BILL ANALYSIS
AB 566
Page 1
Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 566 (Nava) - As Amended: April 27, 2009
SUBJECT : Mobilehome parks: conversions.
SUMMARY : Requires the subdivider to obtain a survey
demonstrating support of a majority of the residents in order to
convert a rental mobilehome park to resident ownership.
EXISTING LAW
1)Requires the subdivider of a mobilehome park to another use,
at the time of filing a tentative or parcel map for the
subdivision, to also file a report on the impact of the
conversion upon the displaced residents of the mobilehome park
to be converted. The report must address the availability of
adequate replacement space in other mobilehome parks
(Government Code 66427.4).
2)Allows the local legislative body authorized to approve or
disapprove a tentative or parcel map for the conversion of a
mobilehome park to another use to require the subdivider to
take steps to mitigate any adverse impact of the conversion on
the ability of displaced residents to find adequate space in
another mobilehome park (Government Code 66427.4).
3)Authorizes local agencies to enact more stringent measures for
the regulation of conversions of mobilehome parks to other
uses (Government Code 66427.4).
4)Exempts the conversion of rental mobilehome parks to resident
ownership from the above provisions (Government Code
66427.4).
5)With respect to the conversion of a rental mobilehome park to
resident ownership, requires the subdivider to offer existing
tenants the option to purchase their subdivided unit or to
continue residency as a tenant in the park if they decide not
to purchase their lot (Government Code 66427.5).
6)Requires the subdivider of a mobilehome park to resident
ownership to file a report on the impact of the conversion
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upon residents and to make the report available to all
residents 15 days prior to the hearing on the tentative or
parcel map before the local legislative body (Government Code
66427.5).
7)Requires the subdivider to conduct a survey of support of the
residents of the mobilehome park for a proposed conversion to
resident ownership that meets the following conditions:
a) Be conducted in accordance with an agreement between the
subdivider and a resident homeowners association if one
exists, that is independent of the subdivider;
b) Be obtained pursuant to a written ballot; and
c) Be conducted so that occupied mobilehome space must have
one vote (Government Code 66427.5).
8)Requires that the results of the survey of support be
submitted to the local legislative body upon the filing of the
tentative or parcel map to be considered as part of the
subdivision map hearing (Government Code 66427.5).
9)Limits the scope of the hearing of the legislative body on the
tentative or parcel map to the subdivider's compliance with
the procedures to avoid the economic displacement of
non-purchasing residents (Government Code 66427.5).
10)Establishes the following method for avoiding the economic
displacement of non-purchasing residents:
a) Allows the monthly rent for non-purchasing residents who
are not low-income to increase from the preconversion rent
to market rents, as defined in an appraisal conducted in
accordance with nationally recognized professional
appraisal standards, in equal annual increases over four
years;
b) Allows the monthly rent for non-purchasing, low-income
residents to increase from the preconversion rent by an
amount equal to the average monthly increase in rent in the
four years immediately preceding the conversion, except
that in no event may the monthly rent be increased by an
amount greater than the average monthly percentage increase
in the Consumer Price Index for the most recently reported
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period (Government Code 66427.5).
11)Waives the requirement for a parcel map or a tentative and
final map with limited exceptions n cases where at least
two-thirds of the owners of mobilehomes who are tenants in the
mobilehome park sign a petition, the language of which is
specified in statute, indicating their intent to purchase the
mobilehome park for purposes of converting it to resident
ownership (Government Code 66428.1).
FISCAL EFFECT : Unknown
COMMENTS :
Background:
According to the Senate Select Committee on Mobile and
Manufactured Homes (Select Committee), there are approximately
4,822 mobilehome parks and manufactured communities in the
California, with an estimated 700,000 residents living in them.
In the vast majority of parks, mobilehome residents own their
homes but rent the spaces on which their homes are installed
from the park on a month-to-month or long-term lease agreement.
According to the Select Committee, of the 4,822 parks, most are
privately owned by investor groups or owner/operators and an
estimated 150 are owned by resident organizations or non-profit
organizations. Contrary to their name, mobilehomes generally
are not mobile. Once installed in a park, they are rarely ever
moved.
In the mid-1980s, as a result of increasing park rents for low-
and moderate-income residents and the closure of some parks and
displacement of residents, the concept of resident-owned parks,
where residents form a homeowners association to purchase a park
and convert it to a mobilehome subdivision, condominium, stock
co-operative, or non-profit ownership, gained popularity.
Between 1984 and 1996, the Legislature enacted a number of laws
relative to conversions to resident ownership.
Legislative History:
The Subdivision Map Act vests in cities and counties the power
to regulate and control the design and improvement of
subdivisions within their boundaries.
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Conversions of mobilehome parks to other uses are considered to
be subdivisions pursuant to the Subdivision Map Act. Prior to
1991, the Map Act required a subdivision map to be filed and
approved by the local jurisdiction before individual lots in a
park could be sold and converted to a resident-owned
subdivision or condominium, and allowed the local government to
impose its own conditions on the map. Subsequently, resident
groups and conversion consultants complained that by imposing
"unreasonable" conditions, some local governments were actually
hampering conversions to resident ownership.
In 1991, AB 1863 (Hauser), Chapter 745, exempted from
subdivision map requirements a conversion where two-thirds of
the residents were in support. In 1995, the Legislature passed
SB 310 (Craven), Chapter 256, which amended Government Code (GC)
66427.5 to establish statewide standards for avoiding the
economic displacement of non-purchasing residents in the event
of a conversion of a park to resident ownership. Under the
provisions of SB 310, rents for lower-income non-purchasing
households can only increase by the average monthly increase in
the four years preceding conversion and shall not exceed the
most recent increase in the Consumer Price Index. For all other
non-purchasing residents, rents can increase to market levels in
equal amounts over four years. By establishing a state rent
control formula for low-income residents who do not purchase
their lots, SB 310 preempted any local rent control ordinance
from regulating rents in a park converted to resident ownership.
SB 310 also specified that the scope of the local hearing on a
conversion to resident ownership shall be limited to the issue
of compliance with GC 66427.5.
El Dorado Palm Springs, LTD. v. City of Palm Springs et al.:
In 1993, the owner of the El Dorado Mobile Country Club, a
377-space mobilehome park in Palm Springs, filed a tentative
subdivision map as a first step to converting the park to
resident ownership. The Palm Springs City Council, concerned
that this was a "sham" conversion to circumvent its local rent
control ordinance, approved the map subject to several
conditions, including that the effective map date would be the
date escrow closed on 120 lots in the park. Under this
condition, the park would cease to be subject to the city's
mobilehome space rent control ordinance after 120 of its lots
had sold. At that point, the formula for mitigating economic
displacement under SB 310 bill would be applicable.
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El Dorado's owner filed a lawsuit in superior court to compel
approval of the subdivision map without the conditions,
including the condition delaying the effective date of the map.
El Dorado's owner argued that the effective date of the
conversion was when one lot sold, and that pursuant to GC
66427.5, the city council did not have the power to impose more
stringent requirements. The lower court denied the park owner's
petition, but in 2002, the 4th District Court of Appeal reversed
that decision, ruling in favor of the park owner.
The appellate court ruled that the city was limited to the scope
of assuring that El Dorado's owner had complied with the
requirements of 66427.5. The court ruled that 66427.5 takes
effect as soon as one unit is sold, and therefore, its rent
formulas supersede a local rent control ordinance as soon as
that first lot is sold. The Appellate Court opined that the
question of whether or not there should be more protections in
the statute to prevent "sham" conversions by a park owner was a
legislative one and not a legal one.
The proponents of SB 310 did not foresee instances in which
mobilehome park owners, rather than residents, would pursue
conversions using the provisions of 66427.5. Since the El
Dorado conversion, many more mobilehome park owners have pursued
this type of conversion. This has set up a conflict between
park owners and park residents over the use of existing state
law for conversion of parks to resident ownership.
Survey Requirement:
In an attempt to respond to the El Dorado case, in 2002, the
Legislature passed AB 930 (Keeley), Chapter 1143. AB 930
required a subdivider to obtain a survey of support of residents
of the mobilehome park for a proposed conversion to resident
ownership. The survey must be conducted in accordance with an
agreement between the subdivider and a homeowners' association
and must be obtained as a written ballot with each occupied
mobilehome space having one vote. Once completed, results of
the survey must be submitted to the local agency to be
considered as part of the subdivision map hearing. AB 930
included uncodified language stating the bill was intended to
assure that such conversions were "bona-fide."
Since the survey requirement was added to the provision of the
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Map Act governing conversions to resident ownership, some local
governments have enacted local ordinances to define "bona fide,"
including a requirement that a certain percentage of residents
indicate an interest in purchasing their lots. Several of these
ordinances are the subject of pending litigation as park owners
have challenged the measure of resident support as evidence that
the conversion is bona fide.
Need for the Bill:
The author is concerned that park owners interpret the survey
requirement simply as a step to be completed in the conversion
process rather than something that local governments can truly
take into consideration and use as a basis for approving or
denying a conversion to resident ownership. According to the
author:
"Under current State law, a 'survey' must be taken of park
residents before the conversion; however, park owners argue the
survey has no meaning. Park owners argue that even if the
survey shows that 100% of the residents oppose the conversion,
the local agency has no option but to approve the conversion?."
AB 566 would require the survey to demonstrate that a majority
of the residents of the mobilehome park support the proposed
conversion to resident ownership in order for the conversion to
proceed.
Arguments in Support
Writing in support of the bill, the Golden State Manufactured
Home-Owners League writes:
"?the conversion of a mobilehome park to condominiums
unfairly transfers a significant portion of the value of a
resident's home to the park owner. Unlike conventional
rental housing, such as an apartment, in a mobilehome park
there is a shared property interest between the park owner
and the homeowner. The parkowner holds title to the land.
The homeowner has title to the mobilehome, but also a
property right under California law to sell the home in
place, and a property right in the leasehold interest in
the space on which the home is located. Each of these
rights is recognized and protected in California law, and
the homeowner has in good faith purchased their mobilehome
at a value that was based upon the existence of these
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interests. They have, in fact, paid for each of these
property rights in purchasing their home, and have done so
at a price that assumes the continuation of these rights.
California courts are in agreement on this point: the value
of the mobilehome on its lot-represented by the leasehold
interest and the right to sell in place-is a property
interest that belongs to the homeowner. See e.g. Sandpiper
Mobilehome Village v. City of Carpenteria, 10 Cal.App.4th
542 (1992). The appraisal industry agrees. The guidelines
issued by the National Association of Appraisers directs
its members to abandon the outdated notion that mobilehomes
are a depreciable asset, and instead acknowledges that
mobilehome owners accumulate equity in their homes and this
equity includes the in-place value of the home.
The conversion of a mobilehome park to condominiums
dramatically reorganizes the property rights of mobilehome
owners without any compensation. It grants to the park
owner the property value that the homeowner has fairly
bargained and paid for.
AB 566 would address this unfair shift by giving homeowners
a stake in this process. By allowing homeowners a say in
whether they desire to purchase the lot on which their
mobilehome sits allows both parties to bargain for a fair
price in exchange for the homeowner surrendering the
property interest they have lawfully purchased. Without AB
566, thousands of homeowners will see the investment in
their homes evaporate as conversions of parks proceed
undeterred."
Arguments in Opposition
Writing in opposition, the Western Manufactured Housing
Communities Association states:
"Even though the conversion process is a fair and important
option for all parties involved, there is an overarching
reason for an increase in the number of conversions over
the years since El Dorado vs. City of Palm Springs. El
Dorado was the seminal case that proved it was legal for
park owners to initiate conversions and owners have now
realized a mechanism to get out of the rental mobilehome
business. Conversions are a symptom of a larger problem
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caused chiefly by the severity of local rent controls
imposed on parks in over 100 cities. Over 80% of those do
not allow full vacancy decontrol in which rents may be
raised to market when a home is sold, and re-rent
controlled at the new base rent?
It is no mystery that the cities where most of the
conversions are proposed contain the most stringent (non
vacancy decontrol) forms of rent control. The cities
include Santa Rosa, East Palo Alto, Hayward, Goleta, Carson
and Palm Springs. Ironically, stringent rent control in
those cities fails to achieve any of the objectives of rent
control such as increasing or preserving affordability,
increasing supply or addressing shortage. In fact, because
of the artificially low space rents the home prices in the
parks are becoming quickly unaffordable to new residents.
Therefore, the economic value of artificially low rents is
completely captured by the tenant who was there when rent
control was enacted (whether or not that tenant was "low
income") through inflated home sales?
Our members do not want to go out of the rental mobilehome
park business and would like to continue providing a
valuable source of rental housing in the state. Many of
these properties have been in family businesses for up to
50 years. However, when we discuss subdividing mobilehome
parks, it is imperative that legislative leaders understand
the economic reason why some parkowners have chosen that
option."
Related legislation:
AB 1542 (Evans, 2007) would have allowed local governments to
apply local rent control after the conversion of a mobilehome
park to resident ownership where such rent control existed prior
to the conversion and applied the state rent control formula
only in cities and counties with no local mobilehome rent
control. Additionally the bill struck the language limiting the
scope of local hearings on conversions to the issue of
compliance with GC 66427.5. AB 1542 was vetoed by the governor
with the following message:
I am greatly concerned about housing affordability and
homeownership for all Californians. I understand the
sanctity of the home and the importance of having stability
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in your living situation. This need for stability was
eloquently expressed by the many seniors throughout
California who have written to me on both sides of this
bill.
I also recognize that compared to other housing issues
there is a uniqueness regarding mobilehomes and all the
varied manners of ownership, leasing, affordability, and
opportunity. It is because of this uniqueness that laws
were enacted to create statewide standards for mobilehome
parks.
The intent of current state law is to provide an
opportunity for home ownership to those mobilehome owners
who desire to own both their home and the land it rests on.
The law also offers protections for low-income individuals
against unwarranted rent increases.
While the bill's intent is to preserve low-income housing,
it also extends rent control in certain circumstances to
mobilehome owners in much of the state no matter what their
income level. It is unclear what state interest is served
by the extension of rent control for those who do not have
an economic disadvantage. In addition, establishing two
statewide standards for rent control seems confusing and
unnecessary.
It is clear that mobilehome issues require a comprehensive
approach to ensure that low income individuals and families
are protected, homeownership opportunities are afforded to
those who choose them, and stability of the home and
property is preserved.
I urge the Legislature over the coming year to find a
solution that provides true balance for all the
stakeholders involved in mobilehome issues.
Double referred :
The Assembly Committee on Rules referred AB 566 to Housing and
Community Development and Local Government Committee. If AB 566
passes this committee, the bill must be referred to the Assembly
Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION :
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Support
City of Carson (sponsor)
County of Ventura (sponsor)
AARP California
Bay Federal Credit Union
CA Rural Legal Assistance Foundation
CA State Association of Counties
Cities of Capitola, Goleta, and Los Angeles
Counties of Santa Cruz and Sonoma
Executive Counsel of Homeowners
Golden State Manufactured-Home Owners League
Western Center on Law & Poverty
Individual Letters (7)
Opposition
CA Mobilehome Parkowners Alliance
Californians for Resident Ownership
Law Offices of Gilchrist & Rutter
The Loftin Firm, LLP
Western Manufactured Housing Communities Association
Individual Letters (14)
Analysis Prepared by : Anya Lawler / H. & C.D. / (916)
319-2085