Wednesday, August 13, 2003
C.A. Upholds Penalties for Evading Mobile Home Rent Control
By DAVID WATSON, Staff Writer
The Sixth District Court of Appeal has upheld over $1 million in penalties and restitution levied against owners of two San Jose mobile home parks for evading rent control by forcing tenants into long-term leases.
The court said Monday that Santa Clara Superior Court Judge Leslie C. Nichols acted properly in ordering two limited partnerships—Beaumont Investment and San Jose Investments—to pay $525,000 in civil penalties and the same amount in restitution under the state’s Unfair Competition Law and its False Advertising Law. Both statues are part of the Business and Professions Code, and both provide for civil penalties of up to $2,500 for each violation.
Justice William M. Wunderlich said Nichols correctly found the companies committed 14,124 statutory violations: one for each of the 154 tenants forced into a lease, and two—one under each statute—for each time monthly rent was charged in excess of what would have been permitted under San Jose’s mobile home rent control ordinance.
Wunderlich rejected the company’s argument that the penalties were excessive, noting they amounted to only $37 per violation.
“Higher per-violation penalties have been affirmed in many cases,” Wunderlich said.
He said Nichols was not required to count violations based only on the number of victims involved.
Number of Violations
“Given the circumstances of this case, the trial court did not err in calculating the number of statutory violations based on defendants’ actions as well as the number of affected tenants. First, each unlawful act was a separate, discrete event. Each long-term dealer lease violated the Ordinance....Each collection of unauthorized rent violated the Ordinance....Furthermore, each unlawful act—including the collection of excess rent each month—was designed to enrich defendants at the expense of the affected tenants.”
The justice noted that the trial court based the amounts of the penalty, as well as of the restitution, on the approximate amount of excess rent charged to the tenants for the spaces their mobile homes occupied.
Nichols found that the park signed long-term leases with two mobile home dealers—New Horizon Mobile Homes and United Mobile Homes—that tenants were forced to assume when they purchased the homes. Some of the leases included renewal provisions that resulted in effective terms as long as 25 years, the court said.
The Santa Clara district attorney’s office sued the park owners and one of the dealers in 1995.
The San Jose ordinance exempts long-term leases from rent control, but only if the mobile home is used as the “personal and actual residence” of the tenants. Wunderlich noted that the park conceded the leases signed by the dealers did not meet that requirement.
He rejected the park’s contention that another provision of the rent control ordinance, recognizing the right of a “mobilehome owner, mobilehome tenant, prospective mobilehome owner or prospective mobilehome tenant” to enter into an exempt lease, had the effect of “expand[ing] the universe of exempt lessees.”
Such an interpretation of the ordinance was unwarranted, he said, and would probably violate the state’s Mobilehome Residency Law, which contains an analogous provision limiting exempt leases to owners who live in their own mobile homes.
Wunderlich said Nichols properly assessed penalties for conduct dating back to 1987, declining the park owners’ invitation to apply a four-year limitations period for actions under the statute. The justice agreed with the trial judge that the park engaged in a civil conspiracy that was still continuing at the time of trial, with the result that the statutory period had not yet begun to run.
Though Wunderlich described the lease arrangements in the case as “[c]onsistent with common practice” in the industry, Santa Clara Deputy District Attorney Kenneth Rosenblatt, who handled the litigation, said as far as he knew the scheme was “unique to our neck of the woods.”
State law permits, but does not require, local jurisdictions to adopt mobile home rent control, Rosenblatt noted, and many have not.
The two parks—Casa del Lago and Lamplighter—were owned by separate partnerships but controlled by the same individuals, Rosenblatt told the MetNews. By signing the leases before the mobile homes were sold, they hoped to avoid the San Jose strictures on space rental rates.
“They thought they had a way around it, and they didn’t,” the deputy district attorney said.
The case is People v. Beaumont Investment, Ltd., 03 S.O.S. 4374.
Copyright 2003, Metropolitan News Company