As Councilman John Masson said at the July 20th City Council meeting, the coach owners seem to be getting the short end of the stick. I would go farther. I would say they are getting shafted. This became apparent when item 11: Long-Form Rent Review Board Hearing for Sundance Mobilehome Park was discussed. It was only in March of last year that I wrote about another rent increase for this park. https://ablueviewescondido.com/2015/03/28/you-cant-have-it-both-ways-unless/ .
To review the bidding, the park was opened in 1977 with 88 spaces. Now, only 19 of those spaces are subject to rent control. In 2013, under another “long-form” rent revue, the previous park owner was allowed to raise the rent of the 29 spaces then under rent control by an average of $124.37 added to which was a $17.07 fee to cover the park owner’s expenses to process the long form application, including legal fees. One of the affected tenants, Robert Wise sued the owner and the City objecting to the increase and the inclusion of the application expenses. Wise lost the case, and the appeal to the Fourth Appellate District, Division One. As I noted in my blog, an average $15.29 rent increase was granted to the new owner of the Sundance Park under a “short-form” rent increase in March, 2015.
This time the park’s new owners, Sundance MHC, LC, requested an average increase of $157.17, based on the maintenance of net operating income (MNOI) for the park. Additionally, the residents were again asked to pay for the cost of the long-form application. This MNOI has been the traditional basis used to determine what a fair and reasonable rent increase should be. A large part of that increase ($72) was due to the increase in property taxes on the park from around $18K to $84K, when the park was sold in October of 2014. In a nutshell, MNOI analysis determines how much the net operating income should be increased to reflect an increase in the consumer price index (CPI), and other factors that increase operating costs such to allow the park owners to keep the return on their investment steady. The City staff recommended that the rent be increased by $102.22 with an additional increase of $5.02 for five years to cover the application costs. That $5.02 figure was the amount that prorated the entire expense among all 88 spaces in the park. The owner argued that it should only be charged to rent control spaces only.
The Council voted to approved $102.22 increase in rent, and an additional fee of $5.02 over five years to cover the application costs, with Councilwoman Olga Diaz and Masson voting no.
Diaz argued that the tenants did not participate in the decision to sell the park, and shouldn’t be penalized with the $72 increase. Councilman Mike Morasco, and Mayor Sam Abed had argued that the fees should be included, because that had been what was done in the 2013 rent increase decision. To change tack, Abed and Morasco argued, would be to invite a lawsuit. They also argued that since, according to City Attorney Jeff Epp, the owners had a legal right to charge for the property tax increase, not to do so would also risk a law suit. Actually they did change tack a little, because in the 2013 decision, the fee to reimburse the owner’s application fees was prorated for the 29 rent-control spaces only, while the one passed at this meeting was to be prorated for all 88 spaces. After the meeting, my friend, Dollie McQuiston, who attends practically every City Council meeting, mentioned that she remembered the 2013 hearing, and that Epp had told the Council (same council as we have today) that whether or not to include a fee to cover the application expense was at the discretion of the Council. Intrigued, I watched the tape of the meeting, available on the City’s website. It was an eye-opener.
At that 2013 hearing, the old owner had asked for an average rent increase of over $771 per month, per space. Some of the rent-control covered tenants testified that they had been threatened with exactly that sort of increase when they choose not to enter into another long term lease. Since the opening of the park, until 2010, all the tenants had agreed to long term leases. It was only then that some 29 tenants opted to not sign a long term lease, but take advantage of their rights under the Escondido Rent Protection Ordinance (Prop. K). As my friend Dollie remembered, Epp did indeed say that it was up to the Rent Review Board (the City Council) to determine whether or not such things as application costs including legal fees should be included, and if included, whether or not those costs should be pro-rated over all the 88 spaces or just under rent control.
The Council, according to the analysis of the city’s hired expert Dr. Kenneth A. Barr also had the discretion to determine what percentage of the increase in the CPI, as well as what other factors to be considered. Barr indicated that any rent increase from zero to $179.35, depending on what variables the Council choose to base their increase upon, was acceptable. The Council voted for the $124.37 rent increase, plus the $17.07 fee in 2013, with Diaz voting no. The Council felt the park owner should be reimbursed for application expenses, and that those expenses should be bourn only by the tenants under rent control. The Court held that the Council’s action was legal, but it did not find that any other action would have been illegal. In fact, the appellate court remarked that cases where a rent review board was sued by tenants rather than park owners were uncommon. That says something, I believe, about this Council’s attitude about Prop. K, or any measure that attempts to help meet the needs of the less affluent.
At this July 20 meeting, as at the 2013 meeting, several tenants said they would have to move if the Council approved such a high rent increase. The reduction in the number of spaces under rent control, from 29 to 19, would indicate the validity of their statements. As Diaz pointed out, these high increases seem to go against the spirit of Prop. K that was supposed to prevent tenants on fixed incomes being forced out of their mobile homes by excessive rent increases.
At the end of this last meeting, Wise told the Council that he would appeal to the Supreme Court. It is interesting to me that Abed, Masson and Gallo are very concerned about any legal expenses the City might face from a lawsuit from the park owner, over a rent increase that might not force elderly tenants from their homes, but showed no hesitation in deliberately incurring a lawsuit over the Escondido Country Club issue.