Mobile Home Rent Control Ordinance Upheld by California Federal Appeals Court

Name: McKirdy & Riskin, P.A.
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Home » Condemnation Law » Mobile Home Rent Control Ordinance Upheld by California Federal Appeals Court

by: Anthony F. Della Pelle

28 Dec 2010

The 9th Circuit Court of Appeals, in an en banc decision, reversed its earlier three judge panel decision which granted summary judgment for plaintiff’s claim that a rent control ordinance was a taking without just compensation. Plaintiffs, collectively the Guggenheims, own a mobile home park in Goleta, California which they purchased in 1997. The park was subject to a county rent control ordinance, and later became subject to a local rent control ordinance identical to the county ordinance. The Guggenheims claimed that the rent control ordinance acted as a taking in violation of the Fifth Amendment from limiting the park’s profits by limiting the rental fees the park could collect.

The Court agreed with the city that, because the Guggenheims bought the property with full knowledge of the ordinance, they had no reasonable expectation that they could increase rents beyond the levels permitted by ordinance. The Court stated that “[w]hatever unfairness to the mobile home park owner might have been imposed by rent control, it was imposed long ago, on someone earlier in the Guggenheims’ chain of title. The Guggenheims doubtless paid a lot less for the stream of income mostly blocked by the rent control law than they would have for an unblocked stream. The 2002 City of Goleta adoption by reference of the Santa Barbara County ordinance did not transfer wealth from them to their tenants. That transfer occurred in 1979 and 1987, from other landlords, and probably benefitting other tenants.” The Court further stated that “[e]nding rent control would be a windfall to the Guggenheims, and a disaster for tenants who bought their mobile homes after rent control was imposed in the 70’s and 80’s. Tenants come and go, and even though rent control transfers wealth to ‘the tenants,’ after a while, it is likely to affect different tenants from those who benefitted from the transfer. The present tenants lost nothing on account of the City’s reinstitution of the County ordinance. But they would lose, on average, over $100,000 each if the rent control ordinance were repealed. The tenants who purchased during the rent control regime have invested an average of over $100,000 each in reliance on the stability of government policy. Leaving the ordinance in place impairs no investment-backed expectations of the Guggenheims, but nullifying it would destroy the value these tenants thought they were buying.”

The 9th Circuit Court of Appeal’s opinion for the en banc hearing can be found here.

The 9th Circuit Court of Appeals’ initial opinion for this matter can be found here.

The following are news articles on the topic:

Los Angeles Times, “Court upholds mobile home rent controls“;

BusinessWire, “Ninth Circuit Affirms Local Government Right to Regulate in Mobile Home Rent Control Case, Reports Shute, Mihaly and Weinberger LLP“;

Santa Barbara Independent, “Mobile Home Rent Control Upheld: Ninth Circuit Court Backs City of Goleta in Major Test of Statewide Protections for Homeowners”