The City of Montclair's ordinance controlling rents in mobile home parks is constitutional, the Fourth District Court of Appeal has ruled. The court rejected mobile home park owners' argument that the ordinance was a regulatory taking without compensation.
Citing the California Supreme Court's decision in Santa Monica Beach, Ltd. v. Superior Court, (1999) 19 Cal.4th 952, the appellate court ruled that "a rent control ordinance is a regulatory taking if it is an arbitrary regulation of property rights." (See CP&DR Legal Digest, February 1999.) In Montclair, the City Council adopted its ordinance to protect mobile home owners' equity in their homes, and to protect prospective park tenants from excessive rent increases. These are "legitimate government interests," the court concluded.
In continuing California courts' generous attitude toward rent control ordinances, the unanimous three-judge appellate panel dealt extensively with the proper way to test the constitutionality of an ordinance. The court ruled that important takings cases upholding a landowner's development rights are not applicable to rent control controversies.
The Montclair City Council adopted the ordinance in question on June 20, 1998. The ordinance amended a previous rent control measure that allowed park owners to raise rents as much as they wished when a mobile home owner sold the unit. Plus, a study commissioned by the city found that park owners were skirting the prior ordinance by requiring prospective tenants to sign long-term leases that were exempt from the rental control ordinance. The prospect of having to pay higher rents discouraged some potential mobile home buyers. The study said that these limitations on the ability to sell mobile homes resulted in more homes being abandoned, which placed them in the hands of park owners.
Thus, the city adopted new regulations that precluded park owners from requiring tenants to sign long-term leases, and limiting rent increases upon sale of a unit from 3% to 8% annually, depending upon the Consumer Price Index. The ordinance also allowed park owners to apply for higher rents based on operating costs, taxes and capital improvements. Park owners also could file an application for higher rents with the city's Park Mediation Committee, whose decisions were appealable to the City Council.
On August 18, 1998, park owners filed a lawsuit complaining that the ordinance was unconstitutional on its face. Park owners argued that enactment of the ordinance amounted to inverse condemnation. Park owners did not raise issues of federal constitutionality, instead leaving those for a federal court to decide.
Riverside County Superior Court Judge Peter Norell sustained the city's demurrer, and the park owners appealed.
Park owners argued that the court should follow the decision of the Ninth U.S. Circuit Court of Appeals in Richardson v. City and County of Honolulu, (9th Cir. 1997) 124 F.3d 1150. In that case, the Ninth Circuit ruled that Honolulu's rent control ordinance was a regulatory taking because, as written, the ordinance did not advance its legitimate stated goal of creating more affordable housing.
But the unanimous Fourth District, Division Two, panel said Richardson was not applicable because the Ninth Circuit used the Agins-Nollan test in striking down the Honolulu law. Under the Agins-Nollan test, an ordinance is unconstitutional if it fails to substantially advance a legitimate government interest and it deprives a property owner of all economically viable uses of his property. Agins v. Tiburon, (1980) 447 U.S. 255; Nollan v. California Coastal Commision, (1987) 483 U.S. 825. However, the precedent from these landmark cases does not extend to rent control plans, the court said.
In City of Monterey v. Del Monte Dunes at Monterey, (1999) 119 S.Ct. 1624, the U.S. Supreme Court "acknowledged that it had never extended the Agins-Nollan test beyond cases involving regulations requiring dedication of private property for public use as a condition of the issuance of a land development permit," Presiding Justice Art McKinster wrote for the three-judge appellate panel. (See CP&DR Legal Digest, June 1999.)
Furthermore, the state Supreme Court in Santa Monica Beach ruled that the Agins-Nollan test does not apply to general rent control laws. "Instead, the court adopted a more deferential standard of review, reasoning that general rent control laws are ‘essentially legislative determinations that do not require any physical conveyance of property,'" McKinster wrote. The same reasoning that applies to general rent control laws — the Santa Monica law that the court upheld was aimed at apartments — should apply to mobile home rent control, the appellate court ruled.
"The proper inquiry in determining whether a rent control scheme applicable to mobile home parks is a regulatory taking under the California Constitution is whether such a scheme is an arbitrary regulation of landowner's property rights," McKinster wrote.
With little discussion, the court held that protecting current mobile home owners' equity and protecting prospective park tenants from excessive rents are legitimate government interests. Thus, the Montclair ordinance is not an arbitrary regulation, the court concluded.
Montclair Parkowners Association v. City of Montclair, No. E024137, 99 C.D.O.S. 9453, 1999 Daily Journal D.A.R. 12197, filed December 2, 1999.
For Parkowners: Robert Coldren, Hart, King & Coldren, (714) 432-8700.
For Montclair: Diane E. Robbins, Robbins & Holdaway, (909) 627-1503.
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