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Are Long-Term Mobile Home Space Leases Fair?

By Benjamin Cadranel

The article “In a California Manufactured Home Park, Seniors Asked to Sign Leases that may Outlive Them" featured in the Sac Bee is a fascinating look into the #manufacturedhousing #mobilehomepark owners and homeowner/resident dynamic. The relationship is unique to the residential rental space, because #residents actually own the homes they live in, just not the space the home is on. The uniqueness of the relationship led to California passing the Mobilehome Residency Law and many local jurisdictions passing rent control ordinances.

Long term leases have long been used as a legal workaround to rent-control ordinances. The loophole has been known to legislatures since the statutes themselves were written but have not been corrected. Many residents including the ones in this article are asking why?  Senate Bill 999 aims to fix the long term lease loophole if passed. Park Owners are clearly opposed.

The workaround was likely kept in place, on the one hand, as a nod to a park owner's right to a reasonable return on investment. Most new park owners buy a park that has been neglected over the years or is just in need of significant repairs.  Add to that the fact that the new owner pays “market rate” for the park and incur a stepped-up property tax basis most likely. The cost of operations naturally goes up. Those external forces create extra burdens on park owners to increase rents to meet investment return margins.

On the other hand, mobile home park residents argue that because of their unequal bargaining position, they deserve clarity and protection from excessive and unfair rent increases. Rent control ordinances ensure that monthly rents never increase dramatically (usually with exceptions for pass-throughs of common park improvements for the benefit of all residents, utilities, etc.). Long-term leases that workaround these ordinances are usually designed to avoid the restrictions, and increase park valuations, notwithstanding any benefit to the residents. It is not a secret, its business. And just like taxes, park owners find all the legal ways of maximizing value and minimizing liability.

This article does a good job of illuminating the human toll of business decisions and the no-win choices that must be made between park owners and residents. Every park owner will tell you that they think manufactured housing should remain affordable, and every resident should be understanding that a park owner is entitled to a fair return on their investment.   

The problem, of course, is that humans are imperfect, leading to perversions, albeit legal, of the law. Ordinarily, we see landlords implementing 13-month leases as an obvious workaround to the limitation of rent control ordinances to raise rents beyond a certain point for annual or monthly contracts. Residents retain their own leverage until the contract is signed and negotiate terms if a park owner is demanding concessions. In this case, there was not even a rent-control ordinance in place, but the owner was anticipating statewide rent control as a response to the pandemic. The park owner, anticipating the changing legal landscape, wanted to ensure a workaround with a 25-year lease, which seems excessive, even by reasonable standards, given the advanced age of the residents.

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