El Rovia Mobile Home Park, LLC v. City of El Monte ( 2020 )

Filed 5/13/20 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
EL ROVIA MOBILE HOME B295640
PARK, LLC,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BS172209)
v. ORDER MODIFYING OPINION
CITY OF EL MONTE, [There is no change in judgment]
Defendant and Respondent.
BY THE COURT:
It is ordered that the opinion filed herein on April 23, 2020
is modified as follows:
On page 4, in the second full paragraph, delete “MAI,” from
the sentence, “This study was subsequently undertaken by Dr.
Kenneth K. Baar, MAI, a recognized expert on mobilehome park
issues.” Delete footnote 5 (which states “MAI stands for Member
Appraisal Institute, and refers to a professional designation for
real estate appraisal”) that immediately follows this sentence.
On page 7, renumber footnote 6 as footnote 5.
On page 8, in the first full paragraph, add footnote 6 to the
end of the sentence that reads: “The petition included a real
estate appraisal report prepared by John Neet, MAI, in which
Neet expressed an opinion that the market value of spaces at the
Park was $665 per month as of September 10, 2015.” Footnote 6
shall read: “MAI stands for Member Appraisal Institute, and
refers to a professional designation for real estate appraisal.”
There is no change in judgment.
____________________________________________________________
RUBIN, P. J. MOOR, J. KIM, J.
2
Filed 4/23/20 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
EL ROVIA MOBILE HOME PARK, B295640
LLC,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BS172209)
v.
CITY OF EL MONTE,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Mitchell L. Beckloff, Judge. Affirmed.
Dowdall Law Offices and Terry R. Dowdall
for Plaintiff and Appellant.
Olivarez Madruga Lemieux O’Neill and Rick R. Olivarez;
Demetriou, Del Guercio, Springer & Francis, Jeffrey Z. B.
Springer and Leslie M. Del Guercio for Defendant and
Respondent.
__________________________
INTRODUCTION
After respondent City of El Monte (the City) enacted rent
control for all mobilehome parks, petitioner El Rovia Mobile
Home Park, LLC (El Rovia LLC) applied for a base year rent
adjustment to $665 per month per space. The City agreed that El
Rovia Park (the Park) space rents were below market value, but
found that the lawful rent for the 2012 base year was $525 per
month. El Rovia LLC appealed this decision to an administrative
law judge, who agreed with the City’s findings. El Rovia LLC
then sought a writ of administrative mandamus. In the writ
proceeding, El Rovia LLC claimed that the base rent year should
have been 2015, not 2012, and the base rent should be $665, not
$525. The trial court denied the writ.
At the heart of the dispute is the City’s 2015 rent control
Ordinance No. 2860, which at least for some purposes states that
in the calculation of rents, the base year is the “2012 calendar”
year. (El Monte Ord. No. 2860, Mun. Code § 8.70.080, subd.
(C)(1).)1 El Rovia LLC contends that the City’s use of 2012 as the
base year violates the holding in Vega v. City of West Hollywood
(1990) 223 Cal.App.3d 1342 (Vega). It claims the administrative
law judge “arbitrarily refus[ed] to adjust the base date rent to one
that reflects general market conditions.”2 Specifically, El Rovia
1 Ordinance 2860 was later codified in El Monte Municipal
Code section 8.70.010 et seq. Where appropriate, we use the
Municipal Code citation.
2 In Vega, the Court of Appeal held that the California
Constitution required municipalities implementing rent control
to allow property owners “to start rent calculations with a base
date rent similar to other comparable properties.” (Vega, supra,
2
LLC asserts the base rent year should have been 2015 (not 2012,
the year identified in the rent control ordinance and utilized by
the City) and argues substantial evidence does not support the
finding that $525 was the reasonable base rent. We affirm,
concluding that the administrative law judge applied the correct
base year for rent control and substantial evidence supported its
findings of the base year rent.
FACTS AND PROCEDURAL BACKGROUND
1. Rent Control History in the City
In 2012, the City enacted Ordinance No. 2811, which
established rent control for large mobilehome parks in the City.3
The ordinance placed a moratorium on mobilehome rent
increases in the two largest parks (Brookside with 421 spaces and
Daleview with 175 spaces). It did not apply to smaller
mobilehome parks such as the Park, which had only 77 spaces.
As part of its rent control process, the City retained an
expert to evaluate mobilehome rental rates. In a report dated
July 25, 2013 (the Waronzof Report), the expert expressed
concern that the largest mobilehome park in the City, Brookside,
had significantly higher rents than other mobilehome parks in
the City and the region. The report also observed that most of
the mobilehome park residents in the City were in the lower
223 Cal.App.3d at p. 1352.) Vega’s focus is not on the date
selected as the base rent date under rent control, but on the rent
level that properly reflects the market conditions on that date.
3 We mention Ordinance No. 2811, and later
Ordinance No. 2829, only for historical purposes. The present
dispute is governed by Ordinance No. 2860, enacted in 2015.
3
income range; and many parks in the City were smaller and older
than those in the region surrounding the City.
In September 2013, the City approved its second rent
control law, Ordinance No. 2829.4 That ordinance placed ceilings
on rental rates and rent increases only at the two largest
mobilehome parks in the City. The ordinance acknowledged
concerns expressed in the Waronzof study: there was a shortage
of housing in California; 80 percent of households in mobile
homes in the City were in poverty; relocation of mobile homes is
difficult, costly, and damages the home; mobilehome parks are
susceptible to excessive and unfair rent increases due to private
sector ownership; and monthly rents for certain mobilehome
spaces in the City had exceeded the average rent for area
apartments.
The 2013 ordinance also required the City to retain a
consultant to conduct another demographic and economic study
of mobilehome housing in the City. This study was subsequently
undertaken by Dr. Kenneth K. Baar, MAI, a recognized expert on
mobilehome park issues.5 Baar found that mobilehome rent
control in the City was triggered by exceptional rent increases in
one large park (Brookside), which contained about one-third of all
the mobilehome park spaces in the City. Baar observed that rent
increases in the other parks had not been a matter of serious
concern.
4 Again, we mention this second ordinance only to give
historical perspective.
5 MAI stands for Member Appraisal Institute, and refers to a
professional designation for real estate appraisal.
4
2. Ordinance No. 2860
On August 4, 2015, the city council approved Ordinance No.
2860, which replaced the earlier rent control ordinances and
extended rent control to all mobilehome parks in the City,
regardless of size. It is this law that drives the present dispute.
In the preamble of Ordinance No. 2860, the city council
acknowledged California’s severe housing shortage, the unique
problems associated with mobilehome ownership, the prior efforts
to regulate a segment of mobilehome parks in the City, and the
Baar report. Section 8.70.010, subdivision (A) describes the
purposes of the ordinance as preventing excessive and
unreasonable rent increases, preserving available mobilehome
spaces in the City, enabling mobilehome owners to preserve
equity in their mobile homes, permitting park owners to receive a
fair return on their investment, and preserving affordable spaces
for rent in the City.
Ordinance No. 2860 states that no rent can be charged in
excess of the rent in effect as of July 1, 2015, unless the City
authorizes the increase through an application process.
(§ 8.70.050.) The ordinance identifies 2012 as the base year for
rent and rebuttably presumes the net operating income received
by the park owner in 2012 was fair and reasonable. (§ 8.70.080,
subd. (C)(1).) The ordinance states: “It is expected that a rent
increase within the limits of [the Consumer Price Index (CPI)
increase provision after the base year rent is established] will
provide the mobilehome park owner with a fair and reasonable
return.” (§ 8.70.080, subd. (A).)
A rent increase is authorized in the following situations:
(1) a rise in the CPI (§ 8.70.060), (2) in-place sales of mobilehomes
(§ 8.70.075), (3) maintenance of a fair return standard
5
(§ 8.70.080), and (4) new capital improvements (§ 8.70.100). The
fair return standard in section 8.70.080 is evaluated with a
maintenance of net operating income (MNOI) formula for
assessing the necessity for increases. The MNOI formula offsets
a park owner’s operating income by its operating expenses, and
compares the base year’s net operating income to the year in
which the owner applies for a rent increase. (§ 8.70.080, subd.
(E).)
Although the rent in fact charged in the base year is
presumed to be the base rent under rent control, the ordinance
allows for the mobilehome park owner to rebut the presumption
that it had been receiving a fair return in the base year. The
owner may demonstrate this by “evidence provided by the
mobilehome park owner to the city of gross income, operating
expenses, and the determination of net operating income for the
base year and current year.” (§ 8.70.080, subd. (D).) For
example, under section 8.70.080, subdivision (D)(2), park owners
can present evidence at a rent control hearing to show that it did
not receive a fair return in the base year because “gross income
during the base year was disproportionately low due to
exceptional circumstances.” In adjusting the base year rent
under, subdivision (D)(2), the City shall consider (1) whether
some residents were charged reduced rent, (2) whether the low
rent was attributed to property destruction, (3) the pattern of
rent increases in the years prior to the base year and whether
those increases reflected increases in CPI, (3) whether base
period rents were disproportionately low in comparison to the
base period rents of other comparable parks in the City, and
(4) other exceptional circumstances. (§ 8.70.080, subd. (D)(2).)
6
Ordinance No. 2860 also provides “[n]othing in this chapter
shall preclude the [c]ity [m]anager or hearing officer from
granting an increase that is necessary in order to meet
constitutional fair return requirements.” (§ 8.70.080, subd. (H).)6
3. El Rovia Park
The Park is one of the 33 mobilehome parks in the City.
There are approximately 1,427 individual mobilehome spaces for
public rental. The Park has 76 spaces and is one of two parks in
the City that are age-restricted for residents 55 years or older.
The existing permanent improvements on the property (an office
and laundry room) were built in 1950.
In early 2013 and prior to petitioner El Rovia LLC’s
purchase of the Park, Matthew Davies (one of El Rovia LLC’s
principals) examined the rental history of the mobilehome park
and determined that rents in the Park were in the low $200s per
month range. At about that same time, Davies met with the
mayor and city attorney and became aware of the rent control
measure under consideration for the larger mobile home parks.
This early legislation did not cover the Park. El Rovia LLC
purchased the Park for $2,642,500 in mid-2013 with the intention
of gradually raising rents to market levels, which it believed to be
in the high $600s.
4. Rent Adjustment Application
In 2015, after El Rovia LLC had purchased the Park, the
City enacted Ordinance No. 2860, the law at the heart of the
6 The “constitutional fair return requirements” is an
apparent reference to the appellate court decisions in Vega,
supra, 223 Cal.App.3d at p. 1342, and Birkenfeld v. City of
Berkeley (1976) 17 Cal.3d 129 (Birkenfeld).
7
present dispute. As earlier observed, the ordinance placed all
mobilehome parks in the City under rent control. It appears that
by September 10, 2015, roughly a month after
Ordinance No. 2860 was adopted, El Rovia LLC was charging
rents as high as $550 per month per space.
On October 7, 2016, El Rovia LLC submitted to the City a
petition for rental adjustments, seeking to increase rents for all of
the Park’s 76 spaces to $665 per month. The petition included a
real estate appraisal report prepared by John Neet, MAI, in
which Neet expressed an opinion that the market value of spaces
at the Park was $665 per month as of September 10, 2015. This
conclusion was based on Neet’s analysis of six other mobilehome
parks – Daleview (the only other age-restricted park in the City),
three other parks in the City, and two parks outside the City,
neither of which were age-restricted.7
In a November 2, 2016 letter, the City advised El Rovia
LLC that the petition was incomplete because it lacked the
income and expense information required by section 8.70.080,
subdivision (D) for the MNOI analysis. After receiving no
response from El Rovia LLC, the City sent a letter on January 23,
2017 seeking further information. On February 10, 2017, El
Rovia LLC submitted further information but did not include the
net operating income information specified in section 8.70.080,
subdivision (D). On March 10, 2017, the City again notified El
Rovia LLC that it still deemed the petition incomplete.
7 Daleview was one of the two large (100 plus spaces)
mobilehome parks affected by the City’s initial rent control
ordinances of 2012 and 2013.
8
In a March 15, 2017 letter, El Rovia LLC asserted that the
City was required to process its application and argued that the
City must establish a base year rent as of 2015 pursuant to Vega
v. City of West Hollywood, supra, 223 Cal.App.3d. El Rovia LLC
refused to provide any further financial information and
demanded that the City deem its application complete.
In a letter dated March 22, 2017, the City pointed out that
El Rovia LLC had still failed to provide all of the information
required by section 8.70.080, subdivision (D). However, the City
stated that it would “move forward” with the application. The
City retained James Brabant, MAI, of Anderson & Brabant, Inc.,
to review Neet’s appraisal, and formulate an opinion of the space
rental value of the Park for the 2012 base year. Brabant
reviewed Neet’s report and took issue with (1) Neet’s failure to
use 2012 as the base year as required by the ordinance, (2) Neet’s
factually inaccurate report of average rent at Daleview, (3) Neet’s
unexplained use of two parks outside of the City (one with very
high rent and neither having age restrictions), and (4) Neet’s
failure to consider 2015 Park rents that ranged from $500 to
$550.
Brabant concluded that: “Of the four parks Neet used that
are comparable according to the ordinance (Daleview, Santa Fe
MHP, Capri Gardens and Vagabond Villa), the two that in my
opinion are superior to the subject had adjusted average rents
ranging from $676 to $700 per month. The two parks rated
inferior to the subject had average adjusted rents ranging from
$515 to $520 per month. The three most recent rents negotiated
in June and July of 2015 at the subject park were at $550 per
month which is consistent with the comparable data that
brackets that amount. Therefore, it is my opinion that Neet’s
9
conclusion of an average rent of $665 per month in 2015 is
overstated.”
Using the four parks identified as comparable and two
additional parks Brabant deemed relevant, Brabant appraised
mobilehome park rents in 2012, the base year identified in the
ordinance. He analyzed each property as either being superior or
inferior to the Park and examined the rents for each—ranging
from $400 to $700 per month. He concluded that the average
rental value of $525 per month per space was the reasonable base
rent for the Park as of 2012. Brabant provided a second opinion
that “based upon a review of 2017 Registrations from park
owners, contacts with park management, and inspections of the
various parks,” “the average rental value of El Rovia [Park], as of
April 2017, is $575 per month, including sewer.”
In a May 18, 2017 letter, the city manager informed
petitioner that the City had completed its review of the rent
adjustment application, that in 2012 the fair rental value for the
Park spaces was $525, and that the fair rental value of the Park
spaces as of April 2017, was $575 per month per space.8
On June 6, 2017, El Rovia LLC appealed the City’s
determination and requested a hearing.
5. Administrative Hearing
On September 6, 2017, an administrative law judge (ALJ)
with the State of California Office of Administrative Hearings
8 The difference between the monthly rent of $525 in 2012
and monthly rent of $575 in April 2017, the month preceding the
Brabant report, was presumably based on the city’s assessment
that El Rovia LLC would be entitled to further rent adjustments
in the five years after the base rent had been set.
10
heard El Rovia LLC’s appeal of the City’s base rent
determination. At the hearing, El Rovia LLC presented
testimony from Davies, one of its principals, and its appraiser,
Neet. Davies testified that when considering the purchase of the
Park in 2012, the Park’s rents were just over $200 per month per
space. Upon purchasing the Park in mid-2013, El Rovia LLC
planned to raise the rents to market levels, which it considered to
be in the high $600s per month. Davies stated that El Rovia LLC
was not making a claim that it was not receiving a fair return; it
was making a Vega challenge to the manner the base rent had
been established.
El Rovia LLC asserted 2015 (the year Ord. No. 2860 was
adopted) must serve as the base year because it exhibited market
conditions immediately prior to enactment of the rent control for
smaller mobilehome parks. El Rovia LLC submitted Neet’s
report as evidence that as of September 10, 2015, the market
value of the spaces at the Park was $665 per month per space.
Neet also testified consistently with his written report.
In contrast, the City argued that the City had lawfully
established 2012 as the base year by ordinance. It presented
Brabant’s report and testimony. Brabant reiterated his earlier
stated concerns about Neet’s analysis and testified consistent
with his report that, as of 2012, space rental value at the Park
was $525.9 Brabant interpreted section 8.70.080, subdivision
(D)(2)(d), which allows for adjustment of the base year rent when
there are exceptional circumstances, as controlling El Rovia
9 Brabant explained that he used the terminology “ ‘space
rental value’ ” rather than “ ‘fair market value’ ” because
Ordinance No. 2860 does not use the term “ ‘fair market value.’ ”
11
LLC’s application. Under that subsection, a rent adjustment is
available when a park owner’s base period rents are
disproportionately low in comparison to base period rents “ ‘of
other comparable parks in the city.’ ”
The ALJ determined that 2012, not 2015, was the lawful
base year, and the year for making base rent adjustments, based
on the language of the statute (§ 8.70.080, subds. (C) & (D)(2)(d))
and the City’s broad discretion to establish a base year of its
choice. The ALJ observed that the ordinance’s use of 2012 as the
base year was reasonable because that date preceded the
imposition of the first rent controls in the City, making 2012
more likely to be reflective of general market conditions and
uninfluenced by rent control legislation. The ALJ also reasoned
that choosing 2012 as the base year was reasonable given that
the Park is an age-restricted park, and the only other age-
restricted park in the City was one of the two large parks that
were the subject of the 2013 rent control ordinance. Therefore,
gauging 2015 rents unaffected by rent control in comparable
parks would be difficult as one of the most similar was already
rent controlled. The ALJ also found El Rovia LLC had made no
claim that the rents resulting from the use of 2012 as the base
year deprived it of a fair return.
Relying significantly on the Brabant report (the only
evidence of market conditions in 2012), the ALJ concluded that El
Rovia LLC was “entitled to a base year rent adjustment, as of
2012, of up to $525 per month per space . . . .” The court found,
“The value of $525 per month per space . . . is reasonable
considering El Rovia’s location within the range of superior and
inferior comparable properties.” The ALJ further explained that
El Rovia LLC’s “various arguments were not persuasive that Mr.
12
Brabant failed to provide a valid opinion as to general market
conditions in 2012. Mr. Neet did not offer any competing
opinions concerning general market conditions in 2012. Further,
without any analysis of market conditions in 2012, the proper
base year, [a]ppellant failed to offer an alternative and valid
value determination upon which any party can base a request for
a rent increase.”
6. Petition for Writ of Administrative Mandamus
On May 1, 2018, El Rovia LLC filed its first amended
petition for administrative mandamus pursuant to Code of Civil
Procedure section 1094.5 to set aside the City’s denial of El Rovia
LLC’s application to set a base rent of $665 and to require the
City to set a “base rent” based on 2015 market conditions.
On October 9, 2018, El Rovia LLC filed its Motion for
Judgment on the Petition for Administrative Mandamus. On
December 12, 2018, the court denied El Rovia LLC’s petition,
essentially agreeing with the ALJ’s analysis. On February 4,
2019, the court entered judgment denying the petition. El Rovia
LLC timely appealed.
7. Separate Facial Challenge
On August 1, 2017, before it filed its administrative writ
petition, El Rovia LLC filed an action in the Los Angeles Superior
Court entitled, El Rovia Mobile Home Park LLC v. City of El
Monte, case No. KC069501. The complaint asserted a “facial”
challenge to the City’s ordinance alleging that there was no
rational basis for imposing rent controls upon the smaller parks
in the City. The City filed a demurrer which the trial court
sustained with leave to amend. El Rovia LLC declined to amend
and appealed the ensuing judgment. (El Rovia Mobile Home
13
Park v. City of El Monte (Mar. 21, 2019, B288134) [nonpub. opn.]
(El Rovia I).)
Our colleagues in the Second Appellate District, Division
One, affirmed the dismissal of all causes of action, save one –
which was based on El Rovia LLC’s claim that the City had failed
to demonstrate the “constitutional fact” of a housing shortage to
justify rent control under Birkenfeld, supra, 17 Cal.3d at p. 129.
On August 29, 2019, following remand to the trial court, El Rovia
LLC voluntarily dismissed El Rovia I.
DISCUSSION
El Rovia LLC argues that: (1) 2015, not 2012, is the lawful
base year for the determination of base rent adjustments and
(2) the ALJ’s contrary decision was not supported by substantial
evidence. After explaining the legal landscape for El Rovia LLC’s
rent adjustment application, we address each argument in turn.
1. Rent Control Adjustment Principles
As mentioned above, Ordinance No. 2860 expressly states
that the base year for mobilehome rent is 2012 and presumes the
net operating income received by the park owner in 2012 was fair
and reasonable. (§ 8.70.080, subd. (C)(1).) Pursuant to the
ordinance, there are four authorized reasons for a rent increase,
one of which is maintenance of a fair return. (§ 8.70.080)
Throughout the rent control adjustment application process, El
Rovia LLC repeatedly asserted it was not seeking a base rent
increase on any of these four grounds.
Rather, El Rovia LLC explicitly sought a “ ‘Vega’
adjustment.” In Vega, supra, 223 Cal.App.3d at p. 1342, the
defendant city had enacted a rent control ordinance that set the
rent charged at an earlier fixed date (the base date rent) as the
starting point for fixing maximum rents. The landlord of a nine-
14
unit property sought to adjust the base date rent because the
rents on the property had been considerably suppressed since
well before the base year due to “peculiar circumstances.” (Id. at
p. 1344.) The City’s rent control commission refused to adjust the
base rent because the landlord had not provided evidence of the
amount of return generated by comparable buildings, despite
recognizing the appraisal evidence submitted by the landlord
demonstrated the base date rents charged were
disproportionately low. (Id. at p. 1347.)
The Vega court concluded that based on constitutional
concerns, “a property owner must be permitted . . . to start rent
calculations with a base date rent similar to other comparable
properties.” (Vega, supra, 223 Cal.App.3d at p. 1352, citing
Birkenfeld, supra, 17 Cal.3d at p. 129.) The court reversed and
remanded the matter to the rent control commission with
instructions to “set the landlord’s base date rents consistent with
the appraiser’s evidence of rents for comparable units and then
apply the [o]rdinance’s maintenance of net operating income
formula to establish the current maximum allowable rents.”
(Vega, at p. 1352.)10 Our Supreme Court’s holding created a two-
step process: “After [1] base date rents are established which
reflect general market conditions, then [2] the Commission
should apply and maintain the net operating income formula of
the [o]rdinance.” (Vega, at p. 1351.)
10 We observe that Ordinance No. 2860 appears to anticipate
a Vega adjustment as it provides: “[n]othing in this chapter shall
preclude the [c]ity [m]anager or hearing officer from granting an
increase that is necessary in order to meet constitutional fair
return requirements.” (§ 8.70.080, subd. (H).)
15
As El Rovia LLC’s brief on appeal makes clear, this case
presents a claim for a Vega determination of the base year rent
for the Park.
2. Standard of Review
On appeal we are tasked with reviewing the ALJ’s decision,
not the trial court’s. “Appellate review of the factual basis behind
a decision by a rent control board or agency is governed by the
substantial evidence standard. . . . ‘[W]e consider all relevant
evidence in the administrative record, beginning with the
presumption that the record contains evidence to sustain [the
agency’s] findings of fact.’ . . . ‘[I]n the absence of an
unconstitutional and confiscatory taking, the courts [are] not
authorized to interfere with the actions of the local rent
boards . . . .’ ” (Colony Cove Properties, LLC v. City of Carson
(2013) 220 Cal.App.4th 840, 865–866 (Colony Cove).) In applying
the standard, we focus on the decision of the agency rather than
that of the trial court and “ ‘answer the same key question as the
trial court . . . whether the agency’s findings were based on
substantial evidence. [Citations.]’ ” (MHC Operating Limited
Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 218–
219 (MHC).)
“To the extent that the administrative decision rests on the
hearing officer’s interpretation or application of the Ordinance, a
question of law is presented for our independent review.” (MHC,
supra, 106 Cal.App.4th at p. 219.) “However, a rent control
board’s interpretation of a rent control ordinance and its
implementing guidelines is entitled to considerable deference.
[Citations.] ‘The burden is on the appellant to prove the board’s
decision is neither reasonable nor lawful.’ ” (Colony Cove, supra,
220 Cal.App.4th at p. 866.)
16
3. We Find No Error in the City’s Selection of 2012 as
the Base Year
El Rovia LLC first contends that the ALJ erred in using
2012 rather than 2015 as the base year rent when ruling on its
request for an adjustment. El Rovia LLC reasons the base rent
year should be 2015 because the ordinance regulating the smaller
parks was enacted in 2015 and froze rents in that year. We
disagree.
Here, El Rovia LLC sought to adjust the “base rent.” The
City does not quarrel with El Rovia LLC’s right to seek a base
rent adjustment. The parties dispute the starting point. The
ordinance expressly identifies 2012 as the base year for initial
rent determinations, and it rebuttably presumes that the net
operating income received by the park owner in 2012 was fair
and reasonable. (§ 8.70.080, subd. (C)(1).) Nowhere in the
ordinance is 2015 identified as the base year for assessing
increases in rent. We are not asked to engage in statutory
interpretation to give meaning to an ambiguous ordinance. The
base rent year is clearly established. El Rovia LLC’s argument is
that, as a matter of constitutional law, the City was required to
establish 2015 as the base year.
We start our analysis with an established principal: The
City is entitled broad discretion in selecting the base year under
rent control. “Mobilehome rent control ordinances are accorded
particular deference as rational curative measures to counteract
the effects of mobilehome space shortages that produce
systematically low vacancy rates and rapidly rising rents.”
(Carson Harbor, Ltd. v. City of Carson Mobilehome Park Rental
Review Bd. (1999) 70 Cal.App.4th 281, 290 (Carson Harbor).) “It
is within a city’s prerogative and legislative authority ‘to
17
determine what rent control scheme it will adopt’ and ‘to decide
what base year to employ in its rent control ordinance.’ ” (Colony
Cove, supra, 220 Cal.App.4th at p. 874, quoting MHC, supra,
106 Cal.App.4th at p. 223 & fn. 4.)
“Fair return is the constitutional measuring stick by which
every rent control board decision is evaluated.” (Carson Harbor,
supra, 70 Cal.App.4th at p. 288.)11 This standard evaluates
whether the rent control ordinance results in an impermissible
confiscatory taking. “While a fair return is constitutionally
required, ‘the state and federal Constitutions do not mandate a
particular administrative formula for measuring fair return . . . .’
[Citations.] Thus, ‘rent control laws incorporate any of a variety
of formulas for calculating rent ceilings.’ [Citations.] ‘Under
broad constitutional tolerance, California cities may enact
various forms of residential rent control measures to satisfy the
just, fair and reasonable rent standard. [Citation.] Public
administrative bodies, charged with implementing and enforcing
rent control measures, are not obliged by either state or federal
constitutional requirements to employ any prescribed formula or
method to fix rents.” (MHC, supra, 106 Cal.App.4th at pp. 220–
221, Carson Harbor, supra, 70 Cal.App.4th at p. 290 [“the actual
method utilized to regulate rents is immaterial so long as the
result achieved is constitutionally acceptable”].)
11 “A ‘just, fair and reasonable’ return is characterized as
sufficiently high to encourage and reward efficient management,
discourage the flight of capital, maintain adequate services, and
enable operators to maintain and support their credit status.
However, the amount of return should not defeat the purpose of
rent control to prevent excessive rents. [Citation.]” (Carson
Harbor, supra, 70 Cal.App.4th at pp. 288–289.)
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Here, the City’s selection of 2012 as the base year was
reasonable, constitutional, and factually supported by the record.
Contrary to El Rovia LLC’s assertions, rent control ordinances
typically use “the rent charged on a fixed prior date ‘as a starting
point for the fixing of maximum rents on the theory that it
approximates the rent that would be paid in an open market
without the upward pressures that the imposition of rent control
is intended to counteract.’ ” (Vega, supra, 223 Cal.App.3d at
p. 1349.)
As the ALJ found, 2012 preceded the enactment of any of
the three rent control ordinances in the City, the first of which
was limited to the two larger parks. Thus, “[i]t is sensible to now
use 2012 as a base year for all parks in the City, because that
year predates when any park in the City was subject to rent
control and when the general market could be expected to react.”
By using 2012 as the base year, the City was able to consider all
the mobilehome parks in the City, none of which were under rent
control at the time. This was critical to the City’s assessment of
comparable properties (all mobilehome parks) in its
determination of whether “exceptional circumstances” existed to
depart from the actual rent charged in the base year of 2012.
(§ 8.70.080, subd. (D)(2) [“Exceptional Circumstances in the Base
Year. The gross income during the base year was
disproportionately low due to exceptional circumstances”].)
Because the City was in a rent control-free environment in 2012,
the City’s use of 2012 as the base year was reasonable. Although
not part of our standard of review, we observe this is what the
ALJ found and what the trial court found.
We reject El Rovia LLC’s argument that under Vega or any
other rule of law, the City was required to select 2015 as the base
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year. To the extent El Rovia LLC argues that using 2012 as a
base year is unfair, El Rovia LLC has failed to produce any
evidence that this is the case. El Rovia LLC also failed to show
that, as a matter of law, 2015 is the base year. Such an
argument is contrary to the language Ordinance No. 2860.
We find telling that, on repeated occasions in its appellate
briefs, before the trial court and before the ALJ, El Rovia LLC
made no claim that the rent resulting from the application of the
2012 base year deprives it of a fair return. Based on the
foregoing, we see no Vega concerns about the City’s selection of
2012 as the base year and conclude there was no error in using
comparable 2012 rental rates to determine base year rent.
4. Substantial Evidence Supports the Base Rent
Determination of $525
The City determined that the rents actually charged Park
tenants in 2012 did not provide a fair rate of return – they were
unreasonably low due to exceptional circumstances. This
required the City to adjust upwards the base year rent under
section 8.70.080, subdivision (D). El Rovia LLC argues that
insufficient evidence supports the City’s determination that $525
was the lawful, adjusted base rent. It contends, instead, the only
substantial evidence on which the ALJ should have relied was its
expert’s appraisal, who found $665 as the adjusted base rent. To
borrow a phrase often used in politics, this argument is a non-
starter. Neither El Rovia LLC’s expert, Neet, or any El Rovia
witness presented evidence of what would be a reasonable base
rent adjustment using the ordinance’s 2012 base year. Neet’s
appraisal was based solely on 2015 rents. He was silent on the
2012 rents. For this reason, El Rovia LLC’s substantial evidence
argument on the base year adjusted rent is essentially an attack
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on the City’s selection of 2012 as the base year, an argument we
have rejected.
Substantial evidence does support the City’s finding that
$525 was the reasonable adjusted base rent for 2012. We agree
with the ALJ’s conclusion that Brabant’s appraisal report and his
testimony provide sufficient support for 2012 adjusted base rent
of $525. Brabant was well qualified as an expert on mobilehome
park rent control and performed extensive analysis to reach his
conclusion. In addition to two additional comparable mobilehome
properties which Brabant selected, he also considered four of the
six mobilehome properties that Neet used, only excluding the two
properties located outside the City. Brabant’s report and
testimony explained why he pegged the comparable properties as
either more or less valuable than the Park and why a base year
rent of $525 for the Park was most appropriate on the spectrum
of mobilehome rents in the City.
Without citation to the record, El Rovia LLC argues that
the “[e]ngagement [p]arameters of the City” tainted Brabant’s
report. Specifically, El Rovia LLC asserts: “Mr. Brabant refused
to incorporate the rates of other close parks outside of El Monte
even though many were far closer than other mobilehome parks
in the City and all in the same San Gabriel market area.” At
trial, Brabant testified that he did not use properties outside of
the City to determine the base year rent because inclusion of
such properties was “contrary to the ordinance,” which solely
addressed mobilehome park rents within the City. The City was
entitled to accept Brabant’s evidence and reject Neet’s. At most,
El Rovia LLC’s argument is an invitation that we reweigh the
evidence. We may not do that. (See Donley v. Davi (2009)
180 Cal.App.4th 447, 456 [“We ‘ “do not reweigh the evidence; we
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indulge all presumptions and resolve all conflicts in favor of the
[agency’s] decision. Its findings come before us ‘with a strong
presumption as to their correctness and regularity.’
[Citation.]” ’ ”].)
DISPOSITION
We affirm the trial court’s judgment denying appellant El
Rovia Mobile Home Park, LLC’s first amended petition for
administrative mandamus. Defendant and respondent City of El
Monte is awarded its costs on appeal.
RUBIN, P. J.
WE CONCUR:
MOOR, J.
KIM, J.
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