Annual mobilehome rent increases are usually based on a percentage of the annual Consumer Price Index, known as the CPI. Before addressing the CPI, I want to bring out some facts to remember about rental mobilehome parks. They are different than standard rental units. Both the park owner and the homeowner have investments in the park. In the average rental mobilehome park, the park owner has ¼ of the investment in the land and park amenities, ¾ is the homeowners’ collective investments in the ownership of the housing complexes and the landscaping of the lots. The park owner utilizes the significant leverage over the homeowner’s investments to maximize the profits from his investment.
The Legislature realizing these facts have enacted special laws for mobilehome parks as to the park owner’s contractual duty to provide and maintain the park amenities to protect the homeowner’s investments, the Mobilehome Parks Act. (Title 25 and the Health and Safety code).
The Legislature, in order to protect the homeowner’s investments and tenancy, has enacted the special Mobilehome Residency Law, (MRL), that requires a written Rental Agreement, MRL 798.15. A copy of the MRL must be given with the required written rental agreement, and the MRL provision are incorporated into the rental agreement by reference, MRL 798.15 (c). They are the terms and conditions of park tenancy, MRL 798.8.
You will note it states a written Rental Agreement not a lease, because of the unique difference. These homeowners are not leasing anything, they have contracted to have their investment installed in the park and are renting the use of the lot, the required instillations, park facilities and services (MRL 798.12). What is confusing is that the MRL states a lease is a rental agreement, MRL 798.8, and standard leases are used, when all the MRL provisions are for rental agreements. The provision, MRL 798.19 clarifies it a little as it states “No rental agreement (this would mean a lease) for a mobilehome shall contain a provision by which the homeowner waives his or her rights under the MRL Articles 1-8. Any such waiver shall be deemed contrary to public policy and void. Also the provision MRL 798.15 (h) All other provisions governing tenancy. Therefore any mobilehome lease is not judged as a standard lease but falls under all the MRL provisions for rental agreements. Contract law. “An agreement is the bargain of the parties in fact as determined from language or by implication from other circumstances. A contract is the total legal obligation resulting from that agreement.
The park owner after figuring the cost of construction, recovery of capitalization expenses, (prorated over their life span), adds what the park operating expenses will be, and a just return on his investment, and establishes the Base Rent, listed on the rental agreement, MRL 798.15 (a).
Usually a percent of the annual Consumer Price Index (CPI) is a provision used as the guiding factor for annual rent increases.. So what is, what makes up, and what affect has the annual CPI on mobilehome owners? The U.S. Department of Labor, Bureau of Labor Statistics measures the average change in prices over time in a fixed market basket of goods and services. 100% of the CPI covers prices of food, clothing, fuels, transportation, physicians, dentists and other goods and services that people buy for day-to-day living.
Prices are collected in 87 urban areas across the country. Separate indexes are published by region of the country. 46% of the CPI represents the goods and services of a rental mobilehome park, (Ref. Rutgers Law Review).
Movements of the indexes from one month to the other are usually as percent changes rather than changes in the index points, because index point changes are affected by the level of the index in relation to its base period while percent changes are not. The example in the accompanying box illustrates the computation of index points and percent changes.
Example of a CPI Calculation Calculations
Current CPI 206.00
Minus previous CPI – 195.40
Equals index point change 10.60 Point Change
Index point change 10.60
Divided by previous CPI 195.40
To determine percentage
multiply by 100 0.0542 x 100 = 5.425%
This percent change would be the CPI annual increase on the Base Rent listed in the required written
Rental agreement, but some park owners add the annual CPI increase to the previous years rent total. I believe this to be considered compounding. The homeowner would then be paying CPI annual percent changes increases on the years before CPI increases.
Another complaint I have tried to fight for over the years is that the MRL states the Rental Agreement contain all provisions of tenancy, and some park Rental Agreements (leases) did not have a provision for annual rent increases. Also some park owners, that gave Rental Agreements (leases) with the provision for 100% annual CPI rent increase, abused the agreement, and wanted compensation for things not a provision in the Rental Agreement.
a. When the homeowners agreed to annual rent increases of 100% CPI, they agreed to pay 56% more than the 46% governmental inflation figures for mobilehome parks goods and services. I believe this should be more than ample compensation..
b. The park owners were receiving a just return on their established monthly Base Rent.
c. After pro rating the life expectancy of installations some park owners charged the homeowners for updating and replacement of these required to be provided utility installations.
1. Charging for these was not a provision in the rental agreement, a term and condition of tenancy.
2. If the park owner was supplying utilities by sub-meter service, he could only charge the homeowners the residential rate and the service utility company provided the park owner with a sufficient differential to cover the cost of providing the utility.
3. If the park owner were allowed to charge the homeowners these costs, added to the Base Rent, then the annul CPI increase would not be on the Base Rent but on Base Rent plus these charges.
(a) After the homeowners have paid these costs of updating or replacement of these required to be provided installations are the charges deducted from the homeowner monthly rent payments?
(b) Has the park owner charged the homeowners these charges and also amortized the cost on the park operating statement?
There are many things to think about, but the laws are there. Let’s see they are enforced.
Article by Donna Matthews. Donna can be reached through Mobilehome Magazine.