BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 510| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 510 Author: Jackson (D), et al. Amended: 8/19/13 Vote: 21 SENATE TRANSPORTATION & HOUSING COMMITTEE : 7-3, 4/23/13 AYES: DeSaulnier, Beall, Galgiani, Hueso, Liu, Pavley, Roth NOES: Gaines, Cannella, Wyland NO VOTE RECORDED: Lara SENATE FLOOR : 21-16, 5/2/13 AYES: Beall, Corbett, De León, DeSaulnier, Evans, Galgiani, Hancock, Hill, Hueso, Jackson, Lara, Leno, Lieu, Liu, Monning, Padilla, Pavley, Price, Roth, Steinberg, Wolk NOES: Anderson, Berryhill, Block, Calderon, Cannella, Emmerson, Fuller, Gaines, Hernandez, Huff, Knight, Nielsen, Walters, Wright, Wyland, Yee NO VOTE RECORDED: Correa, Vacancy, Vacancy ASSEMBLY FLOOR : 41-24, 9/3/13 - See last page for vote SUBJECT : Mobilehome park conversion to resident ownership SOURCE : California Rural Legal Assistance Foundation Golden State Manufactured Home Owners LeagueWestern Center on Law and Poverty DIGEST : This bill authorizes a local government to disapprove the conversion of a mobilehome park to resident ownership if the required survey of park residents does not show that a majority CONTINUED SB 510 Page 2 of them support the conversion. Assembly Amendments delete the language which found and declared the changes in this bill are declaratory of existing law, and delete additional intent language. ANALYSIS : The Subdivision Map Act (Act) governs the division of real property into parcels or condominiums and requires that a subdivider file a tentative map for approval by a local agency. In almost all cases the local agency's approval of the subdivision is a discretionary act. Existing law, however, provides for a few situations in which a local agency must deny the subdivision map, such as if the map is inconsistent with the community's general plan. The Act establishes a different process for conversions of mobilehome parks to resident ownership, which severely limits a local agency's discretion. Under this process (contained in Government Code (GOV) Section 66427.5), a subdivider of a mobilehome park submits a tentative or parcel map to the local agency for review and approval. GOV Section 66427.5 requires the subdivider to avoid the economic displacement of non-purchasing residents by: Surveying residents about their support for the conversion. The subdivider must conduct the survey in writing and in accordance with an agreement between the subdivider and the homeowners' association, and the subdivider must submit the results of the survey when filing the tentative or parcel map so that they can be considered as part of the local agency's hearing. Offering each existing tenant an option to buy his/her lot. Filing a report on the impact of the conversion on residents and making that report available to residents of the park. Submitting to a local agency hearing solely on the subdivider's compliance with the law requiring avoidance of economic displacement of non-purchasing residents. Limiting rent increases of non-purchasing, low-income residents by an amount equal to the average monthly increase in rent in the four years immediately preceding the CONTINUED SB 510 Page 3 conversion, except that in no case shall the increase be greater than the increase in the consumer price index. Limiting rent increases on those non-purchasing residents who are not low-income to market-rate levels through equal annual increases spread over a four-year period. The legislative body or an authorized advisory agency (i.e., the planning commission) of the local government must hold a hearing to approve, conditionally approve, or disapprove the map. The scope of the hearing -- and therefore, the approval or disapproval -- is limited to whether or not the subdivider complied with the provisions of law to avoid the economic displacement of non-purchasing residents (i.e., the bullets above). This bill: 1. Authorizes a local agency to disapprove a map to convert a mobilehome park into resident ownership if it finds that the survey results do not demonstrate at least majority support among the homeowners for the conversion. 2. Authorizes local legislative bodies, by ordinance or resolution, to implement the requirement that a subdivider wishing to convert a mobilehome park to resident ownership conduct a survey of support for the proposed conversion and that a local agency may disapprove the map if the survey does not demonstrate majority support among homeowners. Background The residents of California's nearly 5,000 mobilehome parks typically own their mobilehomes and rent the spaces in mobilehome parks on which the homes are placed. Mobilehomes, once placed in a park, are difficult to relocate. Because of this, many local governments impose mobilehome park space rent controls to limit the amount that rent on a space can increase each year. For various reasons, mobilehome park residents in some parks have decided to join together and buy the park or their individual spaces within it. This is referred to as a conversion to resident ownership. CONTINUED SB 510 Page 4 Historically, when mobilehome parks converted to resident ownership, the residents initiated the process and enlisted the help of a nonprofit organization. The nonprofit organization typically buys the entire park and sells lots to individual owners. Until 1996, local jurisdictions imposed their own conditions on proposed subdivisions of mobilehome parks into individual, resident-owned lots. In the 1990s, some argued that local governments sometimes imposed conditions under the Act that prevented the conversion of a park into resident ownership. For example, a local government might condition the map on the building of sidewalks, curbs, and gutters on the streets in the mobilehome park. In 1995, then Senator Craven introduced a bill to address this issue. SB 310 (Craven, Chapter 256, Statutes of 1995) added GOV Section 66427.5 to the Act to limit local review of the subdivision application and to ensure that subdividers of mobilehome parks gave residents the opportunity to purchase a space in the park and to avoid being displaced if they could not afford to purchase a space. SB 310 limited local review of an application to subdivide a park into resident-owned spaces solely to comply with its provisions, which are to avoid the economic displacement of non-purchasing residents. The El Dorado case . 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 when 120 of its lots sold. After that date, the formula for mitigating economic displacement under SB 310 would be applicable. The city council included this condition to prevent the park owner's circumvention of the rent control ordinance by just selling a few lots (i.e., a "sham" conversion). El Dorado's owner filed a lawsuit in superior court to compel approval of the subdivision map without the conditions, CONTINUED SB 510 Page 5 including the condition delaying the effective date of the map. El Dorado's owner claimed that the effective date of conversion was when one lot was sold, and 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 in El Dorado Palm Springs, Ltd., v. City of Palm Springs. The appellate court ruled that state law limited the city's scope to assuring that El Dorado's owner had complied with the requirements of GOV Section 66427.5, the special process in the Act enacted by SB 310. The court ruled that GOV Section 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 proponents of SB 310 had not foreseen instances in which mobilehome park owners, rather than residents, would use its exemption to the Act to convert their parks into condominium-type parks, where the owner subdivides the park and sells spaces to the residents. As the value of the land under a mobilehome park increases, rents for those spaces may not increase commensurately in local communities with rent control ordinances, and this circumstance can create an incentive for a mobilehome park owner to convert his or her park to resident ownership. Since the owner of El Dorado Park in Palm Springs first used the Act for conversion to resident ownership, 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, which has resulted in both legislation and litigation. The survey requirement . AB 930 (Keeley, Chapter 1143, Statutes of 2002) responded to the El Dorado case by requiring a subdivider to survey residents of the mobilehome park on whether or not they support a proposed conversion to resident ownership. The park owner must conduct the survey by written ballot, in accordance with an agreement between the subdivider and homeowners' association, and with each occupied mobilehome space having one vote. The park owner must submit the results of the CONTINUED SB 510 Page 6 survey to the local agency as part of the subdivision map hearing. AB 930 included uncodified language stating the bill was intended to assure that such conversions were "bona-fide." Since AB 930 added the survey requirement, some local governments have enacted local ordinances to define "bona fide," including a requirement that a certain percentage of residents indicate an interest in purchasing their lots. 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. Courts urge Legislature to clarify the law . In both Colony Cove Properties and another decision, Palisades Bowl Mobile Estates, the 2nd District Court of Appeal expressed "hope that the Legislature will recognize the dilemma faced by local agencies illustrated by [these cases] ? and act to clarify the scope of their authority and responsibility." The 6th District Court of Appeal made a similar plea in Paul Goldstone v. County of Santa Cruz last year when it urged the Legislature to instruct local agencies on how to consider the results of the resident survey. This bill addresses that hope and provides instruction, because it gives local governments authority to consider the results of the resident survey and to deny an application to convert to resident ownership based on a lack of majority support. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: CONTINUED SB 510 Page 7 No SUPPORT : (Verified 9/4/13) California Rural Legal Assistance Foundation (co-source) Golden State Manufactured Home Owners League (co- source) Western Center on Law and Poverty (co- source) Besaro Mobilehome Park California Alliance for Retired Americans California State Association of Counties Chateau Calistoga Homeowner's Organization Cities of Carson and Ventura Contempo Marin Homeowners Association Counties of Santa Barbara and Ventura Fairness for Mobile Home Owners Golden State Manufactured-home Owners League, Inc., Chapter 1152 Golden State Manufactured-home Owners League, Inc., Chapter 1200 Golden State Manufactured-home Owners League, Inc., Chapter 841 Golden State Manufactured-Home-League, Inc., Super Chapter 256 Goleta Manufactured Home Owners Coalition Lamplighter-Chino Mobile Home Park Las Palmas de La Quinta, Homeowners Association Board League of California Cities Monarch Country Manufactured Home Owners Association National Manufactured Home Owners Association, Inc. Northern Santa Barbara County Manufactured Homeowners Team Rancho Buena Vista Homeowners Association San Luis Obispo Mobilehome Residents Assistance Panel San Marcos Mobilehome Residents Association Santa Cruz County Manufactured/Mobile Homeowners Association Santa Cruz County Mobile and Manufactured Home Commission Sierra Homeowners Association Ventura Manufactured-Home Residents Council Vista Del Lago Homeowners Association OPPOSITION : (Verified 9/4/13) California Mobilehome Parkowners Alliance Hart, King and Coldren Gilchrist & Rutter, Law Offices Western Manufactured Housing Communities Association ARGUMENTS IN SUPPORT : The author's office notes that mobilehomes have traditionally provided affordable housing to CONTINUED SB 510 Page 8 people who would otherwise be priced out of any type of ownership. Local rent control ordinances keep mobilehome space rents at an affordable rate for seniors on fixed incomes and working families who are struggling to get by. Developers seeking financial gain by converting to resident ownership threaten the affordability and stability that mobilehomes provide for people seeking affordable housing. Existing law allows a mobilehome park owner to subdivide the park into residential ownership but the park owner must conduct a survey of support from the residents. The author's office notes that because of the lack of clarity in the provision of the Act governing park conversions, park owners and their attorneys argue that local agencies may not consider the survey results as a factor in the conversion process. The author's office asserts that 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. This bill makes clear the role of the survey and gives local governments more statutory recourse and authority during the conversion process. ARGUMENTS IN OPPOSITION : The Western Manufactured Housing Communities Association opposes this bill because it will severely limit, if not eliminate park owners' ability to subdivide their land and sell it to the individuals residing in the community. It asserts that the existing 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. CONTINUED SB 510 Page 9 ASSEMBLY FLOOR : 41-24, 09/03/13 AYES: Achadjian, Alejo, Ammiano, Atkins, Bloom, Bonilla, Bonta, Bradford, Brown, Buchanan, Campos, Chau, Chesbro, Cooley, Dickinson, Fong, Fox, Garcia, Gomez, Gonzalez, Gordon, Gorell, Holden, Jones-Sawyer, Levine, Lowenthal, Medina, Mitchell, Mullin, Nestande, V. Manuel Pérez, Quirk, Rendon, Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada, John A. Pérez NOES: Allen, Bigelow, Chávez, Conway, Dahle, Donnelly, Beth Gaines, Gatto, Hagman, Harkey, Jones, Linder, Logue, Maienschein, Mansoor, Melendez, Morrell, Muratsuchi, Olsen, Patterson, Perea, Wagner, Waldron, Wilk NO VOTE RECORDED: Bocanegra, Ian Calderon, Daly, Eggman, Frazier, Gray, Grove, Hall, Roger Hernández, Nazarian, Pan, Quirk-Silva, Salas, Vacancy, Vacancy JA:k 9/3/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED