BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 510
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          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.








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           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  








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               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  








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            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  








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            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   








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            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  








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            §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  








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            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  








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               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;









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             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








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          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