Can a park owner enter into a lease? Leasing rights continue, despite AB2782, and despite some confusion. Some are asking if leasing is legal at all. State exempted leases now expire January 1, 2025 (valid leases are then no longer exempt from local rent laws under Civil Code §798.17). Still, park owners have opportunities, some more than others. Let’s sort out what you can and what you cannot do and expect.
History: I was drafting lease since the early 1980’s, because residents desired a comfort factor. Security. Planning. Predictability. Leases mean a huge relief and eliminating anxiety of the unknown. No one wanted short term agreements, especially seniors.
Then the industry “epiphany”: In the early 1980’s, a “Eureka” moment. Long-lasting stability emerged from the pointless, needless and very destructive rent control battles of the early 1980s. I also remember a well-known tenant lawyer, Richard Singer in San Diego, who believed that long term agreements were the answer for everyone. Some tenant lawyers told me their clients must be “idiots” (their words) for installing expensive mobiles on month-to-month tenancies—aghast they often were.
The answer was leases. Some tenant political action groups published handbooks on leases. Some tenant leaders counseled leasing to improve life-style and end needless acrimony. Some residents wanted to take over control of their parks–until those that did soon discovered the persistent headache of managing park property and people in it.
So, leasing replaced the annual rent increase battles, and pave a road to calm. And still do. Why? Because leases provided long-term stability. In 1985, Senator Leroy Greene codified the rent control exempt lease. Because leasing can be more attractive than rent controls.
By contrast, rent control is the antithesis of stability. Aside from benefitting experts, lawyers and political action exploiters, rent controls drive the parties apart by nature, and cause uncertainty and anxiety. Leases do the opposite, bringing people with common interests together.
Annual rent controls mean increases occur year by year, which respond to moving-changing economic conditions. You can about set your watch by the notices. No one knows next year’s increases. When determined, we all fight about it before commissions and boards, administrative law judges and hearing officers. Rent litigation is stressful, draining and exhausting. By contrast, long term leasing takes the long view planning into account and establishes even, calm assurance. It also means no one receives a notice of closure of the park. How much a relief is that?
Legislators understood this in 1985 and they said enough! So they passed the “Green Bill” to enable leasing so positive and beneficial residents would take a lease over less attractive rent controls, which only provide for government interdiction of a marketplace that forces government to make the decisions. Most tenants would prefer to make the decision for themselves. Which is why the legislature would not pass SB500 which would repeal leases.
Leasing results were lasting. The detente continues even today. Examples abound. Park owners offered long term leases and financed resident home improvement, cash gifts, scholarships, golf club memberships, and trips to Las Vegas. Park owners offered leases which are less annually than the rent control law formula so adjustments would be financed in later successive assignments.
Park owners reduced rents to help seniors and tenants sell their homes with “bridge” leasing. Vacant spaces in remote areas would not fill unless there was a signing bonus attached to a lease. Cities and Counties set up mutual benefit accords, tripartite agreements, long term rental adjustment deals. I know owners who contribute several hundreds of thousands of dollars to a city, for years, to assist needy seniors. Owners have helped seniors with that “world cruise.” The enormity of goodness that flows from community owners, rooted in long and stable relationships, has brought real happiness, and a strong social fabric of good will.
Even progressive operatives admit that “[A] homeowner’s biggest reason for signing a long-term lease is stability and continuity. The formula for rent increases cannot be changed until the lease expires.” In preventing unknown rent adjustments, “[A] long-term lease can solve these uncertainties.” And when it comes to the quality of life, housing services and issues, and maintenance standards, the political activists add that “[T]he park owner can also be contractually bound in a lease to provide a certain level of services to the homeowner, and any deviation can result in a breach of contract.” So…
Why did the legislature take it all away on February 13, 2020? Because it was not duly considered. The legislature unwittingly deprived many groups of empowerment to fashion their own long-term stability and certainty.
How do you know what leasing you can do, and what terms do owners and residents remain empowered to enjoy in a stable long term lease.
Where Exempt Local Leasing is Respected. Many ordinances provide for leasing, respecting the residents and owners who agree on long term stability in leasing. Read the ordinance to see if the local city or county provided the power of residents to work out a good deal in their park.
Why do some enlightened municipalities exempt leasing? Because “thinking” people may believe that if people can solve their own lease issues, there is no need for rent controls. And a lot less expensive for local taxpayers. Thus, leasing is often exempt from the scope of local rent control. This is also official policy in ‘accords’ in many cities.
Read the Ordinance. Many owners may not realize that the ordinance already has an exemption from rent control. Now, none of the old statutory parameters (in former §798.17) apply. For example, there is no requirement for a thirty day waiting period; a three day cooling off period; or signed acknowledgments. There is no bar against automatic extension provisions.
2021 Basic Guidelines for Long-Term Leasing in 2021.
Park Owners Must Offer a Rental Agreement of One Year, One Month to One Year at Tenant’s Option, and Longer Than Twelve Months by Mutual Agreement. §798.18. As to rental agreements greater than 12 months, there are 3 formats exempt from local rent control.
(1) “Old” §798.17 leases: The “old” long-term lease format which is exempt from rent control under state law: §798.17. The “old” lease which is a valid and enforceable lease would be entered into prior to February 13, 2020, characterized by a statutory warning in 12 point boldface type in the first paragraph on the first page of the lease. That lease opportunity ended February 13, 2020. The “old” lease exemption is now invalid, null, and void and has been since February 13, 2020. The state-rent control exemption in the still-valid “old” lease (entered into before February 13, 2020) expires January 1, 2025. “Old” leases can be assigned and required if the lease provides, through to January 1, 2025.
(2) “New Lease per Civil Code §798.18” (unrestricted): where there is no rent control, the free market controls; long-term leases add stability and reliability as a form of voluntary bilateral commitment. The legislature rescinded leasing in AB 2782 so GSMOL can destabilize its members. And disembowel the power to negotiate and bargain. But it is merely a reflection of diminished expectations of resident competency. It tricks the unwitting few into blindly replacing long-term security with anxiety and false security. Leasing is how you secure long-term, stable, and restricted pricing. A fair deal with happy residents.
(3) “Local Exempt” Leases: where there is rent control but a local exemption applies to leases. Does the ordinance allow a lease exemption? If so, the owner may offer a lease exempt according to that jurisdiction. Read the ordinance. Make sure the terms are fair and balanced.
Many believe that AB 2782 means that all leases are illegal. This is certainly incorrect. To disabuse such a misunderstanding, all locally-exempt agreements should specifically quote the ordinance sections relied on for the assertion of a local exemption.
2. The Older The Ordinance, The More Likely There Is A Local Exemption. In early days, city and county fathers recognized the sanctity of the bilateral agreement, such that government’s heavy hand was deemed unnecessary if the parties had worked things out through leasing.
3. Leasing Must Be with Mutual Agreement. You cannot require the tenant, new purchaser, or dealer to execute a long term lease. §798.18. Park management may not require a long-term lease; tenants and assignees cannot require any specific terms of tenancy. But negotiate. You can mandate assignment of an existing lease if the terms so provide.
4. Leasing Terms Must Comply With the: (1) MRL [See §798.15, 798.18]; (2) local ordinance if any; and, (3) general contract law – not in conflict with the MRL.
5. “Old” Long-Term Lease Formats (§798.17) May Require Assignment of the Lease – At sale or other transfer of tenancy in accordance with the provisions of the lease.
[Most assignment clauses specify that the owner may require assignment of the pre-existing lease, or the parties may also substitute a new lease by mutual agreement. Long-term exempt leases may be assigned up to expiration of the term. Vance v. Villa Park provides a full explanation of the community owner’s rights.]
6. The Rental Terms and Conditions for The First 12 Months Must Be The Same in All Offers. In other words, financial benefits to the tenants in the form of reduced rents, moratoria from capital improvements or other expenses, may apply after the first tenancy year.
7. The Lease May Be A Short And Simple Statement – e.g., a brief amendment to the existing written rental agreement, which among other things, incorporates the rules and regulations. For example, lease agreements are locally-exempt in many cities and counties. However, again, the lease is required to comply with all provisions of §798.15. A copy of the MRL, e.g., should be provided.
8 . No Further Offering. Or Cooling off Period: “Old” exempt leases required the offering of the lease for thirty days and the provisions of a rescission or “cooling off” period of seventy-two hours after execution. Those requirements no longer apply. Check for additional local provisions. Los Angeles County, for example, maintains this requirement for its local lease exemption.
9. Check with Your Attorney Before You Add Automatic Renewal and Extension Clauses. “Old” exempt leases prohibited renewal or extension clauses. §798.17. Those requirements no longer apply to long-term leases (more than 12 months in term). All rental agreements are in excess of 12 months because Civil Code §798.55(b) requires ‘evergreen’ renewal. The tenancy is essentially perpetual; some courts also refer to the “life tenancy.” Commentators have questioned if such permanent occupation is a taking, since closure is now more difficult in light of new restrictions which, too, appear to be unconstitutional.
10. “Old” exempt leases provided a requirement that the space be leased for the actual and personal residence of the occupants. That provision no longer applies. Check for additional local provisions.
11. Do You Allow Any Value-Added Improvement To Mobilehome Sites? If considering eventual conversion of use, and you wish to protect you or your family, you may be advised not to allow new construction or any upgrades which will increase the value of the in-place appraisal of the mobilehome. Future cessation may require payment of on-site in-place value, and if so, the owner will be required to purchase the mobile home at in-place market value. In other words, you will be required to pay retail price for your decision to permit construction. You may be burdening your buyer or family members with bigger financial obligations to get your land back.
12. Event-Potential Which Cautions against Long-Term Leases: The assumed strategy is to secure rapport with residents by a stable and viable long-term lease without compulsion or restriction enforced by local government. In some instances, abolition of long-term leasing may serve the interests of the park owner. If sale of the mobilehome park is contemplated, leasing may or may not be desirable; leasing should not extend beyond the expiration of a ground lease without ground lessor consent. Such events can be shared with the tenant community early in routing disclosures to prevent false illusions from real estate agents about any permanent land use.
Can I offer the lease? What Agreements Can I offer? Answer These Questions to Determine Which Rental Agreement(s) You May Offer:
QUESTION NUMBER 1: Is the park under rent control?
Answer: No, I am not subject to rent control.
– I may offer a §798.18 Lease (12+)
– My §798.18 lease is valid and remains enforceable without any price restriction, ceiling, floor or other conditions (except general MRL restrictions and requirements for establishment of a contract, i.e., mutual agreement, see §798.18).
– I am not permitted to offer the exempt “old” lease (the §798.17 claim of exemption from rent controls may not be offered, but pre-existing lease entered into before February 13, 2020 may be assigned until January 1, 2025).
Answer: Yes. I am subject to rent control.
Then, go to “Question number 2.”
QUESTION NUMBER 2: If I am in a rent control jurisdiction, does the ordinance provide for a local lease exemption? You will need to read the ordinance, carefully, all of it, for this information.
Answer: If “yes” (there is a local lease exemption), go to “A.”
Answer: If “no” (there is no local lease exemption), go to “B.”
“A.” Is the lease exemption from rent control require compliance with §798.17 specifically?
Answer: If “yes”, go below to “X”;
Answer: If “no”, go below to “Y.”
“X”: Answer: If my local ordinance allows an exemption for leases if the lease complies with §798.17, that exemption may apply depending on the language in the ordinance.
“Y”: Answer: If my local ordinance provides for an exemption for leasing, as is the case with many ordinances in force and effect in the ‘80’s, then I may offer long-term leases that comply with §798.15 and the short term (1-12) month offers and in excess of 12 months (§798.18) again depending on the language of the specific ordinance.
“B.” Answer: I am subject to rent control and there is no local lease exemption. If there is no local lease exemption, the state legislature will have deprived residents of seeking agreement for long term stability. So, I must offer just the inherently uncertain 1-12 month agreement. A longer term agreement will not be mutually acceptable because we cannot bargain for agreeable long term security. Rather, tenancy is stripped to an uncertain precarious existence. I am forced to offer just a month-to-month to 12 months (followed by month-to-month).
Leasing makes no sense under rent controls, as rent controls prevent economically viable leasing. A lease capped at rent control ceilings would trap me by halting cost recovery for park improvements and replacements, fair return, capital improvements, tax increases, market changes, or the many other legally-required allowances. A hearing every year will cost more. But I must to stay in business unless we close it up. Go to question number 3.
QUESTION NUMBER 3: Does the review of a proposed rent increase require a tenant petition to trigger administrative review:
Answer: If the ordinance requires a tenant petition to start review of a proposed rent increase, determine if a collaborative process or negotiation could lead to a tenant-majority consensus to a rent adjustment schedule can bear fruit. Such an agreement might include a covenant not to petition in return for an agreement for fixed favorable long-term stability. If accepted by a majority of residents, the rent increase, which would affect all tenants, might not have sufficient signatures to qualify for administrative relief, as negotiated. This could lead to many years of peace and understanding.
These and many other alternatives to achieve an equitable distribution of rights and duties among the park owners and tenants can be easily divined by review of your local rent control ordinances.
QUESTION NUMBER 4: Is there an opportunity to achieve long-term stability with either the other provisions of the local ordinance or through city-sponsored mediation and memoranda of understanding or lease accords.
Answer: Many ordinances may offer other exemption possibilities: study your ordinance carefully. In other cities and counties, there may be still other options to deal with HOA approved understandings, supermajority approvals, MOU’s, model leasing, accords, and the like.
Generally: check all attachments, purchaser packets, and other handouts that apply to prospective purchasers and new tenants. The legislature did not fully “clean up” the laws regarding the changes instituted by AB 2782. The form entitled “information for prospective homeowner” and all other forms should be updated to properly refer to leasing issues.
Nota Bene: If there is any exemption to be applicable, it will be applicable because the local ordinance provides it. Same with regard to the statement of information. Any statements which refer to state-exempt (§798.17) long-term leasing agreements should be deleted from residency documentation.
Conclusion:
Like a “way back machine,” some cities and counties are falling back to an anachronistic ‘80’s. To the times of tax credits, disco, and big interest rates. Back when Senator Green codified the exempt long-term lease. Many cities and counties have fallen victim to short sighted beliefs that are simply wrong. Empowering freedom to make their own deals is best for residents. No one knows better than that. Some say that political radical groups are not the proper Nanny (if anyone is) for mobilehome residents (insulting, demeaning and wrong).
In other words, before eyes awaken to solutions, the familiar hue and cry over costly and relentless rent litigation must re-play again. The regrettable emotional cost and anxiety will mean higher rents in the long run, noncompensable distress and anxiety, time away from peaceful retirement and grandkids from a system that requires adjudication of every rent increase. Rent control must run its course and fail, again, and city budgets must burst. Then, leasing will be rediscovered in those areas where empowerment of residents has been swiped away by a ham-fisted unfeeling legislature.