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HomeMy WebLinkAboutAgenda Statement 1988/05/10 Item 10• ITEM TITLE: COUNCIL AGENDA STATEMENT Item 10 Meeting Date 5/10/38 Report - State Mobilehome Residency Law and the Right of First Refusal SUBMITTID BY: Assistant City Attorney (4/5ths Vote: Yes No X ) On November 17, 1987, this office submitted a report recommending delay in any action by the City with regard to a local ordinance giving mobilehome park residents a right of first refusal for the sale of the mobilehome park within which they reside, due to the uncertain state of the law. Notwithstanding that report, Council directed this office to return with an ordinance to accomplish that result, following review by the Mobilehome Issues Committee and comments from Mary Frances Click. This report further discusses the legal ramifications involved in the proposal, presents input from the Committee and Mrs. Click, and again recommends against the adoption of the ordinance, but presents the ordinance to be placed on first reading if it meets with Council approval. OMMENDATION: That Council not place the ordinance on first reading. S/COMMISSIONS RECOMMENDATION: The independent Mobilehome Issues Committee voted 8-1 at its April 14, 1988 meeting to recommend the City Council not approve the ordinance because of its unconstitutionality. DISCUSSION: On November 10, 1987, the City Council referred to this office the question whether a "loophole" exists in State law, which provides mobilehome owners a right of first refusal when a mobilehome park is sold pursuant to a listing agreement, but provides no similar protection when the park is sold by other means. We reported for the meeting of November 17, 1987 that California Civil Code X798.80 does not provide mobilehome owners with a right of first refusal upon a proposed sale of a mobilehome park, but rather with a notice of the proposed sale when a listing agreement is used, although notice is not required if the property is sold without a listing agreement. We mentioned litigation relating to mobilehome park regulations, including Gregory v. City of San Juan Capistrano (1983) 142 Cal.App.3d 72, 191 Cal.Rptr. 72, in which the Fourth District Court of Appeal expressly held that an ordinance of the City of San Juan Capistrano requiring mobilehome park owners to give a right of first refusal to mobilehome park tenants was unconstitutional. Since this was a clear and unequivocal holding of a California Court of Appeal, to which all trial courts in San Diego County uld have to defer, we recommended awaiting the outcome of other other ding litigation, and any future litigation involving the City of San Diego other cities which have adopted such ordinances. • Page 2, Item-- 10 _ Meeting Date _ 5/?^ 38 A decision of any division of any District Court of appeal in the California judicial system is a binding precedent, statewide, on all trial courts. Accordingly, when a case comes to trial in a San Diego County trial court raising the issue of the constitutionality of a City ordinance imposing a right of first refusal such as that proposed, the trial court will rule in the same way as the Gregory court. This would guarantee, at the minimum, an appeal to Division One of the Fourth District Court of Appeal of an adverse decision in the San Diego County Superior Court. Generally, different divisions of the same Court of Appeal rule the same way on similar cases, and rarely issue opposing published decisions. Thus, a decision from the Fourth District Court of Appeal, Division One, consistent with that in Gregory is highly probable, and the likelihood of Supreme Court review in the absence of an opposing decision from another District Court of Appeal, is very small. Accordingly, the most probable outcome of enactment of an ordinance similar to that found unconstitutional in Gregory would be an adverse trial court decision followed by an adverse Fourth District Court of Appeal decision followed by denial of review by the California Supreme Court, with the potential for the payment of costs, and perhaps attorney's fees to the opposing side. At the meeting of November 17, we were provided with the materials provided to the San Diego City Council when it adopted a right of first refusal ordinance approximately two weeks prior to the November 17 Chula Vista City Council ting. We have reviewed the City Attorney's memorandum dated July 13, 1987 find that it provides no legal analysis supported by citation to legal horities which would justify the hope that another division of the same District Court of Appeal, or another District Court of Appeal would reach a different legal conclusion based on the same facts presented in the Gregory case. The memorandum asserts that a right of first refusal ordinance could constitute a reasonable limitation on the exercise of property rights, and states that the case does not include a discussion of this approach. The memo concludes: "While the Gregory case represents a substantial hurdle to be overcome in future litigation, it may be possible to prevail when the matter is considered as a land use regulation. It must be recognized that it may be necessary to carry the issue to the California Supreme Court for final resolution." Initially, we point out that the decision in Gregory was unanimous by the three justice panel. There was no dissenting opinion. It was written by Justice Kaufman, who is now on the California Supreme Court. The City of San Juan Capistrano was represented by outside private counsel from Monterey, California and Park City, Utah, as well as separate counsel on behalf of the several mobilehome owners associations amicus curiae, the California Department of Housing and Community Development, the Legal Aid Society of Orange County, the City Attorney of the City of Westminster, and fifteen other ~y Attorneys, including Vince Biondo, of Carlsbad, all as amicus curiae in port of the City. In a thirteen page decision, the Court of Appeal upheld ,.- • Page 3, Item LO _ Meeting Date ';/10/88 the constitutionality of the rent control aspects of the ordinance, but struck down that portion of the ordinance requiring an owner who desires to sell his mobilehome park first to offer it to residents, and if they decide to purchase it, to sell it to them. Three pages of the decision are devoted solely to the issue of the preemptive right of the residents to purchase the park. The Court concluded that the provision amounted to a taking in violation of the Fifth and Fourteenth Amendments to the United States Constitution and Sections 1 and 19 of Article 1 of the California Constitution. Rather than including no discussion of whether the ordinance provision was a reasonable limitation of the exercise of property rights, as stated by the San Diego City Attorney, the Court stated: "The determination as to whether a regulation goes so far as to constitute a taking involves a balancing of the governmental interest sought to be advanced by regulation in the specified manner against the gravity of the interference with or impact on property rights resulting from the regulation...This part of the ordinance effects an outright abrogation of well-recognized property rights. The ability to sell and transfer property is a fundamental aspect of property ownership...." Gregory v. City of San Juan Capistrano, supra, 191 Ca1.Rptr. 47 at 58). Court further stated: "This is not a case where the infringement upon property rights is the incidental and largely unavoidable byproduct of legislation designed to achieve some other beneficient purpose. This part of the ordinance has no other effect than to take away the owner's right to sell to the purchaser of his or her choice and grant to the park residents a preemptive right to purchase the owner's property....It is true that in certain circumstances government may abrogate or impair property rights without compensation in the exercise of its police powers, but such circumstances are narrowly circumscribed....Here the only purpose identified by City as being served by this part of the ordinance is affording 'mobilehome resident a measure of control over their own living situations.' The suggested justification is entirely insufficient to legitimate the uncompensated appropriation of significant private property rights..." (Gregory v. City of San Juan Capistrano, supra, 191 Cal.Rptr. 47 at 59). The Court further found that the ordinance appropriated the owner's legally recognized right to sell a right of first refusal or preemptive right in the mobilehome park, citing numerous cases for the proposition that it is "well tablished that a preemptive right is a valuable property right which may be ~ght, sold, and enforced in a court of law." The Court concluded: ~~- • Page 4, Item_ 10 Meeting Date ~ / 10 j 8 8 "An owner can no longer sell this right because it has been taken by the City and granted to the park 'residents'". (Gregory v. City of San Juan Ca istrano, supra, 191 Ca1.Rptr. 47 at 58. The City of San Juan Capistrano did not petition the California Supreme Court for review of the Gregory decision in 1983. Unrelated language in the case dealing with the right of the park owner to have a reasonable rate of return on the value of his property was disapproved in Fisher v. City of Berkeley (1984) 37 C.3d 644, 686; 209 Ca1.Rptr. 682, 716. The Gregory decision is the only existing precedent on the issue in California and the San Diego City Attorney provides no cases to support the opposite result. We are concerned that, if the decision in the Gregory case is correct, enactment of an ordinance granting residents of a mobilehome park a right of first refusal would constitute a taking under the recent United States Supreme Court decision in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles (1987) 107 S.Ct. 2378 for which the City would be responsible for damages for the temporary taking. It would constitute a form of inverse condemnation, for which under the California case law, if the City loses, the City could be responsible for attorney's fees and costs of the mobilehome park owners. Additionally, Adeline Smith, representative of the tern Mobilehome Association advised us that the Cities of San Jose and ord rejected an ordinance similar to that adopted by San Diego, and that e Association would be suing the City of San Diego soon to have the ordinance declared unconstitutional. As of April 20, 1988, she advised no suit has been filed. Suit is unlikely because the San Diego ordinance requires the existence of a "resident organization", and there are very few of them in existence. Our November 17, 1987 report also recommended delay in the hope that the U.S. Supreme Court decision in another case would clarify the law. Unfortunately, the decision in Pennell v. City of San Jose (1988) S.Ct. did not shed any light on this issue (although the Supreme Court upheld the San Jose rent control ordinance). One positive factor is that there is a similar right of first refusal in the condominium conversion provisions of the State Subdivision Map Act (Government Code §66427.1). It is, of course, not known whether the arguments made in the Gregory case would prevail in an action attacking the right of first refusal embodied in Government Code X66427.1 with regard to apartment conversions to condominiums. Factual distinctions could be made between the conversion of an apartment house to a condominium or stock cooperative project and the sale of a mobilehome park. We were also requested by Council to review other similar ordinances. Attached are copies of the ordinances enacted by Carlsbad and San Marcos, the only ones we have been able to discover. The San Marcos ordinance is essentially the same as the San Diego ordinance. The Carlsbad ordinance is ~ferent, it is a "conversion" type which the San Jose City Attorney opinion eludes would be a lawful exercise of the police power. This requirement . _ ~ ,~ r' • Page 5, Item 1'~ Meeting Date 'S T1"(T~ ~8 currently also exists in the Chula Vista mobilehome park conversion ordinance, Chula Vista Municipal Code Section 9.40.020 B 7). Finally, Council directed we obtain the comments of Mary Frances Click. She voted with the majority of the Mobilehome Issues Committee to recommend the ordinance not be adopted. As to the provisions of the San Diego ordinance, she questions the sufficiency of 45 days to finalize a contract (proposed X9.60.020 A) and the reason for 90 days to finalize a contract to purchase only a portion of the park. She prefers 60 day to finalize a contract to purchase the entire park. She also is concerned that the provision for sale of a portion of the park would be utilized by a park owner to retain or sell only the common areas of a park, resulting in a separate rental being charged for the use of the common facilities. Our version follows the San Diego and San Marcos provisions on these issues, and may be changed if the Council desires. For all the above-stated reasons, we continue to recommend that the Council not adopt a City ordinance granting a right of first refusal to the residents of mobilehome parks within the City of Chula Vista, outside the context of a mobilehome park conversion. Nevertheless, we have prepared a proposed ordinance similar to that adopted by the City of San Diego, and if it meets with your approval, it may be placed on first reading, The San Diego City finance contains a "Loophole" by only requiring notice of a listing, but not an offer, although notice of both is authorized by the Civil Code section. cordingly, the proposed ordinance requires notice and the right of first refusal whether the property is listed or merely offered to a potential buyer. The State law, and consequently both the San Diego and the proposed ordinance all have the further "loophole" that no action is required by the owner if the owner does not initiate the offer. If desired, a provisions such as 15-31 (c) in the San Marcos ordinance could be added to plug this hole. 4107a ',~~~ • ~-- by t City Council Of Chula Vista, Caii~ornia Dated by t re City Co~..ncil cf Crl~~;,a y~I:~L~~ (,,:w,ilornia Dated -, ,, ;.~° ..~