by Deane Sargent | Source |
The resident group at Youngstown MHP, Petaluma, CA announced that the recent arbitration action brought by their new corporate park owner (“Owner”) resulted in a resounding VICTORY for the residents.
Youngstown MHP is a 103 site low/moderate income park in an industrial area of Petuluma. There are 74 sites covered under the Petaluma Mobilehome Park Rent Stabilization Program (“Program”).
The new Owner purchased Youngstown MHP in November, 2020, and, eleven months later, in November 2021, the Owner’s attorney filed an application for a rent increase for the 74 sites. The rent increase application, since it was greater than 300% of the current Consumer Price Index, triggered Arbitration under the Program.
The Owner asserted, after eleven months, that it was not making enough money from the park and sought to pass through to the residents the Owner’s debt service on the loan taken out to purchase the park, and the increase in property taxes because of the reassessment of the park’s value, also due to the purchase. Specifically, the Owner sought a rent increase of $286.22/site/mo, plus an additional $15.45/site for 60 months to cover the costs of their application (total rent increase of $301.67). Rents in the park currently average about $794/mo/site. The increase would have been about 38% over the average site rent. Under the Program, the Owner has the burden of proof as to their claims.
The Owner’s attorney presented a lot of information regarding the Owner’s right to a “Fair Return”, the comparable rents in the area, expenses of the prior owner, physical condition of the park, and the Owner’s debt service and property taxes. The Owner also provided expert witness reports and testimony from an appraiser and a CPA.
The Team (“Team”) for the resident group consisted of attorney Evan Livingstone (California Rural Legal Assistance), local Petaluma attorney Richard Reynolds, attorney Garrison Boyd (Legal Aid of Sonoma County), and expert witnesses Dr. Kenneth K Baar (economist and rent control expert), Deane Sargent (financial consultant), Vanessa Hill (CPA and Lease consultant) and Terry Bell (Realtor).
The Team pointed out that, although the Owner and his attorney presented a bunch of irrelevant information, the Owner and his attorney, under the Program guidelines, have the burden of proving of their case. They presented nothing relevant to the real issue – “Did the Park Owner experience a decrease in Net Operating Income (NOI)?”.
While this would be hard to prove in any case where a park has been owned for only 11 months (there are no operations by the current Owner with which to compare), the Team showed that the Owner, AFTER adjustments for increased property taxes AND debt service, was making as much or more than the prior park owner.
The Arbitrator agreed.
The rent increase was DENIED in full. The request for reimbursement of legal costs for the application was DENIED in full. The Arbitrator did allow the Park Owner to reinstate and implement the normal annual CPI adjustment (3.2%).
Deane Sargent (PMC Financial) is pleased to have assisted the residents and the Team with this success.
However, Deane’s day-job is helping resident groups purchase or refinance their MH parks. Contact Deane at 415-271-3919 or firstname.lastname@example.org, if you want to discuss your project.