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HomeMy WebLinkAboutOrd 800 Rent Review v INTEROFFICE MEMORANDUM CITY OF PALM DESERT TO: THE HONORABLE MAYOR, CITY COUNCIL AND CITY MANAGER FROM: RAY L. JANES, MANAGEMENT ANALYST II SUBJECT: REVISIONS TO THE RENT REVIEW ORDINANCE DATE: APRIL 25, 1996 RECOMMENDATION 1. That the City Council approve the revised Rent Review Ordinance. BACKGROUND The Rent Review Commission has recommended revising our existing Rent Review Ordinance (City Code Chapter 9.50) to clarify the meaning of certain provisions that were confusing. The City Attorney's office prepared the proposed ordinance to make revisions after consulting with the Commission, staff, and members of the public. The primary issues that needed clarification concerned the proper method for calculating the maximum rent that a park owner is permitted to charge under the ordinance without obtaining a "hardship" rent increase from the Commission, and the relationship between permissible rent increases and the petition process for seeking a hardship rent adjustment. Another important issue that needed clarification was the Commission's ability to disregard certain deferred repair and maintenance costs. The first section of the proposed ordinance clarifies that the Rent Review Commission shall now have two alternates. It also clarifies the role of those alternates, and states that all Commission members must be residents of Palm Desert. The second section of the proposed ordinance clarifies that the Commission shall consider regarding a petition for a hardship rent increase whether any repair or maintenance costs submitted by a park owner could have been minimized or avoided through ongoing maintenance. If the Commission determines that these costs were caused by deferred, negligent, or improper repair and maintenance, then the Commission must disregard them. REVISIONS TO THE RENT REVIEW ORDINANCE APRIL 25, 1996 The third section of the proposed ordinance addresses proper calculation of the maximum rent that a park owner may charge without obtaining a hardship rent increase, and certain other related issues. The ordinance states the maximum rent that a mobile home park owner may charge in the absence of a hardship rent adjustment, and furthermore, cannot exceed the monthly rent that was charged for that space on the base date of April 28, 1983; this may be adjusted up or down for the change in the cost of living since that date. The change in the cost of living shall be measured by three-quarters (75%) of the net change in the Consumer Price Index (CPI) from the base date. Section three of the proposed ordinance also adds a provision so that no rent increase in a 12- month period can be higher than 6% without the Commission's approval. If an increase of more than 6% does occur, then the excess increase may be carried forward for a period of up to eight years, until utilized; this will then allow an automatic annual increase of up to 6% in future years in which the permitted increases in rent would be less than 6%. Section three of the proposed ordinance additionally clarifies that a park owner's ability to make permissible rent adjustments under the ordinance once every 12 months does not limit their ability to apply for hardship rent increases during that period; however, the Commission has to be informed of the increases when they file their petition. The ordinance also clarifies that while CPI changes are always measured from the base date for the purpose of determining rent increases, a park owner can never retroactively collect rent that was not charged to tenants during any 12-month period. Finally, I have attached minutes from the February 23, 1996, Rent Review Commission meeting for your review. The minutes are for backup information, and provide dialogue between the Commission and our Assistant City Attorney regarding some of the aforementioned issues. The Commission will then take official action on the minutes at their September meeting. Respectfully submitte , ice/" RAY L. J/ ES MANA MENT ANALYST II lga Attachments MEETING DATE C? `( /7 49 4, 2 i i.; CONTINUED TO PASSED TO 2ND READING J W ORDINANCE NO. Roo AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM DESERT,CALIFORNIA, AMENDING SECTIONS 9.50.040,9.50.050,AND 9.50.060 OF THE PALM DESERT MUNICIPAL CODE, PERTAINING TO MOBILE HOME PARK RENT REVIEW. WHEREAS, the City Council finds it desirable to amend and clarify various provisions of the City's mobile home park rent review laws. NOW, THEREFORE, the City Council of the City of Palm Desert, California, DOES ORDAIN as follows: Section 1. Subdivision "A" of Section 9.50.040 of the Municipal Code is amended to read as follows: "A. There is established within the city a mobile home park rent review board consisting of five regular members and two alternate members appointed by the city council and serving at the pleasure of the city council. Alternates shall serve only to the extent necessary to form a quorum of three members. The secretary of the board shall determine whether the attendance of one or more alternates at a given meeting is necessary to ensure a quorum and notify them accordingly. Regular and alternate board members shall serve a term of four years, at the end of which he/she may be considered for reappointment. All regular and alternate board members shall be residents of the City of Palm Desert during their terms." Section 2. The following sentence shall be added to the end of subdivision "E" of Section 9.50.050 of the Municipal Code: "In examining repair and maintenance costs submitted in a given case, the board shall consider whether those costs could have been minimized or avoided by the park owner through prudent and ongoing maintenance activities; to the extent such costs were exacerbated through unnecessarily deferred, negligent, or otherwise improper repair and maintenance, they shall be disregarded." Section 3. Section 9.50.060 of the Municipal Code is amended to read as follows: "A. Except as otherwise provided in this chapter (e.g., a fixed-term rental agreement or a hardship rent adjustment), the maximum rent that a mobile home park owner may request, demand, or receive for a mobile home space shall not exceed the monthly rent that was charged for that space on base date (as defined below) adjusted up or down for the change in the cost of living since the base date. In other words, the maximum rent ORDINANCE NO. Rnn chargeable will increase or decrease over time based on fluctuations (up or down) in the cost of living. As the cost of living goes up relative to the base date, the maximum chargeable rent will also go up; as the cost of living goes down, the maximum chargeable rent will also go down. If the cost of living remains constant, then the maximum chargeable rent also remains constant. In implementing this Section, a mobile home park owner shall not increase -- nor be obligated to decrease -- the rent charged for any space more than once during any 12-month period, unless an additional increase or decrease is expressly authorized or ordered by the rent review board. B. Notwithstanding the foregoing, no rent increase in a given 12-month period shall cause the previous rent charged for the space to increase more than 6% unless expressly permitted by the rent review board. If an increase of more than 6% would occur, then the excess increase may be carried forward for a period of up to 8 years, until utilized to allow an automatic, annual increase up to 6% unless expressly permitted by the rent review board. If an increase of more than 6% would occur, then excess increase may be carried forward for a period of up to 8 years, until utilized to allow an automatic, annual increase up to 6% in any future years in which the permitted increase in the rent would be less than 6%. C. The "base date" shall be April 28, 1983, for any space that was rented on that date and not governed by a fixed-term rental agreement permitted by this chapter. For all other spaces, the base date shall be the first date after April 28, 1983, that the space was rented and not governed by a fixed-term rental agreement permitted by this chapter. D. Changes in the cost of living shall always measure from the base date. For purposes of this section, the change in the cost of living shall be measured by three- quarters (75%) of the net change in the Consumer Price Index (CPI) from the base date until any subsequent date in the present. The CPI used for the subsequent date shall be the most recent CPI published before that date. E. Raising rent during a 12-month period in accordance with this Section shall not prevent a park owner from subsequently filing a hardship rent petition during that same period. Nor shall the filing of a hardship rent petition preclude the subsequent imposition of an otherwise allowable rent increase while the petition is pending, provided any such increase is brought to the attention of the City official or board considering the petition. At all times during the hardship petition process, the most recent CPI date shall be used. F. Non-imposition of a rent increase permitted by this Section during a 12-month period shall not affect the maximum rent that a park owner may charge in a later 12- month period. But a park owner may never retroactively collect rent from tenants that could have been charged but was not. That is, rent increases allowed by this Section shall only apply prospectively." 2 ORDINANCE NO. R(1U Section 4. The City Clerk shall certify as to the passage and adoption of this ordinance and shall cause the same to be published once in the Palm Desert Post, a newspaper of general circulation, printed, published, and circulated within the City of Palm Desert, and the same shall be in force and effect thirty (30) days after its adoption. PASSED, APPROVED, and ADOPTED this day of , 1996, by the City Council of the City of Palm Desert, California, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: WALTER H. SNYDER MAYOR ATTEST: SHEILA R. GILLIGAN, CITY CLERK DIRECTOR OF COMMUNITY AFFAIRS CITY OF PALM DESERT, CALIFORNIA 3 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING FRIDAY, FEBRUARY 23, 1996 10:00 A.M. CIVIC CENTER COUNCIL CHAMBER * * * * * * * * * x x * x x x x x x x x x x * x * x x x x x x x x x x x x x x x x x x x x x * CALL TO ORDER Chairman Coates convened the meeting at 10:20 a.m. II. PLEDGE OF ALLEGIANCE Chairman Coates gave the Pledge of Allegiance. III. ROLL CALL Present: Commissioner Jim Ainsworth, *alternate Commissioner Henry M. Armstrong Chairman Robert Coates Commissioner McCaughey Absent: Commissioner William Adams* Commissioner Ulrich McNulty Also Present: Rick Erwood, Hearing Officer Marshall Rudolph, Asst. City Attorney Ray L. Janes, Management Analyst II Lorena Armenta, Senior Office Assistant IV. NEW BUSINESS A. Annual Selection of New Chairman and Vice Chairman Mr. Janes announced to the Commission that the new term will be fulfilled in August. Then in September, there will be another election for a new chairman and vice chairman. This will allow this Commission to be on cycle with all other City committees and commissions. Also, Commissioner Ulrich McNulty called him and said he would like to be nominated for the position of Chairman. Commissioner Armstrong nominated Commissioner Coates with Commissioner McCaughey seconding the nomination. RENT REVIEW COMMISSION MINUTES 'FEBRUARY 23, 1996 PAGE 2 *oh**dc***************9c9c9c>c******** c*x****, xxxxxx ****xxxxx:Fkk9c **.****—,...** Chairman Coates nominated Commissioner McNulty. A motion was made by Commissioner Armstrong, seconded by Commissioner McCaughey, to re-elect Commissioner Robert Coates as the new Chairman of the Rent Review Commission to be fulfilled until August 1996. Motion carried unanimously with Commissioner Ainsworth voting no. Chairman Coates opened up the discussion for selection of Vice Chairman. A motion was made by Commissioner Armstrong, seconded by Chairman Coates, to elect Commissioner Ulrich McNulty as the new Vice Chairman of the Rent Review Commission to be fulfilled until August 1996. Motion carried unanimously. B. Consideration of the Proposed Revisions to the Palm Desert Municipal Code, Ordinance 773, Sections 9.50.040, 9.50.050, and 9.50.060 Chairman Coates asked Mr. Janes to give him a review of Anthony Rodriguez's letter dated February 22, 1996. Mr. Janes referred the question to Attorney Marshall Rudolph, who has had the opportunity to review the letter, and asked that he give a report. Attorney Rudolph asked the Commission to review Mr. Rodriguez's letter dated February 22, 1996. The letter arrived at this office yesterday, late afternoon via fax machine. Mr. Rodriguez represents the park owner for Silver Spur Mobile Manor. Mr. Rodriguez is expressing concerns on some of the provisions of the draft ordinance. Mr. Rodriguez feels it conflicts with the provision to the state mobile home laws. In Attorney Rudolph's personal opinion, the draft ordinance is just fine. He offered to address each point in the letter briefly. The first objection of Mr. Rodriguez's letter under Section 2. 9.50.050/Improper Repair Maintenance. Mr. Rodriguez is saying that this imposes a maintenance obligation and intrudes on state law which allows tenants to appeal improper park maintenance. But Attorney Rudolph disagrees with that characterization of the ordinance. Rather, he feels the ordinance simply indicates that when maintenance costs have been needlessly exacerbated through unnecessarily deferred maintenance, that fact is relevant information for the Board to consider when reviewing a hardship rent petition. Attorney Rudolph does not feel such a provision conflicts with state law. The second concern of Mr. Rodriguez's letter is that the ordinance implies that newly constructed spaces are subject to rent regulation even though they are exempt from local rent control under state law. Mr. Rudolph disagrees and points out that in all fairness, the ordinance must be viewed in the context of the entire city code chapter regarding rent review, which • RENT REVIEW COMMISSION MINUTES FEBRUARY 23, 1996 PAGE 3 *************dc******** c**ir***xxxxxxxx**xxxxr.r,xx*xxxxxr.xxx9cxxxxr,xxx****,'c c****** it amends. That chapter clearly provides that any tenancy exempt under state law is also exempt from city rent regulations. So the newly constructed spaces are exempt under state law, and under the city's rent control laws. The third concern from Mr. Rodriguez's letter is the cap on rent increases. The provision Mr. Rodriguez refers to provides a cushion for a rent increase in a given year; it cannot exceed more than 6%, unless the Rent Review Board allows it and the excess is carried forward. Mr. Rodriguez points out that you can't have an absolute cap on rent increase. Attorney Rudolph feels this is not an "absolute" cap since an increase of more than 6% is allowed, and it must be carried forward. The ordinance expressly states that an increase greater than even 6% in a year can be permitted by the Rent Review Board recognizing the fact that circumstances may arise where a greater than 6% increase is necessary or appropriate. In addressing the fourth concern from Mr. Rodriguez's letter regarding "Use of Most Recent CPI" on hardship rent petitions. Mr. Rudolph says that ironically, this was put into the draft ordinance for the same reason that Mr. Rodriguez's is objecting to because hardship petitions sometimes take many months to work their way through the process, if not years. During that time, the CPI can change considerably. If the petition and decision is based on old CPI data that was in effect when the petition was first filed, the result may not be accurate by the time the petition actually gets to the Rent Review Board. It seems appropriate to strive for accuracy in rent increases by using the recent data. That is what the draft ordinance is intended to do. Mr. Rodriguez would prefer to give notice of a proposed rent increase at the time the petition is filed, so that the 90-day notice period will have expired by the time a petition was granted. Attorney Rudolph feels the benefit of using the most current data outweighs any logistical inconvenience to the park owners resulting from complying with the state law 90-day rent increase notice period. Finally, Mr. Rodriguez mentions his satisfaction that the ordinance now allows banking of CPI rent increases. Attorney Rudolph expressed a lot of confusion exists regarding the meaning of the word "banking." He pointed out that there is no legal definition of "banking" rent increases. The term suggests a variety of possible interpretations. The ordinance clarifies that changes in CPI are always to be measured from the base year, as opposed to being measured only over the last 12 months. Thus, if a park owner does not impose the maximum rent in a given year, it does not affect his ability to charge the maximum allowable rent in a subsequent year. If that is "banking," then yes, the ordinance allows it and, arguably has always allowed it. Having said that, it is important to note that in no event can a park owner go back and collect rent that could have been charged but was not -- that is, all rent increases are prospective in effect only. The ordinance makes that clear. • RENT REVIEW COMMISSION MINUTES FEBRUARY 23, 1996 PAGE 4 ***********'x**** 'c*9t**ah9t********4,4,4,*****,—xxxx .4,*xxxxx —7,,, xxxxxx**xkxxx —,* Chairman Coates stated he recently heard on the radio the County of Riverside had adopted a rent review ordinance with respect to mobile home parks. He has not had the opportunity to read the ordinance, but he knows it exists. The County's ordinance has some similar features and issues that this Commission is trying to address. It would give him peace of mind, if the County of Riverside had some rules that were adaptable to all the cities in the County of Riverside. Chairman Coates would like to know if it's possible to institute a study and see if there is a way to conform the City of Palm Desert's Rent Review Ordinance to the County's ordinance. Attorney Rudolph responded that Best, Best & Krieger participated in the County of Riverside's draft ordinance. Their offices were contacted because of their experience with the Palm Desert Rent Review Ordinance and working with other local cities rent control ordinances. The County's ordinance was modeled with the City of Palm Desert's ordinance. The ordinances are very similar, although they are different in a few respects. For example, the County ordinance allows permissive rent increases equal to 100% of the increase in CPI and also use arbitration. Chairman Coates stated the County's ordinance has an automatic cost of living adjustment on an annual basis; if this is correct, then it would eliminate many of the objections and letters from lawyers reguesting a hardship rent increase. Attorney Rudolph said the County's ordinance is actually the same as the City's ordinance with respect to the permissive adjustment that can be made by park owners without filing a hardship rent petition. Under the County's ordinance there are two processes: (1) there is an annual permissive adjustment that can be made by park owners based on CPI changes; (2) And a process for seeking a hardship rent increase. Chairman Coates asked how does the County process compare to the City's process. Attorney Rudolph said the process is basically the same. There are permissive adjustments that can be made based strictly on changes of the CPI without coming to the board. This ordinance is to clarify exactly how the permissive adjustments are calculated. If for some reason, park owners feel that annual permissive adjustment are still not producing a fair return on their property, then they can petition the board for a hardship rent increase. The tenants also have a right to come before the board for hardship or an adjustment for consideration. Chairman Coates asked when addressing the usage of the word "banking," with an automatic cost of living adjustment there would be no need for banking. Attorney Rudolph stated automatic and permissive are sort of synonymous terms. Automatic is used by people sometimes to refer to rent increase that can be imposed without coming to the board for permission; park owners can implement it on their own every year based on changes in the CPI. . RENT REVIEW COMMISSION MINUTES FEBRUARY 23, 1996 PAGE 5 xxxxxxxx***9c**dc$c$t*eh*th*********kirk .***'cxxxxxxx**xxxxxxxxx***xxxxx************* Chairman Coates asked what happens if the CPI doesn't change. Attorney Rudolph replied, if the CPI doesn't change then there is no increase over the maximum amount of rent that could have been charged the previous year. That would be true for the County's ordinance and for the City's ordinance. We are always measuring back to base year for the purposes of figuring out changes in the CPI. Thus, if every year a park owner always charged the maximum allowable rent and CPI stayed flat for a while, the park owner would be stuck with that amount until the CPI changed again. In those scenarios, the park owner could not increase the rent while the CPI level is flat. Chairman Coates asked if there is still a provision for hardship rent increases. Is there a time limit that a park owner can impose these rent increases? And if so, in the time limit it lapses, is there something in the rent ordinance that says you can't accept it? Attorney Rudolph responded this ordinance addresses specifically how permissive rent increases are calculated and how they are measured. There are two potential ways of addressing this issue that can be found in local mobilehome ordinances throughout the state: One is to say the base year rent when the ordinance comes into existence was unregulated and is presumed to have produced a fair return on property. That presumption can be rebutted, but the maximum amount of rent you're allowed to charge at any given time is based on a percentage (such as 75%) of how much the CPI has increased from the base year's CPI. You're always looking back to base year. For example, if a park owner decided not to charge the maximum rent or maybe only a few years just let the rent stay at a particular level, when they ultimately decide to charge the maximum rent they would still be comparing today's CPI to back to the base year CPI. The park owner does not get penalized for not charging the maximum rent during those years but that doesn't mean they can go back and retroactively collect the rent. The other school of thought, which is the way some other city ordinances do it, the base year is only significant as a starting point. After that, the only thing that will be looked at is how the CPI has changed the past twelve months. If the CPI has increased during that period, then the rent can be raised; if the rent is not raised, it is lost. The park owner will have to wait until the next year and, once again, can only look back twelve months. It's either use it or lose it. For that reason, however, it forces the park owner to take the maximum allowed rent increase each year. Chairman Coates asked what happens if the CPI goes down. Attorney Rudolph said if the CPI goes down, then the maximum allowable rent decreases, which can be sought by a tenant. Chairman Coates asked what is the process for a tenant to apply for a decrease in rent. Attorney Rudolph replied that first, the park owner should do it automatically which he is required under the ordinance. If the ordinance is not followed, then the tenant has the right to bring a petition to the board to make a decision as to whether the park owner is violating • RENT REVIEW COMMISSION MINUTES 'FEBRUARY 23, 1996 PAGE 6 ******olr***********eh**wwxxxxxxxxxxxx **xxxxx--,,,,,,. ***9cxxxxx *****dcdc**** the ordinance. If the Board fmds the park owner was wrong, or in violation of the ordinance, the City can then prosecute. It could seek a civil injunction, or seek criminal sanction of some sort. Chairman Coats asked what is the rationale of the County of Riverside using 100% of the CPI versus the City's 75%. Attorney Rudolph said it is strictly a policy oriented, legislative decision. Seventy-five percent (75%) is not a magic number, although it is commonly used in ordinances in this area. It probably reflects the fact that the CPI used by the City relates to certain workers for the Los Angeles, Long Beach and Anaheim area. This is a different area. They don't have measurements of CPI for every little area in the country. Perhaps at the time this was done, it felt that this was the nearest regularly reported one they wanted to use for this area. They may have felt that the change of cost of living here in this area does not increase as dramatically or is not as high on average as it is in Los Angeles or Long Beach. The County of Riverside is using the same CPI or maybe using a different CPI, but in their view 100% of the CPI is appropriate. Some park owners might agree that 100% of the CPI is the best measurement. On the other hand, park tenants might argue that it should be something like 60%. A line has to be drawn somewhere and that just becomes a policy decision for the Board of Supervisors or in this case the City Council. Chairman Coates asked if the speaker particularly has a view point on whether it sees 75% or 100% of the CPI. Attorney Rudolph replied no. The ordinance has used 75% CPI and a majority of other local cities use the same percentage. There is a certain degree of reliance and acceptance of this figure. When the ordinance was being drafted, the one thing they did not want to change was the CPI figure. No one has had any problem with this. The only issue being addressed is how far back to go. This decision would have to be referred to the City Council. Chairman Coates asked the other commissioners if they had any questions. Commissioner Armstrong asked if there was anyone present representing Attorney Anthony Rodriguez or the park owner. No one replied. Commissioner Armstrong asked what was the reason for inserting the word "unnecessarily" under Section 2. Attorney Rudolph said there was discussion by the Commission and they felt that there could be circumstances under which deferred maintenance would be appropriate. The original draft ordinance did not have that word. Chairman Coates stated the Commission has reviewed the proposed revisions then proceeded by asking the commissioners for their comments and input. RENT REVIEW COMMISSION MINUTES 'FEBRUARY 23, 1996 PAGE 7 ****************xxkxxxxxxx*xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx*********** Commissioner McCaughey stated the Commission is agreeing with Attorney Rudolph statements. This Commission is trying to clarify this ordinance only. Attorney Rudolph stated attorney's will always come up with arguments; It just depends on who they're representing. In this case, Mr. Rodriguez has his own arguments for the park owner. If Mr. Rodriguez was representing the tenants, he would come up with other arguments. This is simply Mr. Rodriguez's opinion. Attorney Rudolph stated he was the only person who had the opportunity to review the letter and these were strictly his opinions in regards to Anthony Rodriguez's letter. Again, the letter arrived yesterday late in the afternoon via the fax machine. If for some reason, Doug Philips or Dave Erwin disagree with this view of the ordinance, some language can be inserted if necessary to clarify that this Commission is not intruding or trying to regulate any area that is covered by the state law. If the Commission wants to cover this possibility,the Commission could approve it subject to non-substantive revisions by the City Attorney that they may feel are necessary to clarify or render it consistently with state law. That way,minor clarifying changes could be inserted without having to schedule another Board meeting. Chairman Coates asked about the last paragraph on Mr. Rodriguez's letter stating, "However, in order to avoid future litigation my client again requests the Board to carefully consider the above comments to the proposed amendments." Chairman Coates stated he believes this Commission has done that in addressing Mr. Rodriguez's letter. The Commission has given its full consideration. Chairman Coates asked for the Commissions vote on the proposed revisions. It was moved by Commissioner Armstrong,seconded by Commissioner McCaughey,that the Rent Review Commission accept the proposed ordinance as submitted with the opportunity that the secretary insert Mr. Rudolph's comments. "If for some reason, Doug Phillips or Dave Erwin disagree with this, some language can be inserted if necessary to clarify that this Commission is not intruding or trying to regulate in a area that is covered by the state law. If the Commission wants to cover this possibility, if it decides to approve the draft ordinance, the Commission could approve it subject to non-substantive revisions that may be necessary to clarify or render it consistent with state law." Motion carried unanimously. V. ORAL COMMUNICATIONS Chairman Coates asked the audience for their remarks. There was none. • RENT REVIEW COMMISSION MINUTES FEBRUARY 23, 1996 PAGE 8 VI. ADJOURNMENT It was moved by Chairman Coates, seconded by Commissioner Armstrong to adjourn the Rent Review Commission meeting at 10:48 a.m. RESPECTFULLY SUBMITTED, LORENA . ARMENTA SENIOR OFFICE ASSISTANT