Terry R. Dowdall, Dowdall Law Offices, A.P.C.

 

July 19, 2021

The Honorable Gavin Newsom
Governor, State of California
State Capitol
Sacramento, CA 95814

RE: AB 978 – Request for VETO of AB 978

Dear Governor Newsom:

I have practiced law for more than forty (40) years. I represent mobilehome park owners, whether it be in the courts or before local agencies, across the state– but I have settled far more rent disputes by collaboration than litigation. I have written for the C.E.B. about mobilehome tenancies. I have taught management education for the WMA since 1982.

I regret the need to respectfully request a veto of Assembly Bill 978. A jaundiced view of this request based on my partisan background cannot take away from the plain fact that AB 978 does not allow for any “safety valve” by landlord or tenant for relief from rate ceilings that are too high or too low. Let me explain.

AB 978 sets absolute (unchallengeable) rent ceilings in two ways: first, in mobilehome parks which straddle the boundary line of two incorporated cities. Second, park-owned rentals in all mobilehome parks are regulated with an absolute ceiling.

In every city and county with rent stabilization in California–every single one– there is an exhaustion of administrative remedies procedure. This is because the courts do not set rents, agencies do. AB 978 has no administrative remedy. Absence of any remedy cuts both ways:

Fixed rent may be too low: the landlord has no “safety valve” to seek an exception, adjustment, or review as necessary to avoid a confiscatory result.

Fixed rent may be too high: tenants have no remedy to request a rent reduction if rents are already too high to stomach another increase, nor even to seek a service-reduction adjustment.

Plainly, no one has any remedy to seek an adjustment from the ironclad and absolute specification of rent ceilings under AB 978. This reality is in striking contrast to the availability of administrative remedies provided in every ordinance in California. The courts are resoundingly clear on the requirement of administrative relief to review the fixing of rental rates.

1. Administrative remedies: for review of individual confiscatory effects: A fixed rent ceiling requires a prompt adjustment mechanism (in the form of administrative relief) from a rent ceiling to avoid a confiscatory result. This requirement harkens back to the seminal case of Birkenfeld v. Berkeley (“[F]or such rent ceilings of indefinite duration an adjustment mechanism is constitutionally necessary . ..” (emphasis added) 17 Cal.3d 129, 169 – 170 [550 P.2d 1001; 130 Cal. Rptr. 465].

Park owners offering affordable housing are often “Ma and Pa” individuals who, like many owners of small buildings, worked, scraped and saved. Like clients Jack and Kathryn, the elderly couple with one little park in the Inland Empire, which has never reached full occupancy. They are very kind and generous; they have even personally delivered home-cooked lunches to my office staff. They do not gouge, they are not wealthy. They do not keep pace with the market. Others would have been insolvent without park leasing to keep them afloat. But for park rentals, valuable affordable housing opportunities would be lost. No one desires to provide park rentals—such are often desperate measures to survive when there is no demand for spaces. Then who has the superior bargaining power? (It is not the park owner).

Quick example: why administrative remedies are needed? Consider a new purchase of a mobilehome park. Seller owned it for forty years. The new property tax assessment calls for a rent increase which far exceeds AB 978. Unless rent can be further adjusted the property becomes insolvent. To whom may the buyer appeal? AB 978 contains no administrative relief.

2. Administrative remedies-beginning base rent adjustment: everyone should start at the same place. Rents vary. Many park owners are below current conditions. They are entitled to start at the same place as economic conditions warrant. Vega v. City of West Hollywood, 223 Cal.App.3d 1342, 273 Cal.Rptr. 243 (1990) (“… the question is whether the base date rents can ‘reasonably be deemed to reflect general market conditions.’ … [A]fter base date rents are established which reflect general market conditions, then the Commission should apply and maintain the net operating income formula… [T] he rents which are then established must provide the landlord with the requisite ‘just and reasonable return.’”

But AB 978 does not allow landlords or tenants any chance to “plead their case” for the beginning rent levels, and rent adjustments that would be fair under the circumstances.

AB 978 is not a fully-developed product of legislative process which contains the basic elements for rate-setting of mobilehomes or mobilehome spaces. There are no administrative remedies against any hardship by landlord or tenant. Certainly, establishment of a new bureaucracy to provide that “safety valve” may be costly, but governmental efficiency is no defense to confiscating due process or the right to petition for redress of grievances by landlords or tenants. AB 978 cuts off any such possible review or exceptions.

For these reasons, a veto is appropriate. Thank you for your consideration, and we respectfully request that you veto AB 978.

 

Very truly yours,