Legal Analysis of Proposition 98's Two Most Devastating Impacts on Mobilehome Owners

The below memo was written by Attorney William Constantine
Courtesy of the Coalition of Mobilehome Owners - California (see also CoMO-CAL's FREE Yahoo Discussion Group)

Re: Legal Analysis of Proposition 98's Two Most Devastating Impacts on Mobilehome Ownership & Rent Control - A Nightmarish Scenario!

Summary:

1. Proposition 98 is certain to eliminate mobilehome rent control through its imposition of permanent vacancy decontrol and its prohibition on future mobilehome rent control laws and ordinances.
2. Proposition 98 is also very likely to overturn the Mobilehome Residency Law's just cause eviction protections, which would then allow park owners to immediately start evicting mobilehome owners simply to take their spaces out of rent control.

Dear Mobilehome Homeowners' Associations and individual Mobilehome Owners:

I am writing this memo to clear up some of the confusion regarding Proposition 98's most devastating likely impacts on the mobilehome community. Many of you have contacted me complaining that you cannot find the language in Proposition 98 that eliminates mobilehome rent control. Others have complained that you do not understand whether or not Proposition 98 immediately eliminates rent control or if it just establishes permanent vacancy decontrol. Your confusion is understandable since Proposition 98 appears to be intentionally written to hide its most devastating impacts on mobilehome and other rent control in order to trick many voters into believing that they are simply voting to prevent eminent domain abuse. Of course, that is not true as Proposition 98's primary target is mobilehome rent control. That is why mobilehome park owners and apartment owners have contributed 85% of the campaign contributions to the Yes on Proposition 98 Campaign.

Below, I will attempt to clear up this confusion by explaining how it is unequivocal that Proposition 98 will establish statewide mobilehome vacancy decontrol (i.e., rent control is lost when a mobilehome is sold or transferred - causing the homeowner to lose most, if not all, of their investment in their mobile home). Although it is true that Proposition 98 does not immediately eliminate rent control, prior to the next time the mobilehome is sold or transferred, it is very likely to have the far worse nightmarish impact of allowing mobilehome park owners to immediately begin evicting mobilehome owners from their parks, without cause, simply to allow the park owners to immediately take their mobilehome spaces out of rent control when the tenancies in their spaces are then changed due to the evictions.

I. Introduction - Proposition 98's Two Fatal Blows to Mobilehome Ownership: Permanent Vacancy Decontrol and Evictions without Cause.

At first glance, the impact that Proposition 98 will have on mobilehome rent control in California is not apparent since its proponents have camouflaged it with the crafty and misleading provisions that are contained within the text of the changes that Proposition 98 will make to the California Constitution. For example, Proposition 98's title does not either mention or even allude to its impact on mobilehome rent control and ownership and, instead, it deceivingly calls itself the "California Property Owners and Farmland Protection Act." Likewise, most of its proponents' literature suggests only that it simply provides new restrictions on the use of eminent domain.

Far from simply providing restrictions on the use of eminent domain, Proposition 98's actual provisions will deliver two fatal blows to mobilehome rent control and ownership in California. The first fatal blow is certain to occur and the second is very likely to occur. The first fatal blow is that it directly eliminates mobilehome rent control forever in California by making it unconstitutional to limit the price that a private owner may charge another person for the use of his or her property - the very definition of rent control! It attempts to whitewash this impact by claiming that its imposition on each individual mobilehome space will be delayed until the current tenants occupying the space move out of their mobilehome or no longer use it as their principal place of residence - permanent vacancy decontrol!

However, even that temporary reprieve is likely to prove worthless because Proposition 98's second fatal blow to mobilehome ownership will likely occur immediately because it also threatens to invalidate the California Mobilehome Residency Law's (the MRL) "just cause' eviction provisions (Civil Code sections 798.55 and 798.56) that now only allow mobilehome park owners to evict mobilehome owners from their parks under very narrow circumstances (e.g., failure to pay rent, serious rule violation, park conversion or closure). Put together, these two impacts mean that Proposition 98 will very likely result in the nightmarish scenario of allowing mobilehome park owners to immediately start evicting mobilehome owners simply to then be allowed to raise the rents on their vacated mobilehome spaces.

II. Proposition 98 Unequivocably Targets and Eliminates Mobilehome Rent Control.

Proposition 98's provisions that unequivocably eliminate mobilehome rent control are fairly easy to interpret. Proposition 98 accomplishes the elimination of mobilehome rent by first adding a simple sentence, containing two key operative terms, to the end of Article I, section 19, of the California Constitution. That new sentence states:

"Private property may not be taken or damaged for private use."

Proposition 98 then defines the term "taken" to include "limiting the price a private owner may charge another person to purchase, occupy or use his or her real property." That definition is the definition of rent control - limiting the price that a property owner can charge for the use of their property.

Proposition 98 then takes the final step in eliminating mobilehome rent control by then defining the term "private use" to include "regulation of the ownership, occupancy, or use of privately owned real property or associated property rights in order to transfer an economic benefit to one or more private persons at the expense of the property owner. "

Accordingly, Proposition 98 directly eliminates mobilehome rent control through the above definitions since mobilehome rent control unequivocally is a regulation of the price that a property owner may charge for the use of their property (e.g., the mobilehome space) that transfers an economic benefit from the mobilehome park owner to the mobilehome owner (e.g., the economic benefit to the park owner of being able to charge unlimited rents is transferred to the mobilehome owner as the economic benefit of being protected from unlimited and unreasonable rent increases).

Section 6 of Proposition 98, entitled "Effective Date," delays Proposition 98's elimination of mobilehome rent control by delaying its effective date against all rent control statutes and ordinances in California, which were enacted prior to January 1, 2007, until "only so long as at least one of the tenants of such unit or space as of the effective date ("qualified tenant") continues to live in such unit or space as his or her principal place of residence." This is an expanded version of permanent vacancy decontrol as it permanently eliminates mobilehome rent control on every rental mobilehome space in California as soon as the mobilehome on it is sold, sublet, or inherited or it as soon as its tenants are evicted from the mobilehome park. It also eliminates rent control on spaces on which the mobilehome is not the principal place of residence of at least one of its "qualified tenants."

This permanent elimination of mobilehome rent control is an impact of Proposition 98 that an analysis of the impacts of Proposition 98 on California housing laws, which the Western Center on Law and Poverty published on December 19, 2007, classified as a change to California housing law that is certain to occur if Proposition 98 is adopted.

Proposition 98 also prohibits any new mobilehome rent control laws or ordinances and also immediately repeals any mobilehome rent control statute or ordinance that was adopted after January 1, 2007.

III. Proposition 98 Will Also Very Likely Allow Mobilehome Park Owners to Begin Evicting Mobilehome Owners from Mobilehome Park Simply to Remove Their Spaces from Rent Control.

The same provisions of Proposition 98 that eliminate mobilehome rent control in California through permanent vacancy decontrol are also very likely to overturn the MRL's "just cause" eviction protections (e.g., Civil Code sections 798.55 and 798.56) that now only allow a mobilehome park owner to evict a mobilehome owner from their mobilehome space under very narrow circumstances (e.g., failure to pay rent, serious rule violation, park conversion or closure).

The Western Center on Poverty and Law's December 19, 2007 - Analysis of Proposition 98's Housing Impacts concludes that Proposition 98 would very likely overturn these just cause eviction protections of the MRL:

The "just cause" eviction provision of the MRL was enacted in acknowledgment of the extreme difficulty in moving a mobile home after a termination, which cost thousands of dollars. In addition, for both mobilehome park residents and other tenants, there is often no place to move to - there is a chronic shortage of rental housing and mobilehome park spaces throughout California. Limiting displacements to those for just causes imposes a small but real burden on the landlord, but confers an enormous (economic) benefit on the tenant. Both the state legislature and local governments (often by local vote) have implemented just cause protections as mportant public policies. The initiative would very likely do away with these protections.

The main reason that Proposition 98 is very likely to overturn the MRL's just cause eviction protections is that Proposition 98's definitions of the terms "taken" and "private use" make unconstitutional the "regulation of the ownership, occupancy, or use of privately owned real property or associated property rights" that "transfer an economic benefit to one or more private persons at the expense of the property owner." The Western Center on Poverty and Law's analysis points out that the California Supreme Court will be the ultimate arbiter of the meaning of this language and that they have recently took a very expansive view of economic activity that is likely to be applied to any future interpretation of the meaning of the above phrase "transfer an economic benefit." See Hernandez v. City of Handford (2007) 41 Cal.4th. 279. The Western Center on Poverty and Law's then concludes that this language in Proposition 98 is very likely to be interpreted to overturn all just cause eviction protections in California:

Again, under the initiative a "private use" means regulation of the occupancy of private property in order to transfer an economic benefit to a private person at the expense of the property owner. Just cause eviction laws are indisputably a regulation of the occupancy of private property and they are likely to be interpreted as existing in order to transfer an economic benefit from the landlord to the tenant.

Thus, the Western Center on Poverty and Law has defined the "economic benefit" to tenants, which just cause eviction protections protect, as being the "right to occupy the property at a fixed rent." That is the "economic benefit" whose "transfer" to the tenant that Proposition 98 would make unconstitutional.

The above economic benefit transfer analysis applies with even much greater certainty to the MRL's just cause eviction protections since it much clearer that a mobilehome owner's investment in the "in place value" of their mobilehome is a huge "economic benefit" that the MRL's just cause eviction protections are intended to protect. This means that it is even much more likely that Proposition 98's provisions will render the MRL's just cause eviction protections unconstitutional then that they would render other non-mobilehome rent control just cause protections unconstitutional. This is the reason that the Western Center on Poverty and Law concluded that Proposition 98 would very likely do away with the MRL's just cause eviction protections.

An important fact that supports the Western Center on Poverty and Law's conclusion that Proposition 98 will very likely do away with just cause eviction statutes and ordinances in California, including the MRL's just cause eviction provisions, is the fact that apartment owners have also contributed substantial sums in support of Proposition 98 even though under current law, the Costa Hawkins Rental Housing Act, their rental units are already subject to vacancy decontrol (fortunately, mobilehome parks are exempt from Costa Hawkins). Thus, at first glance, it would seem they have nothing to gain by Proposition 98's imposition of state wide vacancy control since they already have it under Costa Hawkins. The obvious answer to that dilemma is that when they participated in the drafting of Proposition 98, they must have intentionally drafted its provisions so that it would also overturn the just cause eviction ordinances in their jurisdictions and, thereby, would allow them to also start evicting their tenants to get their units out of rent control.

IV. Conclusion

Since Proposition 98 "will very likely do away" with the MRL's just cause eviction protections, a mobilehome park owner will not have to wait until a mobilehome owner voluntarily moves out to raise the rent on their mobilehome space under Proposition 98's vacancy decontrol. Instead, a park owner will very likely be able to simply evict a current mobilehome owner, "without cause," simply to cause the tenancy in their mobilehome space to transfer in order to then be able raise their space's rent under Proposition 98's vacancy decontrol provisions. This means that Proposition 98 is likely to put all mobilehome owners at risk of immediate evictions, and the resulting immediate loss of their investments in their mobilehomes, rather than just subjecting them to the future dire economic consequences of vacancy decontrol (i.e., the future loss of their investments and their mobilehomes when they attempt to sell them in the future without rent control). Unfortunately, this nightmarish scenario must be taken seriously by all mobilehome owners in California.

Please feel free to contact me if you have any questions.

Yours very truly,

Final draft dictated but not proofread to save time.

William J. Constantine
Law Office of William J. Constantine
303 Potrero, Building #29, Suite 104
Santa Cruz, California 95060
WConst1238@aol.com
Phone: (831) 420-1238
Fax: (831) 480-5934