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As someone living on a fixed income, the price also appealed to Baker.

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Where else was I going to live for that kind of money? While Baker owns her home, she does not own the land in the community where it sits. Like many manufactured home owners, Baker enters into a land-lease agreement with a park owner. The Colorado-based management company also installed meters under each home in the park to measure water use, which had previously been included in the lot rental fee under local ownership.

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Superior Court 28 Cal. More specifically, rent control legislation will be held to be constitutionally valid as a proper exercise of the police powers so long as it is "reasonably calculated to eliminate excessive rents and at the same time provide landlords with a just and reasonable return on their property. City of Berkeley 17 Cal. City of Los Angeles Cal. City of Berkeley, supra, 17 Cal. Town Council 68 N. Although whether rent control legislation is reasonable or confiscatory depends ultimately on the result reached, it "may be invalid on its face when its terms will not permit those who administer it to avoid confiscatory results in its application to the complaining parties.

City of Carson 35 Cal. It is only these or comparably drastic ordinances which can be struck down as facially confiscatory. City of Cotati Cal. Town Council, supra, A.

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Cotati Alliance for Better Housing v. City of Cotati, supra, Cal. In determining the facial validity of this rent control ordinance we are mindful it need not articulate a formula for determining precisely what constitutes a just and reasonable return. For, "[r]ent control agencies are not obliged by either the state or federal Constitution to fix rents by application of any particular method or formula.

As the United States Supreme Court has stated, '[t]he Constitution does not bind rate-making bodies to the service of any single formula or combination of formulas. City of Carson, supra, 35 Cal.

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The trial court found the ordinance facially unconstitutional because in setting initial rents and providing for adjustments it does not guarantee the park owners a just and reasonable rate of return because the formulae employed do not include the fair market value of the property and the general market conditions as factors in setting and adjusting rents.

The Association claims fair market value is the only nondiscriminatory criterion upon which to base current rent regulations and due process mandates use of a reasonable return on fair value standard. City of Los Angeles, supra, Cal. The Association argues the Supreme Court's use of the phrase "reasonable return on property" in Birkenfeld was intended to invoke a fair market value standard, relying on governmental price regulation cases such asSmyth v.

Ames U. Railroad Com. Oakland Cal.


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In public utility rate regulation cases, the United States Supreme Court has held that 'the Constitution does not bind rate-making bodies to the service of any single formula or combination of formulas. Pipeline Co. InPower Comm'n. Hope Gas Co. The Circuit Court had reversed a commission order setting rate bases because it determined the rate base should reflect the 'present fair value' of the gas company property.

The court stated U. But the fact that the value is reduced does not mean that the regulation is invalid. The heart of the matter is that rates cannot be made to depend upon "fair value" when the value of the going enterprise depends on earnings under whatever rates may be anticipated. In Helmsley v. Borough of Fort Lee 78 N.

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Brown E. Likewise, the court in Cotati Alliance for Better Housing v. The fatal flaw in the return on value standard is that income property most commonly is valued through capitalization of its income. Thus, the process of making individual rent adjustments on the basis of a return on value standard is meaningless because it is inevitably circular: value is determined by rental income, the amount of which is in turn set according to value. Use of a return on value standard [ Cal.

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Value and hence rents would increase in a never-ending spiral. Similarly, as apparently was true in Cotati, if there was a housing shortage which caused rents to be artificially high, use of prerent control value as the measure will perpetuate artificially inflated rates. Rent control utilizing this standard is no rent control at all. Courts of other jurisdictions have also rejected the return on value standard for similar reasons. See Helmsley v. Township Council 68 N. Hoboken Rent Leveling Board N. Boston Rent Control Administrator 6 Mass.

The Association relies on Gregory v. City of San Juan Capistrano Cal. In Gregory, the court stated: "Plaintiffs are correct that to accord with due process of law a rent control ordinance must permit rents that will allow an efficient owner a fair return on the value of his property. The former court aptly noted: "[T]he assertion that due process requires a return on value ignores the unavoidable circularity problem inherent in the assurance of such a return.

Indeed, the single decision cited by Gregory id, Cal. Borough of Fort Lee, actually rejected a value-based standard because of the circularity problem. The Association contends the delay inherent within the procedure for notice, hearing and decision, combined with the 60 days notice to the homeowner of any increase in his or her rent required by Civil Code section [ Cal.

However, only those delays which are longer than practically necessary to achieve the legitimate purposes of the legislation are constitutionally proscribed. B and I, the Commission must hear an application within 30 days of submission and render written findings and decision within 14 calendar days from the date of the hearing. Adding the 60 days required written notice of a rent increase under Civil Code section SeeBirkenfeld v.

We perceive no valid reason for not immediately implementing those approved increases based upon NOI adjustment applications. Under the ordinance, a park owner must fall behind the permitted rent ceiling before obtaining an increase.

Some short-term uncompensated confiscation may well be unavoidable under rent control, but it is essential that the severity and [ Cal. Borough of Fort Lee, supra, A. Because there is no practical necessity to deprive park owners of economic relief already approved on their NOI adjustment applications, we construe the language of section 16B.

The city contends the ordinance guarantees park owners a just and reasonable return by permitting them to increase their rents to at least maintain their NOI at the level, with adjustments for inflation because the rents were set by park owners that year in a free market so that the net income produced necessarily reflected general market conditions. In any event, the city notes if for some reason the park owner was behind the general market in , the ordinance permits him to increase the base rents to reflect the market conditions.

Because the CPI is a statistical snapshot of general market conditions, this ordinance essentially permits park owners to obtain a just and reasonable return under general marketing conditions in any given year. The FNOI standard is "designed to guarantee landlords at least the same rate of return, with adjustments for inflation, they experienced prior to the enactment of rent control. This approach is termed the 'maintenance of profit approach,' 'historic return approach,' or 'fair operating income approach. A just and reasonable return under the guidelines is that level of rent necessary to enable the landlord to maintain the same net profit as obtained in the last year there was an unregulated housing market.

As described above, the Oceanside ordinance provides an automatic or permissive adjustment formula permitting the rent to be increased by a certain percentage, or an adjustment determined by the profit maintenance formula which permits the raising of the NOI by a certain percentage.

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We conclude employing the latter standard to guarantee park owners a fair NOI is facially constitutional. The Oceanside ordinance permits park owners to adjust for inflation to maintain the same NOI they enjoyed in the rental market before rent control. It insures the NOI established for a park owner is fair by permitting him to adjust it to a level equal at least to 50 percent of his gross operating income during the base year. The FNOI standard "avoids the primary failure of the cost-of-living increase system in that it distinguishes between increasing costs of operation and fixed costs of mortgage principal and interest Assuming those costs are reasonable, they will be paid from rental income and will be considered in computing an increase in net operating income.

Courts of various jurisdictions have upheld in concept rent control ordinances which employ standards based upon a theory of guaranteeing property owners a fair NOI. See, e. Sullivan 1st Cir. Boston Rent Control Administrator, supra, N. Rent Control Bd. The FNOI approach has been described as the most easily administered basis for determining rate of return within this context.

This standard tends to reflect the tenant's interest by giving the park owner an incentive to incur all reasonable expenses for maintenance and services. Indeed, "'The maintenance-of-net-operating-income standard is consistent with the view that rent should be allowed to increase at the same rate that operating costs increase. It also recognizes the reality that profit levels vary greatly between buildings, depending on their location and expected future appreciation.

I have nothing against renters or tenants of mobile home park land, I simply believe strongly in the rights of private property owners.