BILL ANALYSIS �
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
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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 :
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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 �hereafter 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
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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 �hereafter
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
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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
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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
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- 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
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- 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 �and 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
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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
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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 �sic] 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