[California Supreme Court 17 Cal.3d 129, 130 Cal.Rptr. 465 (1976)]
The State Supreme Court stated that rent control is no different than many other forms of economic regulations which are constitutionally valid when reasonably related to the furtherance of a legitimate government purpose. The State Supreme Court also concluded that state law does not preempt the field of placing maximum limits on residential rents and that a charter amendment for rent control could properly be enacted by initiative.
[California Supreme Court 35 Cal.3d 184, 197 Cal.Rptr. 284 (1983)]
The Supreme Court reversed, finding that the ordinance, with its 12 non-exclusive factors, did provide sufficient guidelines, and that local jurisdictions are not obligated by either the U.S. or California Constitutions to fix rents by use of any particular formula.
[Civ. No. 28680. Court of Appeals of California, Fourth Appellate District, Division One. June 27, 1984.]
The Court of Appeal reversed, holding the ordinance to be constitutional. Specifically, the Court found as follows:
[10 Cal.App.4th 542 (1992)]
The Court of Appeal ruled in a concisely worded opinion that there was no physical or regulatory taking. The Court found that vacancy control cannot constitute a regulatory taking where it advances a legitimate public purpose. This case also holds that a park owner cannot challenge the effect of the ordinance until he first seeks a rent increase and goes through rent hearings. In other words, the ordinance could only be challenged as applied, and not on its face.
[California Court of Appeal, Fourth District 16 Cal.App.4th 481, 20 Cal.Rptr.2d 371 (1993)]
The Court rejected the park owner’s argument, holding that “fair return on investment,” as represented by the Net Operating Income (NOI) approach is sufficient. “Fair return on total value of property” is not required. This prevents the park from obtaining increased rent based upon value where the value of the property has increased since it was purchased. The Court noted that the NOI approach has been praised by commentators “for both its fairness and ease of administration.”
[California Court of Appeal 224 Cal.App.3d 1349, 1990, 274 Cal.Rptr. 551 (1990); affirmed 112 S.Ct. 1522 (1992)]
In a major victory for residents, the Court of Appeal affirmed the trial court. It found Hall’s reasoning unpersuasive and reaffirmed the conclusion of the California Court of Appeal in Oceanside Mobilehome Park Owner’s Association v. City of Oceanside. The Court stated that the “fact that used mobilehomes in Escondido are selling for more than they have in the past is irrelevant,” called Hall “an interpretative misstep,” and held that Hall was inconsistent with subsequent U.S. Supreme Court holdings. The California Supreme Court denied review. On April 1, 1992, by a 9-0 vote, the U.S. Supreme Court affirmed the Court of Appeal. The Court rejected both Hall and its physical taking theory.
[U.S. Ninth Circuit Court of Appeal (2010)]
The Court noted the following: “Because the owner of the mobile home cannot readily move it to get a lower rent, the owner of the land has the owner of the mobile home over a barrel.”
“[The ordinance] protects owners of mobile homes from the leverage owners of the pads have, to collect a premium reflecting the cost of moving the mobile home on top of the market value of the use of the land. This is a legitimate government purpose, related to, but distinct from lowering housing prices for all renters.”
The Court found that because the park owner had owned the park while it was subject to a similar ordinance, its “expectations” could not reasonably have been that there would be no rent control. In so doing, the Court described that such “[D]istinct investment-backed expectations implies reasonable probability, like expecting rent to be paid, not starry eyed hope of winning the jackpot if the law changes.” “The Guggenheims bought a trailer park burdened by rent control, and had no concrete reason to believe they would get something much more valuable, because of hoped-for legal changes, than what they had.”
“The people who really do have investment-backed expectations that might be upset by changes in the rent control system are tenants who bought their mobile homes after rent control went into effect. Ending rent control would be a windfall to the Guggenheims, and a disaster for tenants…” “Leaving the ordinance in place impairs no investment-backed expectations of the Guggenheims, but nullifying it would destroy the value these tenants thought they were buying.” (Note that the Courts ultimately rejected the position of the MH park appraiser, John Neet, and arguments of Hart, King and Coldren law firm.)
[147 Cal.App. 4th 1170 February 22, 2007, No. 07-15982 (9th Cir. 2013)]
MHC argued that the San Rafael ordinance caused a significant “economic loss” and interfered with its “investment-backed expectations”, phrases which courts see as “primary factors” in determining the validity of a “takings” claim. This is known as the “Penn Central” analysis, named after a 1978 U. S. Supreme Court decision.
On appeal, the Ninth Circuit panel ruled that because MHC had acquired the park after the enactment of vacancy control, it did not suffer a sufficient “economic loss” or interference with its reasonable “investment- backed expectations”. Further, the Court found that MHC could not have expected when it purchased the park that the City would amend its ordinance, or that “the rent control regime would disappear altogether”. Thus, the Court found no Penn Central taking. The Court went on to state that the ordinance “is much more an adjustment of the benefits and burdens of economic life to promote the common good”, and that when “the legislature’s purpose is legitimate and its means are not irrational, our cases make clear that empirical debates over the wisdom of takings – no less that debates over the wisdom of other kinds of socioeconomic legislation – are not to be carried out in the federal courts.” The Court thus held that the San Rafael ordinance “is rationally related to a conceivable public purpose” and that it “does not amount to a private taking”.
Civil Rights. The panel affirmed in part and reversed in part the district court’s bench trial judgment and held that the City of San Rafael’s mobilehome rent regulation passed constitutional muster. The panel held that the district court properly rejected the City’s arguments that plaintiff’s claims were barred by the statute of limitations and precluded by res judicata, and that the district court did not abuse its discretion in allowing plaintiff to amend its complaint. Reversing the district court, the panel held that the economic impact, investment-backed expectations, and character of San Rafael’s Mobilehome Rent Stabilization Ordinance all lead to the conclusion that the Ordinance, as amended in 1999, did not constitute a Penn Central taking. The panel further held that because the Ordinance was rationally related to a conceivable public purpose, the Ordinance did not amount to a private taking, nor did it run afoul of substantive due process. The panel held that the district court did not err in submitting plaintiff’s breach of settlement agreement claims to the jury, denying the motion for a directed verdict on that question, denying the motion for a new trial, or awarding attorneys’ fees to the City for its victory on the settlement claims. Finally, the panel affirmed the district court’s dismissal of plaintiff’s second subsequent suit against the City which was filed while the original lawsuit was pending. The panel determined that the claims in both suits were the same and plaintiff had agreed to waive its damage claims in the first lawsuit.
[544 U.S. 528 (2005)]
The U.S. Supreme Court expressly overruled precedent created in Agins v. City of Tiburon, 447 US 255, (1980). Agins held that a government regulation of private property effects a taking if such regulation does not substantially advance legitimate state interests. Writing for the Court, Justice O’Connor found the test untenable for a number of reasons, but declined to grant Chevron relief because Chevron’s motion before the court (for grant of summary judgment) was limited to a discussion of the “substantially advances” theory which had just been struck down. The Court remanded back to the Ninth Circuit for a determination of whether the statute exacted a Penn Central-like taking.
Quotes from the Court: “Twenty-five years ago, the Court posited that a regulation of private property "effects a taking if [it] does not substantially advance [a] legitimate state interes[t]." Agins, supra, at 260. The lower courts in this case took that statement to its logical conclusion, and in so doing, revealed its imprecision. Today we correct course. We hold that the "substantially advances" formula is not a valid takings test, and indeed conclude that it has no proper place in our takings jurisprudence.” The position confirmed that Rent Stabilization Ordinances do not constitute a regulatory taking of property.
[United States Court of Appeals for the Ninth Circuit February 13, 2015; September 3, 2015, Filed No. 12-17749 2015]
The California State Court of Appeals upheld a 2013 trial court finding that the owner of the Rancho de Calistoga mobile home park is not constitutionally entitled to charge “market rate” rent, the owners’ central claim in both the trial court and appeal. This rejected argument is of particular relevance in that AVMGH Three/Golden Palms Limited Partnership have used appraiser John Neet to make a “market rate” claim in the Rancho Calimesa Mobile Home Ranch application.
Penn Central "identif[ies] several factors, not a set formula," to determine whether this functional equivalence exists. Guggenheim, 638 F.3d at 1120. Chief among the factors to be considered are "[t]he economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations" and "the character of the governmental action-for instance whether it amounts to a physical invasion or instead merely affects property interests through some public program adjusting the benefits and burdens of economic life to promote the common good." Lingle. 544 U.S. at 538-39 (citing Penn Cent .. 438 U.S. at 124) (internal quotation marks omitted) (alteration in original). Applied here, these factors counsel in favor of the City.
“Here, as in Equity Lifestyle, the ordinance articulates just such distinguishing characteristics, including the potential hardship posed by rent increases and the fact that mobile home park residents "are in a unique position in that they have made a substantial investment in a residence for which space is rented or leased" and the associated relocation costs. See Ordinance 644 § 2.22.010.B; Guggenheim. 638 F3d at 1123 (noting that HN18 this court is "bound by precedent establishing that such laws do have a rational basis"). Rancho offers no legitimate claim that Snowden's decision was politically motivated or otherwise arbitrary. We therefore affirm the district court's dismissal (*22) of Rancho's due process and equal protection claims.”
Below is information from an email blast sent by the National Manufactured Home Owners Association (NMHOA), which cites some comments from MHP court cases:
Over the years, several prominent court decisions have acknowledged the plight of people who own their homes but rent the land under them and reside in land lease communities. For instance, in the landmark 1992 case, Yee v. Escondido, the United States Supreme Court ruled unanimously in support of local rent ordinances, by confirming the Escondido rent ordinance did not amount to a “physical taking” of the community owner’s property. The court remarked, “The term ‘mobile home’ is somewhat misleading. Mobile homes are largely immobile as a practical matter, because the cost of moving one is often a significant fraction of the value of the mobile home itself.” In other cases from California heard as recently as 2013 in the Federal Ninth Circuit Court of Appeals, judges have recognized that “Because the owner of the mobile home cannot readily move it to get a lower rent, the owner of the land has the owner of the mobile home over a barrel.” and that, “The people who really do have investment-backed expectations that might be upset by changes in the rent control system are tenants who bought their mobile homes after rent control went into effect.” The court also declared, “[The ordinance] protects owners of mobile homes from the leverage owners of the pads have, to collect a premium reflecting the cost of moving the mobile home, on top of the market value of the use of the land. This is a legitimate government purpose, related to but distinct from lowering housing prices for all renters.” Unfortunately, many states currently have statewide “preemption” against local rent ordinances, which prevents local governments from adopting local rent ordinances in their jurisdictions.
In October 2012, the Federal Ninth Circuit Court of Appeals stated that, “displacement from a mobile home park can mean economic ruin for a mobile home owner.” This was part of the dicta in the Court’s decision to uphold a local zoning ordinance enacted by the City of Tumwater in Washington, whereby the City established a “mobile home park” zoning designation for most of the existing manufactured housing communities in the City. The Court then went on to say that, “as a general rule, zoning laws do not constitute a taking even though they affect real property interests…. Minimal economic effect does not support a takings claim.” Several other Washington jurisdictions have gone to enact local “mobile home park” zones as one way to help preserve existing manufactured housing communities.
In the 1974 case, Stewart v. Green, the Florida Supreme Court stated “If mobile home park owners are allowed unregulated and uncontrolled power to evict mobile home tenants, a form of economic servitude ensues, rendering tenants subject to oppressive treatment in their relations with park owners and the latters’ overriding economic advantage over tenants.” In a 1989 case, Lanca Homeowners, Inc. v. Lantana Cascade of Palm Beach, Ltd, the Florida Supreme Court recognized the immovability of manufactured homes and the resultant total lack of bargaining power had been used as a basis for ruling that homeowners’ “absence of choice” met “the class action requirement of procedural unconscionability.” In 1990, a Florida appellate court subsequently commented in Belcher v. Kier, that “[b]ecause of the difficulties inherent in moving the home from one settled location to another, it is hard to imagine a situation where the park owner and the tenants are in an equal bargaining position on rent increases.”
Perhaps some of these statements will give you “ammunition” in trying to reason with your elected officials to better protect vulnerable homeowners. In many cases, the battle needs to start at the state level to change laws that currently restrict the powers of local officials to properly protect homeowners. Since this is an election year, you have a special opportunity to educate candidates on our issues in the hope that if elected, they will be champions of homeowner rights.