BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1938
                                                                  Page  1

          Date of Hearing:  May 1, 2012

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                   AB 1938 (Williams) - As Amended:  April 26, 2012
           
          SUBJECT  :  Mobile Homes: long-term Rental Agreements 

           KEY ISSUES  :  

           1)Should the management of a mobilehome park be prohibited from 
            passing along to homeowners the costs of any fines or money 
            damages incurred by management's violation of Law?  

           2)Should the management of a mobilehome park be required to 
            attach a summary page OF all monetary charges the homeowner 
            will be liable for during the term of the agreement?  
                 
           3)Should a homeowner's 72-hour right to void a long-term 
            mobilehome rental agreement be measured from the time that the 
            agreement is executed or from the time that the homeowner 
            receives a copy of the executed agreement?  

          FISCAL EFFECT  :  As currently in print this bill is non-fiscal.

                                      SYNOPSIS
          
          This bill seeks to ensure that resident homeowners in a 
          mobilehome park fully understand the terms of their long-term 
          rental agreement with park management.  California's Mobile Home 
          Residency Law governs many aspects of the relationship between 
          park managers and resident homeowners, including long-term 
          rental agreements.  This bill is especially concerned with 
          agreements that are longer than 12 months' duration and thereby 
          often exempted from local rent control ordinances.  According to 
          the sponsor, these long-term agreements tend to be lengthier and 
          more complicated than other leases, so that homeowners may not 
          always appreciate all the fees, charges, and built-in rent 
          increases to which they may be committing themselves.  This 
          bill, therefore, would make the following changes to existing 
          law: (1) it would require that a summary page identifying all of 
          the fees and charges for which the homeowner is liable be 
          attached to any rental agreement; (2) it would prohibit 
          management from passing along the costs of any fines or damages 
          resulting from management's violation of the Mobilehome Parks 








                                                                  AB 1938
                                                                  Page  2

          Act, just as it is currently prohibited from passing along costs 
          that result from violations of the Mobile Home Residency Law; 
          and (3) it would specify that the homeowner's existing 72-hour 
          right of rescission should not start running until the homeowner 
          receives a copy of the executed agreement, as opposed to the 
          time at which the agreement is executed, as is provided by 
          existing law.  This bill is sponsored by the Golden State 
          Manufactured-Home Owners League, which represents resident 
          homeowners.  It is opposed by the Western Manufactured Housing 
          Communities Association, which represents park owners and 
          managers.  The bill passed out of Assembly Housing & Community 
          Development Committee on a 5-2 vote.  This analysis recommends 
          minor amendments that the author may wish to take. 

           SUMMARY  :  Makes changes to the statute governing long-term 
          rental agreements in mobilehome parks.  Specifically,  this bill  :

          1)Requires rental agreements in excess of 12 months' duration to 
            include a summary page attached to the front of the rental 
            agreement entitled "Summary Page of Rent, Utilities and Other 
            Charges" that clearly and concisely summarizes each financial 
            or monetary charge the homeowner shall be liable for during 
            the term of the rental agreement, including, but not limited 
            to, any amounts to be paid for annual rent increases, the 
            pass-through of any expense amount as part of rent, utilities, 
            known incidental reasonable charges for services actually 
            rendered, rent increases intended to take effect upon the sale 
            or transfer of the mobilehome, or any other rent increases 
            that can be obtained during the term of the rental agreement.  
            However if an error in the summary page conflicts with the 
            terms of the rental agreement, the rental agreement shall 
            prevail. 

          2)Prohibits management from charging or imposing upon a 
            homeowner any fee or increase in rent which reflects the cost 
            to management of any fine, forfeiture, penalty, money damages, 
            or fee assessed or awarded by a court of law against the 
            management for a violation of the Mobilehome Park Act. 

          3)Specifies that a homeowner who executes a long-term rental 
            agreement has 72 hours from the homeowner's receipt of an 
            executed copy of the agreement to void the agreement. 

           EXISTING LAW  :









                                                                  AB 1938
                                                                  Page  3

          1)Requires mobilehome rental agreements to be in writing and to 
            include, in addition to any other provisions required by law, 
            the term of the tenancy and the rent thereof; the rules and 
            regulations of the park; the relative responsibilities of 
            management and owners to maintain the physical property; a 
            provision listing any services that will be provided and the 
            fees to be charged for those services; a provision stating 
            that management may charge a reasonable fee for services 
            relating to maintenance in the event that the homeowner fails 
            to maintain the land or premises in accordance with the rules 
            and regulations; and all other provisions governing the 
            tenancy.  Provides, additionally, that a copy of the Mobile 
            Home Residency Law be attached to the agreement, and that 
            homeowners must be notified of any changes to this law, as 
            specified.  (Civil Code Section 798.15.)

          2)Specifies that a rental agreement in a mobilehome park in 
            excess of 12 months' duration Ýhereafter a long-term rental 
            agreement] is exempt from any ordinance, rule, regulation, or 
            initiative measure adopted by any local governmental entity 
            that establishes a maximum amount that a landlord may charge a 
            tenant for rent.  (Civil Code Section 798.17 (a).)

          3)Gives a homeowner at least 30 days from the date when a 
            long-term rental agreement is first offered to accept or 
            reject the agreement, and permits the homeowner to void the 
            agreement by notifying management in writing within 72 hours 
            of the homeowner's execution of the agreement.  Requires 
            management, at the time the agreement is first offered, to 
            provide the homeowner with written notice of the homeowner's 
            right to have 30 days to inspect the rental agreement and the 
            homeowner's right to void the agreement up to 72 hours after 
            execution.  Specifies that failure to provide this notice 
            makes the agreement voidable at the homeowner's option.  
            (Civil Code Section 798.17 (b) and (f).)

          4)Requires management to return an executed copy of the rental 
            agreement to the homeowner within 15 business days after 
            management has received the rental agreement signed by the 
            homeowner.  (Civil Code Section 798.16.)

          5)Prohibits management from charging or imposing upon a 
            homeowner any fee or increase in rent that reflects the cost 
            to the management of any fine, forfeiture, penalty, money 
            damages, or fee assessed or awarded by a court of law against 








                                                                  AB 1938
                                                                  Page  4

            the management for a violation of the Mobilehome Residency 
            Law.  (Civil Code Section 798.39.5.)

           COMMENTS  :  According to the sponsor, the Golden State 
          Manufactured-Home Owners League (GSMOL), this bill is a response 
          to the increasing number of mobilehome parks that are offering 
          resident homeowners long-term rental agreements.  Such 
          agreements provide the advantages of certainty and stability to 
          both park management and the homeowner, but they have one 
          significant advantage from management's perspective:  long-term 
          residential rental agreements - i.e. those in excess of 12 
          months' duration - are exempt from local rental control 
          ordinances.  To qualify for this exemption, the long-term 
          residential agreements must meet two additional criteria: (1) 
          they must give the homeowner at least 30 days from the date that 
          the agreement is first offered to either accept or reject the 
          rental agreement; and (2) the homeowner who executes the 
          agreement must be able to void the agreement by notifying 
          management within 72 hours of the homeowner's execution of the 
          agreement.  This bill would make three changes relating to 
          rental agreements in excess of 12 months' duration Ýhereafter 
          long-term rental agreements]. 

           Summary Page  :  Because the homeowner is bound to long-term 
          agreements that can be anywhere from two to ten years, the 
          author and sponsor contend that the homeowner should have 
          adequate information about the terms of the rental agreement, 
          especially in regards to any built-in rent increases or fees 
          that management may charge beyond rent.  Under existing law, 
          park management is generally permitted to charge a fee for 
          services actually rendered and that are listed in the rental 
          agreement, but management is also expressly prohibited from 
          charging certain kinds of fees.  According to the sponsor, in a 
          lengthy long-term rental agreement, these charges may be 
          scattered throughout the document.  In order to address this 
          concern, this bill would require that all long-term rental 
          agreements contain a cover sheet or "summary page" that "clearly 
          and concisely summarizes" all of the charges that the homeowner 
          will be liable for during the duration of the agreement.  It 
          should be stressed that this summary page would not be a 
          recitation of all of the terms and conditions of the rental 
          agreement, but only a summary of all monetary charges that may 
          be imposed pursuant to the agreement.  This provision would 
          allow a homeowner to see in one place all charges for which they 
          will be responsible, including so-called "pass through" fees 








                                                                  AB 1938
                                                                  Page  5

          that permit management to pass certain capital improvement or 
          other expenses along to homeowners in the form of fee or rent 
          increases. 

           Prohibition on Certain "Pass-Through" Charges  :  In addition, 
          this bill would prohibit a long-term agreement from containing 
          any provision authorizing park management to pass on to 
          homeowners costs related to fines or legal damages that stem 
          from management violations of the Mobilehome Parks Act.  (Health 
          & Safety Code Section 18200 et seq.)  Existing law already 
          prohibits park owners from passing through the costs of such 
          fines and damages resulting from violations of the Mobilehome 
          Residency Law, which governs the relationship between landlords 
          and tenants in mobilehome parks.  As their names would indicate, 
          both the Mobilehome Residency Law and the Mobilehome Parks Act 
          regulate mobilehome parks: the former, in the Civil Code, 
          regulates the relationship between park management and 
          homeowners as landlord and tenant; the latter, in the Health & 
          Safety Code, regulates and enforces construction, installation, 
          and operational standards in mobilehome parks.  In sum, this 
          provision of the bill logically follows from existing law: if 
          park management may not pass through fines and litigation costs 
          when it violates one set of statutory provisions relating to 
          mobilehome parks, it's difficult to see why it should be allowed 
          to pass through costs for violations of another set of statutory 
          provisions that also relate to mobilehome parks. 

           72-Hour Right to Void  :  Finally, this bill would provide that 
          the 72-hour window that homeowners have to void (or rescind) a 
          long-term rental agreement does not begin until the homeowner 
          receives the executed lease from the management.  Under current 
          law, a homeowner may void the agreement within 72 hours after 
          signing the agreement.  However, existing law gives management 
          15 business days to return a copy of the executed lease to the 
          homeowner.  In sum, by the time the homeowner obtains his or her 
          copy of the executed lease, the time in which the homeowner may 
          void the lease has already passed.  Having the 72-hour clock 
          begin when the homeowner receives an executed copy, the sponsor 
          contends, will make the right to void the agreement within 72 
          hours more meaningful. 

           The Committee may wish to recommend that the author accept an 
          amendment to the homeowner's right to void the agreement within 
          72 hours  .  The author and sponsor reasonably argue that existing 
          law creates a seeming contradiction: that is, the homeowner has 








                                                                  AB 1938
                                                                  Page  6

          a right to void the agreement within 72 hours of execution, but 
          the homeowner is not entitled to a copy of the executed 
          agreement until 15 days after execution.  On the other hand, 
          opponents, with equal reason, contend that starting the clock 
          only upon the homeowner's receipt of a copy of the executed 
          agreement will create problems of its own: for example, how will 
          management know when the homeowner has received the executed 
          agreement?  The time of execution or signing of agreement is 
          presumably apparent to both management and homeowner.  But the 
          time at which the executed document is received - unless it is 
          hand delivered - is known only by one party.  The problem is 
          made more complex by the fact that the document is not always 
          signed by both parties at the same time.  Typically, according 
          to both sponsor and opponent, the agreement is signed in the 
          local park offices and then sent to the park's parent company 
          which then approves and signs the agreement.  The agreement is 
          not fully executed until both sides sign.

          Perhaps a simple solution would be to require that the homeowner 
          be provided with a copy of the final agreement at the time the 
          homeowner signs the agreement and returns it management.  The 
          72-hour clock would then begin at that time.  This would appear 
          to meet the concerns of both the sponsor and the opposition: 
          that is, the homeowner would have a copy of the final agreement 
          during the full 72-hour rescission period, and the park 
          management would know exactly when the clock begins to run and 
          there would be no delay due to uncertainty of when the homeowner 
          received the executed document.  To be sure, the homeowner will 
          not have received a fully executed document, since the parent 
          company will not yet have signed; but the homeowner will have 
          the final document, albeit without the other side's signature.  
          Where existing statutes provide an express right to rescind a 
          contract, the period of time provided may vary, but it generally 
          begins with the signing of the contract.  (See e.g. Civil Code 
          Sections 1688 et seq., especially 1689.3, 1689.6, 1689.20, 
          1694.1, 1694.6, 1695.4.)  If there is concern that the document 
          could be altered between the time that the homeowner signs the 
          agreement and the time that it is returned to the homeowner with 
          the other party's signature, those subsequent changes would not 
          be binding on the homeowner, and this could be specified in the 
          amendment.  Thus, the Committee recommends that the author take 
          the following amendment:











                                                                  AB 1938
                                                                  Page  7

             -    On page 5 lines 31-36 strike the contents of paragraph 
               (4) of subdivision (b) of Civil Code Section 798.17 and 
               replace it with the following:

            (4) The homeowner who signs a rental agreement pursuant to 
            this section may void the rental agreement by notifying 
            management in writing within 72 hours of returning the signed 
            rental agreement to management, provided that management at 
            that time provides the homeowner with a copy of the final 
            agreement that has been signed by the homeowner.  If the 
            homeowner is not provided with a copy of the final agreement 
            at the time of returning the signed agreement to management, 
            then the homeowner may void the rental agreement within 72 
            hours of receipt of an executed copy of the rental agreement 
            that is returned to the homeowner pursuant to Section 798.16.  
            If the executed agreement differs in any detail from the final 
            agreement signed by the homeowner, then the executed agreement 
            shall be voidable upon the option of the homeowner. 
           
           The above amendment will create an incentive for management to 
          provide the homeowner with a copy of the final rental agreement 
          at the time that the signed agreement is returned to management. 
           If a copy is not provided at that time, then the clock will not 
          begin to run until the homeowner receives the executed agreement 
          and management will have to live with whatever uncertainty that 
          creates.

           Recommended clarifying amendments  :  The Committee recommends two 
          clarifying amendments.  First, as recently amended the bill 
          specifies that if there is an error in the proposed summary page 
          that is inconsistent with the rental agreement, the rental 
          agreement shall prevail.  To prevent potential mischief, this 
          should be clarified to provide that the rental agreement shall 
          only prevail against unintentional or inadvertent errors.  
          Second, the provision in this bill extending the prohibiting the 
          passing through of fines or damages resulting from management's 
          violations of the Mobilehome Park Acts only applies to fines or 
          damages imposed by courts.  However, unlike the existing 
          provision that applies to the Mobilehome Residency Law, the 
          Mobilehome Parks Act provides for orders issued by courts and 
          imposed by an enforcement agency.  Therefore, the Committee 
          recommends the following amendments:

             -    On page 4 line 17 after "an" insert:  unintentional or 
               inadvertent 








                                                                 AB 1938
                                                                  Page  8


              -    On page 7 line 7after "law" insert:  or enforcement 
               agency

          ARGUMENTS IN SUPPORT  :  According the author, "this bill will 
          address a number of consumer protection issues that have arisen 
          in mobilehome park leases."  Because current law allows park 
          management to offer long-term rental agreements - up to ten 
          years according to the author - "a homeowner is bound to such a 
          lease for a very long time Ýand therefore] it is critical that 
          the homeowner have adequate information about the terms of the 
          lease."  The author believes that this bill "will give 
          homeowners more pertinent information about rent and other 
          charges by requiring a summary sheet of the costs to be expected 
          throughout a long-term lease. The problem is that these various 
          clauses are scattered throughout the lease or rental agreement 
          and become confusing and difficult to understand for many 
          mobilehome residents."  

          Furthermore, the author contends that this bill will ensure that 
          homeowners enjoy the protections of existing law by providing 
          that the 72-hour rescission right should not begin to run until 
          the homeowner has received a copy of the executed agreement.  
          Currently, according to the author, "most homeowners do not 
          receive a copy of the rental agreement when they sign it, and . 
          . . park management has no obligation to return an executed copy 
          to the homeowner until 15 business days after its signature.  
          This delay essentially frustrates the rescission right, and 
          renders it moot, since it is not reasonable to expect that a 
          homeowner can recall the content of all that he or she signed 
          from memory."  Finally, the author believes that this measure 
          will ensure that homeowners are not subjected to unfair "pass 
          through" charges, particularly those that represent costs 
          incurred by management's own violations of the law.  

          According to the sponsor, Golden State Manufactured Homeowners 
          League (GSMOL), long-term rental agreements often "contain a 
          number of charges and fees that may be confusing or difficult 
          for a homeowner to calculate or fully understand.  Long-term 
          leases are particularly problematic since they can sometimes 
          exceed 25-30 pages in length, and typically include a number of 
          paragraphs which authorize charging for various categories of 
          rent . . . together with various 'pass through' clauses which 
          authorize a dollar-for-dollar pass through for costs of such 
          items as capital improvements, insurance, government-related 








                                                                  AB 1938
                                                                  Page  9

          services, property taxes or uninsured losses.  There is also 
          typically a rent increase authorized at the time of the resale 
          of the home.  Some leases also contain a 'market catch up 
          clause' which seeks to adjust the rent just prior to the 
          expiration of the lease term to match the highest average rent 
          in the park, or perhaps in the local jurisdiction."  Making 
          matters worse, according to GSMOL, "these various clauses are 
          sprinkled throughout the lease or rental agreement."  A one-page 
          summary of all of the charges in one place, the sponsor 
          believes, would be much easier for the homeowner to understand.  
          Finally, GSMOL supports the bill's other provisions for 
          substantially the same reasons as those made by the author; 
          GSMOL adds, however, that agreements that permit the pass 
          through of fines and damages for violations of law allow 
          landlords to "potentially recoup judgments from the very people 
          who were awarded the judgment.  For example, if homeowners are 
          forced to take the parkowner to court for failing to make 
          repairs at the park, this provision would allow the parkowner to 
          immediately turn to those same homeowners to recoup the value of 
          the judgment the homeowners had successfully obtained from a 
          court."  

           ARGUMENTS IN OPPOSITION  :  The Western Manufactured Housing and 
          Communities Association (WMA) oppose this bill unless amended.  
          To begin with, while WMA contends that the proponents of the 
          bill "have not been able to identify any examples that would 
          necessitate the need for the bill," they admit that "there is an 
          issue in the bill that may deserve attention."  Specifically, 
          WMA concedes that the 72-hour rescission right as set forth in 
          existing law could be clarified.  WMA contends that most 
          managers provide a copy of the signed lease at the time of 
          signature.  Therefore, WMA would agree to an amendment that 
          "would require management to provide a copy of the lease signed 
          by the homeowner at the time they return it to management, and 
                                                then the 72-hour clock would start."  (Note:  Based on this 
          description, WMA would apparently support the amendment 
          recommended by the Committee above.)  At the same time, however, 
          WMA claims that homeowners are already protected by current law 
          in a number of ways, noting (1) that the homeowner has 30 days 
          from the date that the rental agreement is first offered to 
          accept or reject the rental agreement; (2) that the homeowner 
          has 72 hours to void the rental agreement after the homeowner's 
          execution of the document; and (3) that if management fails to 
          provide the homeowner with written notice of these two rights, 
          the agreement is voidable at the homeowner's option.  WMA 








                                                                  AB 1938
                                                                  Page  10

          contends that making the 72-hour right of rescission run from 
          the homeowner's receipt of the executed agreement "may create 
          unintended consequences of delaying the process," hypothesizing 
          a situation in which "the homeowner cannot take receipt of the 
          agreement because they Ýsic] are on vacation or unavailable for 
          a number of days." 

          WMA also opposes the proposed "summary page" that must be 
          attached to the rental agreement.  WMA believes that the 
          provisions in existing law already provide adequate disclosure 
          both in the rental agreement itself (Civil Code Section 798.15 
          (f) and (g)) and in a disclosure form that must be provided to a 
          prospective homeowner at least three days prior to the execution 
          of the agreement (Civil Code Section 798.75.5).  WMA appears to 
          dispute the sponsor's contention that fees and charges are 
          scattered throughout the rental agreements, and instead contends 
          that "most lease agreements cluster these provisions near the 
          beginning of the agreement."  Moreover, WMA contends that a 
          summary page may do a disservice to homeowners by encouraging 
          them to rely upon a "Cliff Notes" version of the lease instead 
          of being encouraged to read the entire lease.  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Golden State Manufactured-Home Owners League (sponsor) 

           Opposition 
           
          Western Manufactured Housing Communities Association (unless 
          amended) 
          California Mobilehome Parkowners Alliance
           

          Analysis Prepared by  :    Thomas Clark / JUD. / (916) 319-2334