BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Noreen Evans, Chair 2011-2012 Regular Session AB 1938 (Williams) As Amended May 17, 2012 Hearing Date: June 26, 2012 Fiscal: No Urgency: No BCP:rm SUBJECT Mobilehomes: Rental Agreements DESCRIPTION Existing law allows a homeowner in a mobilehome park to void a long-term lease within 72 hours of the homeowner's execution of the agreement. This bill would, instead, generally allow a homeowner to void the agreement within 72 hours of receiving a copy of the signed agreement. This bill would also expand the existing prohibition on park management passing through various fines, fees, or damages assessed by a court relating to violations of the Mobilehome Residency Law to also cover violations of the Mobilehome Park Act and amounts assessed by enforcement agencies. BACKGROUND Enacted in 1978, the Mobilehome Residency Law (MRL) governs the relationship between park owners or managers and the residents of the 4,800+ mobilehome parks and manufactured housing communities in California. In most of those parks, residents own their home but lease the land on which their home is installed. Although they have historically been called "mobilehomes," it is very difficult to actually move a mobilehome once it has been installed in a park. To protect mobilehome park residents from rent increases on the property underlying their home, over 100 jurisdictions in California have enacted some form of rent control. Although (more) AB 1938 (Williams) Page 2 of ? mobilehome parks are not subject to the Costa-Hawkins Rental Housing Act (which restricts the use of rent control in other residential properties), the MRL does limit the application of rent control in certain circumstances, including if the rental agreement is longer than 12 months. For homeowners who elect to sign those rental agreements (which are exempt from rent control), existing law requires a homeowner to have at least 30 days to accept or reject the agreement from the time it is first offered, and, permits a homeowner to void the agreement within 72 hours of execution. In response to concerns about management returning executed agreements after the 72-hour rescission timeframe, this bill seeks to allow a homeowner to void the agreement within 72 hours of actually receiving a copy of the executed agreement. This bill would also expand the existing prohibition on park management passing through various fines, fees, or damages assessed by a court relating to violations of the MRL to also cover violations of the Mobilehome Park Act, and amounts assessed by enforcement agencies. CHANGES TO EXISTING LAW 1. Existing law requires mobilehome rental agreements to be in writing and to include, in addition to any other provisions required by law: (1) the term of the tenancy and the rent thereof; the rules and regulations of the park; (2) the relative responsibilities of mobilehome park management and owners to maintain the physical property; (3) a provision listing any services that will be provided and the fees to be charged for those services; (4) 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 (5) all other provisions governing the tenancy. (Civ. Code Sec. 798.15.) Existing law provides that a copy of the Mobilehome Residency Law (MRL) be attached to the agreement, and that homeowners must be notified of any changes to this law, as specified. (Civ. Code Sec. 798.15.) Existing law 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. (Civ. Code Sec. 798.16.) AB 1938 (Williams) Page 3 of ? Existing law provides that a rental agreement in a mobilehome park in excess of 12 months' duration 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. (Civ. Code Sec. 798.17 (a).) Existing law gives a homeowner at least 30 days from the date when a rental agreement in excess of 12 months 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. Existing law 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. Failure to provide this notice makes the agreement voidable at the homeowner's option. (Civ. Code Sec. 798.17 (b), (f).) AB 1938 (Williams) Page 4 of ? This bill would revise the above ability to void a contract within 72 hours, as follows: If management provides the homeowner with a copy of the signed rental agreement at the time the homeowner returns the agreement, a homeowner may void the agreement by notifying the management within 72 hours of returning the signed agreement. If management does not provide a homeowner with a copy of the agreement at the time the borrower returns the signed agreement, a homeowner may void the agreement within 72 hours of receiving an executed copy of the agreement. This bill would conform the required written notice of the homeowner's right to void the agreement within 72 hours to the above changes. 2. Existing law 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 the management for a violation of the MRL. (Civ. Code Sec. 798.39.5.) This bill would extend the above provisions to fines, fees, or damages assessed or awarded by the court or an enforcement agency against the management for a violation of the MRL or the Mobilehome Parks Act. The bill would clarify that these provisions do not apply to violations for which the registered owner of the mobilehome is initially responsible, as specified. COMMENT 1. Stated need for the bill According to the author: This bill will address Ýseveral] consumer protection issues that have arisen in mobilehome park leases. Current law allows a park owner to offer a long-term lease (these leases can be 1-10 years in length or more) to manufactured homeowners. Since a homeowner is bound to such a lease for a very long time, it is critical that the homeowner have adequate information about the terms of the lease. AB 1938 (Williams) Page 5 of ? ÝFirst, this] bill will ensure that homeowners have the protections of existing law which allows homeowners who have signed a long-term lease to rescind the agreement within the first 72 hours by clarifying when the 72-hour rescission right window begins. . . . . Second, under a long-term lease, a homeowner may be subject to many possible "passthroughs", additional fees or charges, in addition to rent that the long-term lease provides for. These passthroughs are intended to allow the parkowner to recapture any costs or losses incurred by the parkowner in the future. However, it is generally against public policy to allow a parkowner to provide for a recapture of a judgment obtained by the park residents against the park owner for actions that harm the residents. The law already prohibits such passthroughs for violations of the ÝMobilehome Residency Law]; this bill would expand that prohibition to include judgments for violation of the Mobilehome Parks Act (MPA). 2. Meaningful right of rescission As noted above, residents of mobilehome parks generally own their home but lease the land upon which the home is installed. Lease agreements that are longer than 12 months are exempt from rent control, and pursuant to existing law, homeowners must have at least 30 days to accept the lease agreement and have a right to void the rental agreement within 72 hours of execution (signing). Park management must provide written notice of those rights to the homeowner at the time the rental agreement is first offered to the homeowner. In order to strengthen those protections for homeowners who may elect to sign a long-term lease, this bill would, instead, allow homeowners to void the lease within 72 hours of (1) returning the signed agreement to management, if management provides a copy of the agreement at that time or (2) receiving an executed copy of the rental agreement. Thus, the 72 hour time period for voiding the lease would essentially start upon receiving a copy of the lease, not upon execution. In support of the need to 72-hour timeframe at receipt of the lease as opposed to execution, the author states: Currently, most homeowners do not receive a copy of the rental agreement when they sign it, and pursuant to 798.16 (b) park management has no obligation to return an executed AB 1938 (Williams) Page 6 of ? 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. Thus, rescission rights are often forgotten or exercised belatedly once the written agreement is provided to the homeowner and they see in black and white what they have signed. From a practical standpoint, any homeowner who wants to void his or her lease would likely first review the lease to see what options that he or she has in that situation. For homeowners who elect to reread their lease after receiving the executed copy from park management, the revised timeframe would essentially give them 72 hours to do so and void the agreement if an objectionable provision was found. It should also be noted that while existing law requires park management to return a copy of the executed lease within 15 business days after receiving the signed agreement, nothing precludes management from immediately providing a copy to the homeowner, thus, starting the 72 hour right to void the lease. 3. Pass through charges Under existing law, park management cannot pass through the cost to management of any fine, forfeiture, penalty, money damages, or fee assessed or awarded by a court against the management for a violation of the MRL. That prohibition arguably ensures that the residents of the park do not ultimately end up paying for the violations committed by the persons running the park. This bill would expand that prohibition to also include fines, penalties, or fees assessed or awarded by an enforcement agency and apply the prohibition to violations of the MPA. In support of that expansion, the author writes: Allowing landlords to pass through judgments, allows them to potentially recoup judgments from the very people who were awarded the judgment. For example, if homeowners are forced to take the park owner to court for failing to make repairs at the park, this provision would allow the park owner to immediately turn to those same homeowners to recoup the value of the judgment the homeowners had successfully obtained from a court. AB 1938 (Williams) Page 7 of ? It should be noted that the MPA includes various requirements, including that the Department of Housing and Community Development (or city and county has assumed responsibility for enforcement) must inspect parks where complaints have been made regarding serious health and safety violations. (Health & Saf. Code Sec. 18400.1 (b).) By expanding the prohibition to also prevent management from passing through the cost of violating the MPA, this bill would further appear to ensure that residents are not required to pay for the cost of violations by park management. Support : California Rural Legal Assistance Foundation; Coalition for Economic Survival; Western Center on Law & Poverty Opposition : None Known HISTORY Source : Golden State Manufactured-Home Owners League Related Pending Legislation : None Known Prior Legislation : None Known Prior Vote : Assembly Housing & Community Development Committee (Ayes 5, Noes 2) Assembly Judiciary Committee (Ayes 10, Noes 0) Assembly Floor (Ayes 73, Noes 2) **************