case invalidated a rent control
ordinance of the City of Oxnard which permitted a mobile home park
owner to add a monthly capital improvement assessment to the
monthly bill in addition to regular rent. The rent control
ordinance specifically provides that such assessments should not be
considered rent. The Court invalidated this provision because it
directly conflicted with Civil Code Section 798 . 31. However, the
Court was careful to point out that had the increase been .added to
rent rather than billed separately as an assessment, it would have
been valid.
ATTACHMENT 2
City Council
December 22 , 1993
Page Two
The San Luis Obispo Mobile Home Rent Stabilization Ordinance is
significantly different from the Oxnard ordinance which was
invalidated in Karrin. The adjustments permitted under the San
Luis Obispo ordinance are specifically included in space rent and
are not a separate fee, charge, or assessment. Under this
situation, it appears clear that the San Luis Obispo Mobile Home
Rent Stabilization Ordinance is valid under the Karrin decision.
(In addition, the 60 day notice of rent increase provided to the
tenants of Creekside Mobile Home Community appears to meet the
requirements of our ordinance as to form and effect. )
Finally, the reference to Civil Code Section 798 ..43 (b) does not
appear to be relevant or related to the question raised.
If you have further questions or comments, please feel free to
contact me at your convenience.
JGJ/sw
attach.
cc: Leola Rubottom
Pat Fleming
John Dunn
c;2-/41-//
San Luiz Obispo, CA
December 7, 1993
flvnonabl-e Flagon Pirvrard and City Counc_ii irernbeu o�
Sart Lyi.e Obiepv, CA
Ze: The ivegat paoe thrvughe being ar ded to the bade tent in
CAeakaidre MbiLehorne %'ante
,7t has been brought to mg attention that Section 5.44.60, paragraph "E,r
4 the San. L.ui,a Obiopo'e Mobizehorne Re.4iderwy Law i.o 1n direct c,4�
with ,the Ca,Ci.4vrrua ilobicehane 2eeidenug Law.
/Paragraph "C" o� Section 5.44.60 04 the Sart LUi6 llubi&L ome Re4idencl4
Law states, "Space rent may be autamatLca.0 y adjg, ed baoed on ,incnea6ee
in expense Az common aicea 'dUltied, nein goveVMent mandated services,
garbage eetviCe ca a vu.t.vn aAe/ce a0,02i.cabte."
%he California State Mobitehome ?eeid.,cg Law No. 798.43 Section (b) states
"aAenever a homevunen id redponaibte 2r gad, on etectri.c uti.Litg deAvi.ce,
management dha.LL dieelode to the /wrnevuner bgone tenancy, w4 ver the
hame=nea'e meter aloo measures gas on e/--' citg yr common. area AcilitLes,
of incfad<ng .lirghting. Thio can be h ed by oayA g
o%ren tea~ the holne-
pontion the ee•.vice to tike corzmvn areas yr di4c.on4&uze sid-
ing the meter on the horreourners ei,te �vrv,. e con-on aaea jLcLL-
ities and er�eu pment."
.In addition to cv.Llecting iUegat pale thzoughd vun pante owzerc es now going
to add these pane throughs to the base tent. /hia wi,U atLvw the inc ea ed
teat 4iau.:.e to be #hz new bane Pr catcutativrt4 or scent bej.Lrwung ne+ct yea,%.
798.31 or the State Aobilehome Rezidency Law Etat", "r4 homeorxwn dhatt not
be cha4aed a j�ee Px oL er than hent, utcliti.es and cricrden-' reasvnab.Le
�v
. . J rr
Changes P,% 4erVicee UCl1t d ZY Ae/ tu+e
Jhe pace thnvughs have been i.0 eznre thein inception acco&Lircg to oun
govvvang State AobiCehawe 2e4i ncncry law.
Accv tv "fiiedt'.6 Annotated Ca ipm7ja Code Con4ti ati.on, Article 6,
Seco xt , "state law 6upencedw manic i pat or ci.trg law."
We ate asking the tion. Mayor and the Counci.L members of the cj. e4 San
Luis Obispo to delete that pant o4 Section 5.44.60 paragraph "C' 44at <.s
ittegat actor to out State i'lobitehane R"idencrg Law.
r lhanfung you in advance �or youa eondideyti.on.
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ATTACHMENT 3
Legislative Draft
SLOMC § 5.44.060 (E)
E. Space rent may be automatically adjusted based on
increases in expenses for common area utilities, new
government-mandated services, garbage service and cable
television, where applicable. The space rent may be
adjusted by dividing the total increase in any such
expenses incurred during a twelve-month period by twelve,
less the percentage in the CPI index for the twelve-month
period. The quotient shall be allocated to the space
rent for each space in the park based on the amount the
space rent relates to total space rent for the park.
A tonin c ari ustrents; gent;: �utkaoaca 2e
paMM:be
ah � hall not be included in '!base '.space; rent...
� fl keaceses>pursuaO6a{ ;; usteal bconseed.r t. Notice ...of the increaseshalle n
fiall be given as required by law no less
than sixty days prior to any such increase being
effective. The notice shall state the amount of the rent
increase, the new space rent, the amount of the total
increase in expenses and the nature of the expense. A
copy of the notice shall be given to the city
administrative officer. The city administrative officer
shall have the authority to resolve questions regarding
computation of the space rent increase based ont his
section. There shall only be one such increase in any
twelve-month period.
ORDINANCE NO. (1994 Series)
An Ordinance of the Council of the City of San Luis
Obispo Amending Chapter 5. 44 .060 (E) of the San
Luis Obispo Municipal Code Relating to
Automatic Adjustments to Rent in Mobile Home Parks
BE IT ORDAINED by the Council of the City of San Luis Obispo:
SECTION 1. Section 5.44 . 060 (E) of the San Luis Obispo
Municipal Code is amended to read as follows:
E. Space rent may be automatically adjusted based on
increases in expenses for common area utilities, new
government-mandated services, garbage service and cable
television, where applicable. The space rent may be
adjusted by dividing the total increase in any such
expenses incurred during a twelve-month period by twelve,
less the percentage in the CPI index for the twelve-month
period. The quotient shall be allocated to the space
rent for each space in the park based on the amount the
space rent relates to total space rent for the park.
Automatic adjustments to rent authorized by this
paragraph E shall not be included in "base space rent"
for the purpose of determining CPI increases pursuant to
Section 5. 44. 060 (B) , but shall be considered as
additional rent. Notice of the increase shall be in
writing and shall be given as required by law no less
than sixty days prior to any such increase being
effective. The notice shall state the amount of the rent
increase, the new space rent, the amount of the total
increase in expenses and the nature of the expense. A
copy of the notice shall be given to the city
administrative officer. The city administrative officer
shall have the authority to resolve questions regarding
computation of the space rent increase based on this
section. There shall only be one such increase in any
twelve-month period.
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 A
Ordinance No. (1994 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 ,
1994 , on motion of , seconded by
and on the following roll call vote:
Ayes:
Noes:
Absent:
Mayor Peg Pinard
ATTEST:
City Clerk, Diane Gladwell
APPROVED AS GTO FORM:
i P.t me
ORDINANCE NO. (1994 Series)
An Ordinance of the Council of the City of San Luis
Obispo Deleting Chapter 5.44 .060 (E) of the San
Luis Obispo Municipal Code Relating to
Automatic Adjustments to Rent in Mobile Home Parks
BE IT ORDAINED by the Council of the City of San Luis Obispo:
SECTION 1. Section 5. 44 . 060 (E) of the San Luis Obispo
Municipal Code is hereby deleted in its entirety and repealed.
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 ,
1994 , on motion of , seconded by
and on the following roll call vote:
Ayes:
Noes:
Absent:
Mayor Peg Pinard
ATTEST:
City Clerk, Diane Gladwell
APPROVED AS TO FORM:
i At me
Exhibit B
ftECEIVED `"FETING AGENDA
."iT - _9 -ITEM #
LO
`�l� bl)DIR
CITY COUNCIL L.M.E. CONVERSION PROCESS , INC. ❑ FIN;DIR
SAN LIJIC OBtSPn. C 14_ JULY 1994 O FIRECHIEF
❑ PW.DIR
Mr . Robert J . Hadley, Managing General Partner , ❑ KNLII;ECHF
The Laguna Lake Company O Rl�GDIR
1650 Exhibito Ave . , Suite #200 ❑ U77LDIR
Long Beach , CA 90804 ❑ PERSDiR 1
Subject : Proposed pass-through of Park street maintenance and
repair costs .
Reference (a) Laguna Lake Mobile Estates "Notice to
Leasehold Tenants at Laguna Lake Estates" ,
dated 21 June 1994 , signed by Pat Fincher ,
Manager .
Reference (b) Laguna Lake Mobile Estates "Notice to
Leasehold Tenants at Laguna Lake Estates" ,
dated 28 June 1994 , signed by Pat Fincher ,
Manager .
Reference (c) California Park Properties , Inc . /Laguna Lake
Company letter to Laguna Lake Homeowners
Board of Directors, dated 12 September , 1991 .
Reference (d) Laguna Lake Company letter to Park Residents
dated 11 June 1992.
Reference (e) Current Mobilehome Park Lease held by the
great majority of Park tenants which became
effective 1 Janauary 1990 and expires 31
December 1994 .
Reference ( f) A signed "Statement of Committment" , Exhibit "A" , a
supplement to the Laguna Lake Mobile Estates Tenant
Impact Report , a part of Laguna Lake Mobile Estates
Tentative Map Application, Tract No . 2038 , dated 3
May 1993 .
Dear Bob :
The purpose of this letter is to detail Park tenant ' s concerns and
position on your proposal to pass-through the cost of "repair" of
existing Park streets to the tenants in the form of an increase in
their monthly rent .
Reference ( a ) is a notice to Park tenants that Park management has
determined that street repairs and resurfacing are required and that
the cost of existing street repair and maintenance will be passed
through to the tenants in the form of an -increase in monthly rent of
$6 . 81 per space , per month for fifteen ( 15 ) years .
1 ��-�� _ ,I
ikCI; IRiF �I.�
JUL 1 9 1994
CITY CLERK
In addition to this notice , Reference ( a ) asks each tenant to vote to
approve the proposed street repairs .
Reference ( b) provides additional information about the proposed
street repairs and asks that the tenants return their ballot .
Park residents have asked you many times in the last four years when
you intended to carry out routine maintenance of the Park streets as
they continued to detoriate. Except for filling a number of potholes ,
some cold patch work, and a slurry coating seven ycars ago , no street
maintenance of any substance has been performed since Park streets
were installed .
Reference ( c ) indicated to Park residents that the Laguna Lake Co .
will repair all interior Park streets once Tentative Map Approval for
conversion of the Park to condominium ownership is obtained .
Reference ( d) responds to the details of a tenant petition submitted
to the City of San Luis Obispo. The last sentence of the paragraph in
reference to Park condition and maintenance on page 3 reads as
follows : "However , in light of the recent petition signed by 206 of
you, and as a prudent business decision, we will not make further Park
improvements except as noted above until after the documents have been
distributed and we have a feel for resident support for this
conversion. "
This statement appeared to many Park tenants as an attempt to coerce
them into going along blindly with the Park conversion to condominium
ownership as a condition of obtaining routine street maintenance and
repair . This deferring of maintenace and repair of the streets has
contributed greatly to the cost impact now that you have finally
decided to do the necessary repair and maintenance.
Reference ( e) indicates that each tenant ' s base rent amount is
supposed to provide for the use of Park facilities , including all
required maintenance and repair. Paragraph 8 of reference ( e) refers
to adjustment of tenant ' s rent for "Capital Improvements" and reads as
follows : "Rent may be increased for any newly installed capital
improvements made by Park if made in accordance with this paragraph .
The term "capital improvements" is defined to include all items which
the Park reports or treats for State or Federal income tax purposes as
capital improvements. The total effective cost to Park for capital
improvements will be verified by a statement from Park ' s accountant
that these are the total costs. The "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 other costs and charges relating to the borrowing of any
sums by Park to make such capital improvements . Expenditures over
$10 , 000 . 00 for newly-installed capital improvements shall be subject
to a majority vote of tenants ( one vote per space ) .
2
Charges to tenants shall be made equally to tenants and in accordance
with adjustment of rent provided in Paragraphs 7 ( a ) and 7( b) . "
Routine repair and maintenance of existing Park streets hardly
qualifies as a "newly installed" capital improvement . According to
the IRS the cost of repairs to existing business property can be
deducted in the year as an expense of doing business . Such expenses
do not qualify as "capital improvements" . In any case, Park tenants ,
under the terms of our current lease have no responsibility for the
costs of such maintenance and repair of existing Park facilities .
In Reference ( f ) , paragraph 6 , "Park Condition at time of Conversion" ,
you personally made a commitment to Park tenants as fellows :
"a . Pursuant to expressed requests of the Residents , and in
accordance with the announced intention of the Owner and Owner ' s
agent , to complete all needed Park maintenance prior to the
conversion, the Owner will undertake reasonable , adequate and timely
action to complete all necessary maintenance , at the Owner ' s sole
expense, to correct the following, but not limited to , listed Park
systems , and such conditions which are the Owner ' s responsibility , as
distinct from any basic maintenance responsibility of the Residents ,
including corrections that are also imposed by City and State
requirements , relating to the same maintenance defects requiring
correction without the prompting by any government requirements ,
particularly those systems affecting Health and Safety.
b . With respect to all such normal maintenance requirements , and
particularly the repair of the creek banks , Owner agrees not to
attempt to recover any such repair expenses from Park Residents , nor
will any other expenses incurred by the Owner for correction of such
Park conditions , be passed through to the Residents or reflected in
any way in the Condominium Unit purchase price . This assurance is
made so that the Residents can respect the valuation of their
Condominium Unit for offer of sale .
C . The following are the major Park aspects needing maintenance which
will be incorporated into the City' s condition of approval of the
subdivision and performed prior to recording the final map :
( iii ) Park Street System: Repair and replacement of worn blacktop
paving on streets and necessary repair of all streets in a manner
which offers some permanence to street surfaces . "
3
For the last four years Park tenants have been very patient as the
proposed conversion of the Park to condominium ownership played out .
At no time was consideration given by the tenants to filing a suit for
"failure to maintain" , using the requirements of paragraph 798 . 15 ( d)
of the State Civi-1 Code , even though , by your direction, the necessary
street maintenance was deferred and the condition of Park streets was
allowed to detori.ate
This action being taken by you at a time when you are trying to gain
the confidence of Park tenants and encourage them to consider signing
long term leases having terms favorable to your objectives causes many
Park residents to doubt your motives and gives them reason to believe
that you are willing to take advangage of them by attempting to apply
a doubtful intrepretation of the terms of our current lease.
Expecting Park residents to pay almost $370 , 000 . 00 for existing street
repair and maintenance that is clearly the responsibility of the
Laguna Lake Co . is unacceptable .
In summary it is the opinion of the Board of Directors , L.M. E.
Conversion Process , Inc . , the Homeowner ' s Association representing all
mobilehome owners who are tenants in Laguna Lake Mobile Estates , that
your intention to attempt to pass-through the cost of Park street
repair as expressed by References (a ) and ( b) is not possible under
the terms o•f our existing lease and we ask that you reconsider this
plan to attempt to pass the costs and finance charges for repair and
maintenance of Park streets through to the tenants in the form of a
rent increase.
We request that you proceed immediately with the planned repair of
Park streets at the expense of the Laguna Lake Co.
Sincerely,
copies :
City Attorney, City of San Luis Obispo
,"Mayor , City of San Luis Obispo
Alice-Jean "A.J. " Davis , Region 8 Manager , GSMOL
Stephen N. Cool , Attorney at Law
Mrs . Pat Fincher , Park Manager
4