Mobile Home Owners Pay Landlord’s Court Costs

SB Independent
By Martha Sadler
July 19, 2007

Battle was joined in the Goleta City Council chambers over who must pay the landlord’s court costs in a rent-controlled park. When the smoke cleared, residents of the Rancho Mobile Estates each received a bill for $803.72 to cover the $94,000 that landlord Daniel Guggenheim spent fighting a suit in which a tenant alleged pain and suffering from an eviction attempt. The residents, who own and maintain their mobile homes but not the land on which the homes sit, objected that they should not have to pay the costs because the lawsuit had nothing to do with them. Goleta’s mobile home rent control ordinance allows the landowner to raise rents only to reflect actual increases in the Consumer Price Index and operating costs, plus capital expenses.

In a unanimous vote, the council affirmed Superior Court Judge Thomas Anderle’s ruling that lawyers’ fees and other legal expenses were a normal operating cost of doing business as a mobile home park landlord. Residents may pay the $803.79 up front or pay $20.38 monthly for the next five years, for a total of $120,000 including 10 percent interest.

At the meeting, Guggenheim’s attorney, Mark Alpert, aggressively tried to convince the council that the rent increase due to court costs should be permanent and not sunsetted once the costs are paid. “We are happy to file a lawsuit in Santa Barbara Superior Court and tell Judge Anderle just what I’m telling you,” he warned. “I want to tell you about the consequences of the decision you are making tonight,” Alpert continued. “Every year you’re going to have a fight and every year you are going to have litigation.” (Alpert also petitioned the court to pass on to tenants the cost of Guggenheim’s unsuccessful federal lawsuit, which challenged the constitutionality of the city’s mobile home rent control ordinance. Anderle rejected that request.)

Clarke Fairbrother — a principal with Newport Pacific Capital Company, Inc., which manages Rancho — claimed rent control resulted in a collective $500,000 annual windfall for Guggenheim’s tenants last year and contended that money should have been Guggenheim’s. Average rent for a one-bedroom apartment in Goleta is $1,100, Fairbrother said, yet Guggenheim currently receives an average of only $365 from each tenant monthly, plus payments for capital improvements and utilities. Counting court costs as an operating expense “brings rents up to a level a little more fair to the property owner,” Fairbrother said.

Adding court costs to residents’ rent is only one strategy that Guggenheim and his representatives are pursuing in order to, as they see it, reclaim the equity that is rightfully his. In early June, Guggenheim applied to the city to subdivide the park into privately owned plots, with each current resident getting first dibs on buying the space they now rent. Fairbrother said Guggenheim will fight the city’s resolution to first determine via Environmental Impact Report the effect on the city’s affordable housing supply of subdividing mobile home parks. However, Guggenheim’s team has taken no such action yet.

Meanwhile, Newport Pacific has been trying to chip away at the solid wall of resistance to the subdivision plan they have encountered from the homeowners’ association. The management company has set up an “executive board” of six residents willing to explore with Newport Pacific the option of buying their own land, and Fairbrother claimed that 20 additional residents of the park’s 150 spaces have expressed interest. Although Newport Pacific has publicly predicted that virtually everybody in the park will qualify for some kind of financing enabling them to buy their lots, questions about specific numbers remain.