BILL ANALYSIS Ó SB 510 Page 1 Date of Hearing: June 26, 2013 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT K.H. "Katcho" Achadjian, Chair SB 510 (Jackson) - As Amended: April 30, 2013 SENATE VOTE : 21-16 SUBJECT : Land use: subdivisions: rental mobilehome park conversion. SUMMARY : Allows local agencies to consider the level of support among existing homeowners when deciding whether to approve a subdivision map for the conversion of a rental mobilehome park to resident ownership. Specifically, this bill : 1)Specifies, at the time of filing a tentative or parcel map for a subdivision to be created from the conversion of a rental mobilehome park to resident ownership, that the results of the survey conducted by the subdivider as required to avoid the economic displacement of all nonpurchasing residents, are required to be considered in the agency's decision as to whether to approve, conditionally approve, or disapprove the map, and the agency may disapprove the map if it finds that the results of the survey have not demonstrated the support of at least a majority of the park's homeowners. 2)Allows local legislative bodies, by ordinance or resolution, to implement the requirements of this section of law regarding the conversion of a rental mobilehome park to resident ownership. 3)Finds and declares that the provisions of the bill regarding the survey do not constitute a change in, but rather are declaratory of, existing law. 4)States the intent of the Legislature to clarify that the legislative intent has been, and continues to be, to require a local agency to consider, in making the decision to approve, conditionally approve, or disapprove the tentative or parcel map, the level of resident support for the proposed conversion, and that those provisions authorize the agency, at its discretion, to disapprove the map if it finds that the results of the survey have not demonstrated the support of at least a majority of a park's homeowners. SB 510 Page 2 EXISTING LAW : 1)Requires, at the time of filing a tentative or parcel map for a subdivision to be created from the conversion of a rental mobilehome park to resident ownership, the subdivider to avoid the economic displacement of all nonpurchasing residents in the following manner: a) The subdivider shall offer each existing tenant an option to either purchase his or her condominium or subdivided unit, which is to be created by the conversion of the park to resident ownership, or to continue residency as a tenant; b) The subdivider shall file a report on the impact of the conversion upon residents of the mobilehome park to be converted to resident owned subdivided interest; c) The subdivider shall make a copy of the report available to each resident of the mobilehome park at least 15 days prior to the hearing on the map by the advisory agency or, if there is no advisory agency, by the legislative body; and, d) The subdivider shall obtain a survey of support of residents of the mobilehome park for the proposed conversion. 2)Requires the following of the survey: a) The survey shall be conducted in accordance with an agreement between the subdivider and the resident homeowners' association, if any, that is independent of the subdivider or mobilehome park owner; b) The survey shall be obtained pursuant to a written ballot; c) The survey shall be conducted so that each occupied mobilehome space has one vote; and, d) The results of the survey shall be submitted to the local agency upon the filing of the tentative or parcel map, to be considered as part of the subdivision map SB 510 Page 3 hearing. 3)Requires the subdivider to be subject to a hearing by a legislative body or advisory agency, which is authorized by local ordinance to approve, conditionally approve, or disapprove the map. The scope of the hearing shall be limited to the issue of compliance, as specified. 4)Requires the subdivider to be required to avoid the economic displacement of all nonpurchasing residents in accordance with the following: a) As to nonpurchasing residents who are not lower income households, as defined, the monthly rent, including any applicable fees or charges for use of any preconversion amenities, may increase from the preconversion rent to market levels, as defined in an appraisal conducted in accordance with nationally recognized professional appraisal standards, in equal annual increase over a four-year period; and, b) As to nonpurchasing residents who are lower income households, as defined, the monthly rent, including any applicable fees or charges for use of any preconversion amenities, may 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 shall the monthly rent be increased by an amount greater than the average monthly percentage increase in the Consumer Price Index (CPI) for the most recently reported period. 5)Provides, for purposes of property tax assessment, that mobilehomes be assessed in the same manner as real property. FISCAL EFFECT : None COMMENTS : 1)Current law requires, at the time of filing a tentative or parcel map for a subdivision to be created from the conversion of a rental mobilehome park to resident ownership, the subdivider to avoid the economic displacement of all SB 510 Page 4 nonpurchasing residents in the following manner - first, the subdivider must offer each existing tenant an option to either purchase his or her condominium or subdivided unit, which is to be created by the conversion of the park to resident ownership, or to continue residency as a tenant; second, the subdivider must file a report on the impact of the conversion upon the residents of the mobilehome park to be converted to resident owned subdivided interest; third, the subdivider is required to make a copy of the report available to each resident of the mobilehome park at least 15 days prior to the hearing on the subdivision map; and lastly, that the subdivider obtain a survey of support of residents of the mobilehome park for the proposed conversion. The provision in existing law requiring the survey of support has been the subject of long-standing controversy including multiple legislative efforts and a number of lawsuits. 2)This bill provides that a local agency is required to consider the results of the survey in making its decision to approve, conditionally approve, or disapprove the map, and that the agency is authorized to disapprove the map if it finds that the results of the survey have not demonstrated the support of a least a majority of the park's homeowners. The bill allows local legislative bodies to implement, by ordinance or resolution, these survey requirements. Additionally the bill sets forth findings and declarations of the Legislature that the changes made by the bill do not constitute a change in, and are declaratory of, existing law, and state the intent of the Legislature to clarify the legislative intent of the survey requirements in existing law. This bill is co-sponsored by the California Rural Legal Assistance Foundation, Western Center on Law & Poverty, and the Golden State Manufactured Home Owners Association. 3)According to the author, "Mobile homes have traditionally provided affordable housing to those who would otherwise be priced out of home ownership. Local rent control ordinances keep mobile homes at an affordable rate for seniors on fixed incomes and working families who are struggling to get by. "However, the affordability and stability that mobile homes have provided for people seeking affordable housing is being threatened by developers seeking financial gain, who have been SB 510 Page 5 using this provision of the Subdivision Map Act in a manner that risks the economic displacement of mobile home owners. "Existing law allows park owners to subdivide an existing rental park and sell the individual lots on which the homes are placed, commonly referred to as a 'condo conversion.' The law requires that the park owner in seeking approval of a map, conduct a survey of support from the residents. However, because of the lack of clarity in mobile home conversion statutes, park owners and their attorneys have been arguing that local agencies cannot consider the survey as a factor in the conversion process. Courts have split on the meaning of the survey, with sometimes absurd results for the low and moderate income homeowners that this law was originally intended to protect. This continued uncertainty has spawned dozens of lawsuits, and the courts have repeatedly urged the Legislature to clarify the law. "SB 510 provides the solution to concerns from local governments, homeowners, cities, and courts by clarifying this statute and making clear the role of the survey, so that local governments have more statutory recourse and authority during the conversion process." 4)In the vast majority of California's nearly 5,000 mobilehome parks, mobilehome residents own their homes but rent the spaces on which their homes are installed. Contrary to their name, mobilehomes generally are not mobile. Once installed in a park, they generally cannot be 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. The Subdivision Map Act vests in cities and counties the power to regulate and control the design and improvement of subdivisions within their boundaries. 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 SB 510 Page 6 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 and intended to purchase their lots. 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. 5)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 would be applicable. 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 SB 510 Page 7 §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. 6)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 existing residents in a 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 resident conversions." Since the survey requirement was added to the provision of the Map Act governing conversions to resident ownership, some local governments have enacted local ordinances to define "bona fide resident conversion," including a requirement that a certain percentage of residents indicate an interest in SB 510 Page 8 purchasing their lots. Park owners have challenged several of these ordinances in court. In 2010, the 2nd District Court of Appeal, in Colony Cove Properties, LLC v. City of Carson, invalidated the City of Carson's ordinance, which depended on certain percentages of support in the resident survey to make presumptions about whether a conversion was bona fide or not. While the court invalidated the ordinance, it did leave open the possibility that a local government could consider the survey in its action at the hearing on the map application. In 2012, the 4th District Court of Appeal concluded in Chino MHC, LP v. City of Chino, et. al.,that "a local agency is entitled to deny a conversion based on the survey results. However, it may only do so if the survey results show that the conversion is a sham." The court noted that "a sham conversion is one that is merely intended to avoid rent control and not to transfer ownership to residents." Also in 2012, the 6th District Court of Appeal in Paul Goldstone v. County of Santa Cruz upheld that county's authority to deny a conversion application due to near unanimous opposition to a conversion from park residents. 7)Writing in support of the bill, Fred Keeley, who currently serves as the Santa Cruz County Treasurer but who authored the bill that placed the survey requirement into law, writes: "In 2002, I was the author of AB 930, which enacted [the] current resident support survey requirement. The purpose of that resident support requirement, as expressed in my letter to Governor Davis asking him to sign AB 930, was to restore the Legislature's intent that such conversions should proceed only 'if residents favored conversion and acquisition of the park, if the conversion would provide certainty and affordability to the residents' and 'where the conversion provides benefit to the residents' (i.e., that they should be approved only if they were 'bona fide resident conversions'). We never intended that a park owner would have to demonstrate that all of a park's residents would be happy with their proposed conversion or that the results of a resident survey would give the residents of a park absolute 'veto power' to bind a local jurisdiction to always have to reject a conversion at any specific level of resident SB 510 Page 9 support. However, our intent was clear that a local jurisdiction, in making their decision on conversion approval, was to consider whether or not the support survey results demonstrated that the conversion was truly a 'bona fide resident conversion' that was supported by and benefitted the residents of the park rather than simply being a scheme by their park owner to make a huge profit that benefitted almost none of the park's residents." 8)The Western Manufactured Housing Communities Association (WMA) and others oppose this bill because they believe that it would severely limit park owners' ability to subdivide their land and sell it to the individuals residing in the community. They assert that the current law, written by former Senator Bill Craven, has worked well over the past 18 years by balancing the needs of the residents and park owners in the community. The benefits for the residents are affordable home ownership or statewide rent control for low-income residents who opt not to purchase (even in communities that do not have rent control) and a gradual phase in of market rents for non-low income residents who elect not to purchase. The benefit to the park owners is a long-term exit strategy to put the land to alternative use and realize reasonable economic value for their investment under one uniform statewide law rather than hundreds of different rules and regulations in hundreds of different jurisdictions across the state. They further argue that giving park residents a say in land use decisions involving the park infringes on the property rights of the park owner. 9)The Legislature has seen this issue before and has heard a number of related measures over the last six years, including the following: a) SB 900 (Corbett) of 2007: Would have added requirements to the Subdivision Map Act for a conversion of a mobilehome park by a subdivider to resident ownership to avoid the economic displacement of non-purchasing residents; b) AB 1542 (Evans) of 2007: Would have added requirements to the Subdivision Map Act for a conversion of a mobilehome park by a subdivider to resident ownership including providing additional rent control protections to non-purchasing mobilehome park residents; SB 510 Page 10 c) AB 566 (Nava) of 2010: Would have allowed a local government to consider the level of support among current residents when deciding whether to approve or disapprove the conversion of a rental mobilehome park to resident ownership; and, d) SB 444 (Evans), of 2011: Would have clarified that a local government, when considering an application to convert a mobilehome park to resident ownership, is required to consider the results of the survey to residents about their support for the conversion in making its decision to approve, conditionally approve, or disapprove the map, and would have allowed the local government to disapprove the map if it finds that the results of the survey have not demonstrated adequate resident support. 1)Support arguments : Supports argue that the bill will give local governments more statutory recourse and authority during the conversion process, and permit local governments to adopt their own local regulations, thereby giving more local flexibility to determine how to assess a conversion application and balance the interests of park owners and homeowners. Opposition arguments : Opponents argue that this bill, "without showing there has been any harm under the current law, gives the residents of a mobilehome park a very valuable property right by allowing the outcome of their vote, and specifically a lack of majority of support to be used in determining if a park conversion can go forward." 2)This bill was heard by the Assembly Housing and Community Development Committee on June 19, 2013 and passed on a 5-2 vote. REGISTERED SUPPORT / OPPOSITION : Support California Rural Legal Assistance Foundation [CO-SPONSOR] Golden State Manufactured Home Owners League (GSMOL) [CO-SPONSOR] Western Center on Law & Poverty [CO-SPONSOR] California Alliance for Retired Americans California State Association of Counties SB 510 Page 11 Chateau Calistoga Homeowner's Organization Cities of Carson and San Marcos City of Goleta (in concept) Congress of California Seniors Contempo Marin Homeowners Association Counties of Lassen, Santa Cruz, Santa Barbara, Sonoma, and Ventura Fairness for Mobile Home Owners GSMOL Chapters 841, 1200, 256 and 1152 Housing California Las Palmas de la Quinta Homeowners Association Board League of California Cities (in concept) National Manufactured Home Owners Association, Inc. San Marcos Mobilehomes Residents Association Santa Cruz County Manufactured/Mobile Homeowners Association Santa Cruz County Mobile and Manufactured Home Commission Support (continued) Sierra Homeowners Association Ventura Manufactured-Home Resident's Council Vista Del Lago Homeowner's Association Individuals (203) Opposition California Association of Realtors California Mobilehome Parkowners Alliance Hart, King & Coldren Western Manufactured Housing Communities Association Law Offices of Gilchrist & Rutter Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958