Friday, January 12, 2007
S.C. Upholds Property Tax Pass-Through for Mobilehomes
By TINA BAY, Staff Writer
California’s Mobilehome Residency Law does not preempt local rent control ordinances permitting mobilehome park owners to separately charge residents for property taxes imposed on park land, the state Supreme Court held yesterday.
Reversing rulings by the Fourth District Court of Appeal and San Diego Superior Court Judge Luis R. Vargas, the high court unanimously concluded mobilehome park owners may impose pass-through charges for real property taxes pursuant to a city ordinance without contravening Sec. 798.31 of the Mobilehome Residency Law.
Chula Vista’s rent control ordinance at the relevant time stated that “space rent,” which was subject to rent increase restrictions, did not include allowable pass-throughs such as property taxes. Instead, the ordinance provided, residents could be charged property taxes as an item separate from and in addition to rent.
Under Sec. 798.31, owners may not charge residents “a fee for other than rent, utilities, and incidental reasonable charges for services actually rendered.”
Writing for the court, Justice Joyce L. Kennard said that a property tax charge constitutes “rent” under the state provision because nothing other than use of the rented space and common areas triggers the charge; it is compensation for the use of the rented space and common areas of the park; and it is a business expense that rental property owners have traditionally recovered from their tenants through amounts charged as rent.
The issue, she said, was whether a separate charge excluded from the definition of “rent” in a local ordinance may nonetheless be considered “rent” under the state statute.
Kennard concluded that exclusion of the property tax pass-through from the definition of “space rent” under the local ordinance was not inconsistent with—and therefore did not preempt—the inclusion of the property tax pass-through within Sec. 798.31’s definition of “rent.”
“[T]he ordinance does not purport to define the term ‘rent’ under the state Mobilehome Residency Law or as used in the leases subject to the ordinance,” the justice explained. “It merely defines and uses the term ‘space rent’ as a way of specifying the charges that the ordinance regulates.”
It does not prohibit the parties from including those other charges as rent in their leases, she wrote.
The lawsuit had been brought by residents of Don Luis Estates, a mobilehome park owned by Luis J. Cacho and three of his children. An ownership transfer following the death of Cacho’s mother in 1994—she had previously co-owned the park with the four—triggered a reassessment of the property’s value and a tax increase of over $18,000.
Cacho and his children implemented a property tax pass-through in 1998 after obtaining the opinion of a city official that the pass-through would not violate the city’s rent control ordinance. The pass-through amount was increased annually, and was listed variously on the invoices as “rent tax,” “rent adj,” “adj,” “other” and “CVMC9.50.030H.”
In 2001, mobilehome park residents sued claiming that state law preemption invalidated the pass-throughs the owners had been making pursuant to the municipal code.
Agreeing with the residents, Vargas granted their motion summary judgment motion in March 2003. Div. One of the Fourth District Court of Appeal affirmed his order.
But Kennard countered that “a discretionary rent increase to compensate for increased property taxes and a separately itemized pass-through of those same property tax increases do not differ in any way that is relevant to the discernable purposes of the Mobilehome Residency Law.”
The case is Cacho v. Boudreau, 07 S.O.S. 162.
Copyright 2007, Metropolitan News Company