Rent Control Victory in California

RENT CONTROL VICTORY IN MARIN COUNTY

Rudderow Law Group (RLG) achieves another victory in the battle against local rent control, this time in the very litigious and pro-tenant City of San Rafael.

The City was enforcing its vacancy control mobilehome rent control law against our client’s RV park, holding rents at a mere fraction of their market value in perpetuity. The City filed a lawsuit against our client when the park exercised its right as a RV park to increase rents. The City contended that RV’s should be deemed “mobilehomes” under the wording used in its ordinance and that rent control should apply because a prior owner of the park had agreed 19 years ago to be subject to the City’s ordinance as part of a deal to secure a limited $25 rent adjustment.

RLG used legislative history, statutory interpretation and mobilehome and RV park expertise to craft a defense for the current park owner that allowed for settlement of the case and avoided the cost of a trial. As part of the settlement, the City effectively conceded that its ordinance did not apply to the RV park, and the park owner agreed not to increase rents to market for existing tenants immediately, but to wait until the current residents leave the park. In exchange, the owner secured a judgment filed with the court that instructs that the client’s park shall forever not be subject to the City’s rent control ordinance.

The bottom-line result: upon turnover, our client may adjust and maintain rents at market without the threat of rent control, having effectively won full vacancy decontrol so that, down the road, there will be no spaces subject to rent limitations, increasing the value of the client’s park exponentially.

RENT CONTROL VICTORY IN SONOMA COUNTY

RLG is also pleased to report another rent control victory for a different client, this time in Sonoma County. Our client maintained that certain spaces in its park were exempt from local rent control under the “new construction” exemption found in California’s Mobilehome Residency Law that says a newly constructed space is exempt if it was initially held out for rent after 1990. Our client contended that it had reconfigured lot lines of certain spaces in the park which made them newly constructed spaces entitled to exemption.

The tenants sued our client, contending that moving the lot lines did not make the spaces newly constructed and exempt under the City’s ordinance. The tenants sought tens of thousands of dollars in monetary compensation, claiming they were entitled to a refund of 10 years of overpaid rent.

RLG took this particular case to trial and argued before a 12-person jury that the subject spaces were exempt. With no prior case law on point, RLG argued that the moving of the lot lines had the legal effect of creating “new spaces” which were entitled to the exemption. RLG also presented evidence showing how the City itself had allowed the park to claim the exemption for many years.

In a 12 to 0 vote, the jury overwhelmingly agreed that the moving of the lot lines did result in the spaces being “newly constructed” entitled to the exemption.

 

RENT CONTROL VICTORY STATEWIDE?

RLG has sued the State of California on behalf of the owner of Anaheim Mobile Estates.  In this suit, RLG contends that the state’s recently enacted rent control law of 3-5% on parks located within two (2) cities is unconstitutional because it fails to provide any mechanism or opportunity for our client to apply for a “fair return” rent increase.  While federal and state law recognize the state’s police power to enact rent control, the law also recognizes that a park owner has a constitutional right to realize a fair return on their investment property.  RLG sued California arguing that the new state law denies Anaheim Mobile Estates this constitutional right.

The State of California attempted to have the case thrown out of court, but the presiding judge ruled that the case will be allowed to proceed. Trial has been scheduled for next year.

In the meantime, California Assembly Bill 1035 was introduced this year which seeks to impose 3-5% rent control on all parks in the State of California (regardless of whether a park is located in two cities). This proposed law likewise fails to provide any mechanism or opportunity for a fair return rent increase.

However, AB 1035 has (for this year at least) hit a roadblock and will not pass due, in part, to the fact that AB 1035’s lack of a mechanism is currently being litigated by RLG in the Anaheim Mobile Estates case.

As reported in the Orange County Register, Assemblymember Buffy Wicks’ office pointed to Anaheim Mobile Estates’ lawsuit as a reason why the bill will not be heard in committee. “As a general practice, most committees will not hear bills that are involved in active litigation,” said Erin Ivie, a spokesperson for Wicks, the chair of the Assembly Housing and Community Development Committee. “In this particular case, holding AB 1035 and making it a two-year bill will allow sufficient time for the [Anaheim Mobile] lawsuit to conclude, providing certainty about what is legal and not legal in this space and preserving our committee’s ability to weigh in on amendments to the bill,” Ivie said.

While this year’s defeat of state-wide rent control is certainly something to celebrate, the battle over rent control will certainly only intensify next year. RLG remains dedicated to its mission to advocate on behalf of park owners in the fight for property rights in all the battles ahead . . .

RLG’s practice includes rent control litigation and fair return applications including Vega adjustment applications. For more information on the types of services offered by the firm, please contact Dan Rudderow directly at (949) 565-1341 or [email protected].