SENATE BILL 5944
State of Washington 55th Legislature 1997 Regular Session
By Senators Prentice, Wood, McAuliffe, Finkbeiner, Goings, Kline, Schow and Rasmussen
Read first time 02/20/97. Referred to Committee on Financial Institutions, Insurance & Housing.
AN ACT Relating to mobile home park rent justification; adding a new chapter to Title 59 RCW; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1. (1) The legislature finds that mobile home owners have a substantial investment in their residences and appurtenances for which space is rented or leased. Alternate sites for relocation of mobile homes are difficult to find due to the shortage of vacant spaces and the restrictions of age, size, or style of mobile homes permitted in many parks. Likewise, the cost of moving a mobile home is substantial and the risk of damage when moving is significant. These conditions result in the creation of a captive market of mobile home owners and tenants. This captivity contributes to an imbalance in the bargaining relationship between park owners and mobile home park tenants in favor of the park owners.
(2) The legislature also finds that because mobile homes are often occupied by senior citizens, persons on fixed incomes, and persons of low or moderate incomes, rent increases affect these persons with particular harshness. Continual space rent increases in mobile home parks threaten to diminish the value of the investment of mobile home owners. Further, existing state law permits mobile home park owners to require mobile home owners to make modifications to their homes for a variety of reasons that constitute capital improvements which would accrue to the benefit of the park owner by increasing the market value of the mobile home park itself. Additionally, many homeowners make voluntary improvements to their homes and spaces that are permanent and affixed to the space. These improvements inure to the benefit of the park owner and become the property of the park owner when the homeowner leaves. Further, in many instances rents in mobile home parks have been raised to such a level that mobile home owners are unable to find purchasers for their homes thereby making them captives in the park, facing the total loss of equity in their homes if they leave.
(3) Therefore, the legislature intends to facilitate and encourage fair bargaining between mobile home owners and mobile home park owners in order to achieve mutually satisfactory agreements regarding space rents in mobile home parks. Absent such agreements, the legislature further intends to protect the owners and residents of mobile homes from unreasonable space rent increases while simultaneously recognizing and providing for the need of park owners to receive a just and reasonable return on their property.
NEW SECTION. Sec. 2. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
(1) "Base year" or "base year rent" means the amounts determined under section 8 of this act.
(2) "Board" means the mobile home park rental review board established by the department of community, trade, and economic development.
(3) "Consumer price index" means the index known as the consumer price index for all urban wage consumers applicable to the pertinent geographical or political area of the state of Washington as published by the United States department of labor, bureau of labor statistics.
(4) "Department" means the department of community, trade, and economic development.
(5) "Director" means the director of the department of community, trade, and economic development.
(6) "Mobile home" means a structure designed for human habitation and for being moved on a street or highway, but does not include a recreational vehicle.
(7) "Mobile home owner" or "resident" means any person who owns or is entitled to occupy a mobile home.
(8) "Mobile home park" means any parcel of land within the state where two or more mobile home spaces are rented or held out for rent, to accommodate mobile homes used for human habitation.
(9) "Mobile home park owner" or "park owner" means the owner, lessor, operator, or manager of a mobile home park.
(10) "Mobile home space" means the site within a mobile home park intended, designed, or used for the location or accommodation of a mobile home used for human habitation.
(11) "Rental agreement" means any written or oral agreement or lease between the owner of a mobile home park and a tenant for the use or occupancy of a mobile home park space which agreement contains the terms and conditions of the tenancy for that space.
(12) "Rent increase" or "rental increase" means any additional consideration demanded from a tenant for a mobile home space. A rental increase includes any reduction in the mobile home park's amenities, facilities, services, or utilities previously available for a tenant's use and enjoyment without a commensurate decrease in consideration paid by the tenant.
(13) "Space rent" means the consideration demanded or received for the use or occupancy of a mobile home space exclusive of any consideration paid for the occupancy of the mobile home itself. The payment of space rent shall entitle the tenant to the full use and enjoyment of all of the mobile home park's amenities, facilities, services, and utilities which are not individually metered and separately billed to the tenant.
(14) "Space rent ceiling" means the amount determined under section 9 of this act.
(15) "Tenancy" means the right of a tenant to the use and enjoyment of a mobile home park space and the mobile home park's amenities, facilities, services, and utilities.
(16) "Tenant" means a person who has a tenancy in a mobile home park.
NEW SECTION. Sec. 3. This chapter applies to each and every mobile home or manufactured home or trailer located in a mobile home park within the state except those parks specifically excluded from coverage by the director.
NEW SECTION. Sec. 4. This chapter does not apply to any mobile home park that the director, in his or her discretion, finds is (1) owned and operated by the residents of the park or (2) is owned and operated by a nonprofit corporation granted tax-exempt status by the internal revenue service. Exclusion from this chapter is granted only upon approval of application for such status made to the director by the residents of the park or their representatives or by the nonprofit corporation.
NEW SECTION. Sec. 5. (1) Within sixty calendar days after the effective date of this act, mobile home park owners shall register all mobile home parks within the state and all mobile home spaces within such parks with the board. This requirement applies to all mobile home parks and mobile home spaces.
(2) The registration shall include, but is not limited to, the following: The name, address, and telephone number of each and every person or entity possessing an ownership interest in the park and the nature of the interest; the number of mobile home spaces within the park; a rent schedule of space rents within the park on January 1, 1997; a schedule of any and all other charges paid by mobile home tenants within the park, the amount thereof, and to whom paid; and the name, address, and telephone number of the park's manager, if any. A park owner shall also update the registration within thirty days of any change to the information previously filed for the park. A park owner shall also provide such further information as required by resolution of the board.
(3) A park owner is not eligible to receive a rent ceiling adjustment under this chapter unless such current registration as may be required for the mobile home park is on file, and complete, with the board prior to the time a petition for a rent ceiling adjustment is filed.
NEW SECTION. Sec. 6. (1) At the time of any registration, mobile home park owners shall pay the department a registration fee for each mobile home space within the park as may be established by the department.
(2) The board shall not accept any petition from any park owner for a space rent ceiling adjustment of any kind and no proceeding shall be scheduled or proceed and no space rent ceiling adjustments granted for any mobile home park if the registration fee is unpaid.
NEW SECTION. Sec. 7. Every mobile home park owner shall file a report with the board on an annual basis, on a date determined by the board. The report shall contain all pertinent financial information related to the operation of the mobile home park. Mobile home park annual reports shall be available for review and copying at the place of business of the board. The board may charge a reasonable fee for photocopying annual reports.
NEW SECTION. Sec. 8. (1) Beginning on the first day of the first month following the effective date of this act, a mobile home park owner shall not charge or collect space rents for any mobile home spaces in an amount greater than the space rents in effect on January 1, 1997, except as provided in this chapter. The space rents in effect on that date, as determined under this chapter, shall be known as the "base rent."
(2) The base rents charged or collected in any mobile home park for the first year following the date of the space rent ceiling shall be known as the "base year." Likewise, the space rents charged or collected in any mobile home park for that period shall be known as the "base year rents."
NEW SECTION. Sec. 9. (1) Any park owner or tenant may petition the board for the purpose of determining the base rent in effect in any mobile home park on January 1, 1997, in any mobile home park developed between January 1, 1997, and the effective date of this act, in any mobile home park developed after the effective date of this act, or in any mobile home park at such other times as may be necessary to apply or interpret this chapter.
(2) Commencing after the effective date of this act, a park owner who has established the base rent for the park by petition to the board is entitled to one annual adjustment in the base rent charged for each mobile home space in a mobile home park equal to thirty percent of the increase in the consumer price index from the date of the establishment of the base rent or the most recent annual adjustment of the space rent to the date proposed in the owner's petition. The adjustment must contain the park owner's calculations supporting the amount of the permissive annual adjustment. There is a rebuttable presumption that the base rent, as adjusted if applicable, provides the park owner with a fair return on the property.
(3) In the event a park owner believes that the permissive annual adjustment to the space rent ceiling does not result in a just and reasonable return on park property, a park owner may petition the board for a further adjustment of the space rent ceiling. The petition must contain the amount of and the basis for the requested adjustment. A park owner's petition may seek an adjustment of the space rent ceiling that increases the park owner's net operating income for any year subsequent to the base year by an amount which, together with the permissive annual adjustment, will produce a just and reasonable return on park property.
(4) An adjustment of the base rent in any mobile home park is not effective until, at least, twelve months from the date of the establishment of the base rent or the effective date of any prior adjustment thereof.
NEW SECTION. Sec. 10. (1) Any tenant of a mobile home space under this chapter may petition the board to determine whether the base rent or adjustments thereof applicable to the tenant's mobile home space are valid under this chapter. The petition must contain the name, address, and telephone number of the tenant or tenants filing the petition and the park owner or manager, a statement of the relief requested, and the basis of the requested relief. The petition shall be signed by the tenant submitting it, accompanied by proof that the petition was personally served or mailed to the park owner or manager and by the payment of the petition fee established by resolution of the board.
(2) Any park owner of a mobile home park under this chapter may petition the board to determine whether the base rent or proposed adjustments thereof applicable to any mobile home space within the owner's mobile home park are valid under this chapter. The petition must contain the name, address, and telephone number of the park owner filing the petition and the tenants of the mobile home park affected by the proposed adjustment, a statement of the amount of the adjustment or other relief requested, and the basis of the requested adjustment or relief. The petition shall be signed by the owner submitting it, accompanied by proof that the petition was personally served or mailed to each tenant and by the payment of the petition fee established by resolution of the board.
(3) The board may designate the form of the petition submitted by any tenant or park owner under this section. The petition may require information deemed necessary by the board in addition to the information required by this section. When so designated by the board, each tenant and park owner must submit their respective petitions on the form and no other form is acceptable. However, a petition may not be accepted by the board unless it is complete, signed by the party submitting it, and accompanied by the payment of the applicable fee.
NEW SECTION. Sec. 11. (1) The mobile home park rental review board is hereby established. The board shall be composed of five members. Two members shall be tenants of mobile home parks. Two members shall be mobile home park owners. One member shall be a member of the general public. Board members shall be selected by the director and shall serve for a term of three years. Board members shall not receive compensation but shall be reimbursed for travel expenses as provided in RCW 43.03.050 and 43.03.060.
(2) The board has the following duties and powers:
(a) Subject to the approval of the department, the board may adopt administrative rules to effectuate the purposes and policies of this chapter and to enable the board to carry out its duties and powers.
(b) The department shall appoint a mobile home rent review director who shall administer and carry out the purpose and policies of this chapter. The rent review director shall be an employee of the department.
(c) The board through the rent review director shall keep a record of its proceedings.
(d) The board shall establish registration fees, require each mobile home park to be registered, designate the form of petitions, and determine the acceptability of petitions filed.
(e) The board shall determine the validity of base rents and adjustments thereof of all mobile home spaces within all mobile home parks within the state.
NEW SECTION. Sec. 12. (1) The proceedings of the board are initiated by the filing and acceptance of a petition pursuant to this chapter. Thereafter, the board shall establish the date and time to consider such petitions. Such proceedings shall commence within forty-five days from the filing and acceptance of a petition unless the board has commenced a proceeding on another petition that conflicts with this period. The board shall mail written notice of its proceedings to all parties affected by a petition, at least fifteen days prior to the date and time so designated. The board may continue proceedings from time to time.
(2) Each party to a proceeding may be assisted by an attorney or such other representative designated by the party.
(3) Formal rules of evidence shall not apply but all testimony shall be given under oath. The board shall have the power to compel, by subpoena, the production of documents and the attendance of witnesses at its hearings.
(4) In the event any party fails to appear at a duly noticed proceeding, the board may hear and review such evidence as may be presented and may make such determinations and findings as shall be supported by the evidence presented.
(5) The board shall determine the validity of the space rent ceiling or adjustments and may grant or deny such other relief requested by the petitions relating to such proceedings. For this purpose, the board shall make written findings, based on the evidence presented, on all issues relevant to the determinations.
(6) The board shall meet to consider the evidence and arguments of the parties no later than ten days after the matter has been submitted for decision and shall make a final decision within a reasonable time. An adjustment of mobile home park rents is not allowed without a board decision.
(7) The decision of the board must be supported by the evidence submitted at the hearing. The petitioning party shall have the burden of proof in such proceedings.
(8) The proponent of any adjustment to a base rent shall have the burden of proof by a preponderance of the evidence.
(9) The determinations and findings of the board constitute a final administrative action. Such determinations and findings shall be mailed to each party to a proceeding. The decision shall become effective upon the date it is mailed to the parties unless otherwise stated.
NEW SECTION. Sec. 13. (1) Net operating income shall be gross income less allowable operating expenses.
(2) Gross income equals the sum of the following:
(a) Gross rents;
(b) Interest from rental deposits, unless directly paid by the landlord to the tenants;
(c) Income derived from any source related to or operated on the mobile home park including, but not limited to, laundry facilities, vending machines, amusement devices, cleaning fees or services, and garage and parking fees; and
(d) All other income or consideration received or receivable for or in connection with the use or occupancy of mobile home spaces.
NEW SECTION. Sec. 14. Operating expenses include the following:
(1) Real property taxes;
(2) Utility costs;
(3) Management fees actually paid if management services are contracted for. If all or a portion of management services are performed by the landlord, management fees include the reasonable value for such services. Management fees greater than three percent of gross income are presumed to be unreasonable. Such presumption may be rebutted;
(4) Other reasonable management expenses including, but not limited to, necessary and reasonable advertising, accounting, and insurance;
(5) Normal repair and maintenance expenses including, but not limited to, painting, normal cleaning, fumigation, landscaping, and repair of all standard services including electrical and plumbing;
(6) Owner-performed labor is compensated at the prevailing hourly rates for the local area upon documentation of the date, time, and nature of the work performed. Owner-performed labor in excess of three percent of gross income is not allowed unless the landlord proves by clear and convincing evidence that such excess expenses resulted in proportionately greater services for the benefit of the tenants;
(7) License and registration fees required by law to the extent they are not otherwise paid by tenants; and
(8) The yearly amortized portion of capital expenses including reasonable financing costs, computed in accordance with any appropriate life table utilized by the internal revenue service.
NEW SECTION. Sec. 15. Operating expenses do not include the following:
(1) Avoidable, unreasonable, or unnecessary expenses;
(2) Mortgage principal and interest payments;
(3) Lease purchase payments and rent or lease payments to landlord's lessor;
(4) Penalties, damages, attorneys' fees, litigation costs, fines, fees, or interest assessed or awarded for violation of this or any other statute, rule, or ordinance;
(5) Attorneys' fees and other costs incurred for proceedings before the board or in preparation for such proceedings, or in connection with any civil actions or proceedings against the board, or a decision, ruling, or order of the board; and
(6) Any expenses for which the landlord has been reimbursed by any security deposit, insurance settlement, judgment for damages, settlement, or any other method.
NEW SECTION. Sec. 16. It is presumed that the net operating income produced by a park owner during the base year provides a fair return on park property.
NEW SECTION. Sec. 17. The board may determine that the base year net operating income yielded other than a fair return on park property in which case the base rent, as adjusted if applicable, may be adjusted accordingly. In order to make such a determination, the board must make at least one of the following findings:
(1) The park owner's operating and maintenance expenses in the base year were unusually high or low in comparison to other years. In such instances, adjustments may be made in calculating such expenses so the base year operating expenses reflect average expenses for the park property over a reasonable period of time. The board shall consider the following factors:
(a) Whether the owner made substantial capital improvements during the previous year which were not reflected in the base rent during the base year;
(b) Whether substantial repairs were made due to damage caused by natural disaster or vandalism which management has taken appropriate action to reduce;
(c) Whether maintenance and repair were below accepted standards so as to cause significant deterioration in the quality of housing services; or
(d) Whether other expenses were unreasonably high or low notwithstanding the use of prudent business measures.
(2) The base rent is disproportionate due to the following factors:
(a) The base rent is substantially higher or lower than in preceding months by reason of premiums being charged or rebates being given for reasons unique to particular spaces;
(b) The base rent is substantially higher or lower than at other times of the year by reason of seasonal demand or seasonal variations in rent; or
(c) The base rent is exceptionally high or low due to other factors that would cause the application of the base year net operating income to result in gross inequity to either the owner or tenant.
NEW SECTION. Sec. 18. (1) To determine the net operating income during the base year, there shall be deducted from the actual or annualized gross income realized in the base year a sum equal to the actual operating expenses for the base year.
(2) In the event the owner did not own the subject property during the base year, the operating expenses for the base year shall be determined by one of the following methods, whichever the board determines to be more reliable in the particular case:
(a) The previous owner's actual operating expenses, if such information is available; or
(b) Actual operating expenses for the first calendar year of ownership, discounted to the 1996 calendar year.
(3) To determine the net operating income for any year subsequent to the base year, there shall be deducted from the actual or annualized gross income, determined by analyzing the monthly rents in effect at the time of filing of a petition, a sum equal to the actual operating expenses for the particular year.
(4) While the net operating income formula should operate to provide a park owner a fair return on park property, the board shall consider all relevant factors presented in making a determination as set forth in this chapter.
NEW SECTION. Sec. 19. (1) Notwithstanding other provisions of this chapter, a space rent increase is not valid during the time that any petition is pending before the board or any proceeding on any petition is being conducted by the board. Likewise, a space rent increase is not valid during the period in which the board's decision for that park is being reviewed by a court of competent jurisdiction except that permissible annual adjustments shall be payable during such judicial review.
(2) A park owner shall not increase space rents under this chapter if the park owner:
(a) Has failed to comply with this chapter or rules adopted under this chapter, including any provisions requiring the payment of registration fees and registration penalties; or
(b) Has failed to comply substantially with any applicable state or local housing, health, or safety law.
(3) An owner shall not increase space rents unless the notice to increase space rents contains a statement in substantially the following form: "The undersigned (owner) certifies that this mobile home space and common areas of the park are not subject to any uncorrected citation or notices of violation of any state or local housing, health, or safety laws issued by any government official or agency."
(4) If an owner fails to comply with this section, the tenant may refuse to pay the space rent increase, may seek administrative or civil remedies under this chapter, or may raise the owner's noncompliance as an affirmative defense in any resulting unlawful detainer action.
NEW SECTION. Sec. 20. (1) An owner shall not reduce the level or kind of services provided to tenants as of January 1, 1997, or take any action in retaliation for the exercise by tenants of any of the rights granted under this chapter.
(2) If a park owner provides in the rent, without separate charge, utilities or similar services including, but not limited to, natural gas, electricity, water, sewer, trash, or cable television, and then attempts to charge separately for such services by any means of transferring to the tenant the obligation for payment for such services, the cost savings shall be given to the tenant by a space rent reduction equal to the actual reduction of the park owner's cost of such transferred utility or similar service, less common area usage, based on the park owner's actual costs for the twelve-month period prior to any notice to the tenants of such change. Failure to comply precludes a park owner from seeking and receiving any relief under this chapter unless and until such compliance occurs.
(3) In determining the cost savings to be given to tenants in the form of decreased space rent under subsection (2) of this section, the cost of installation of separate utility meters, or other costs, incurred by the owner do not constitute a deduction against such space rent reduction. However, this does not prohibit the consideration of those costs as an increased operating expense.
(4) If a service other than a utility or similar service is reduced or eliminated or if a utility or similar service is reduced or eliminated without a concomitant decrease in rent, the affected tenants may file a petition to determine the validity of such action. The petition must be filed within one year of the date on which the service was reduced or eliminated.
NEW SECTION. Sec. 21. (1) Any person who demands, accepts, or retains any payment in violation of this chapter is liable in a civil action to the person from whom such payment is demanded, accepted, or retained for damages in the sum of three times the amount by which the payment or payments demanded, accepted, or retained exceed the maximum space rent that could lawfully be demanded, accepted, or retained, together with reasonable attorneys' fees and costs as determined by the court.
(2) It is unlawful for any owner to adjust any rent in an amount in excess of that allowed under this chapter or by order of the board. An owner who willfully and knowingly violates this chapter or the orders of the board is guilty of a misdemeanor.
(3) The board, the rent review director, the director, and the tenants and owners may seek relief from the appropriate court within the jurisdiction within which the mobile home park is located to enforce this chapter or rules adopted under this chapter or to restrain or enjoin any violation of this chapter or rules, orders, and decisions of the board.
(4) Any waiver or purported waiver by a tenant of rights granted under this chapter, whether oral or written, is void as contrary to public policy.
NEW SECTION. Sec. 22. An owner or tenant aggrieved by any action of the board may seek judicial review by appealing to the appropriate court within the jurisdiction.
NEW SECTION. Sec. 23. This chapter shall be liberally construed to achieve its purposes and to preserve its validity.
NEW SECTION. Sec. 24. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.
NEW SECTION. Sec. 25. Sections 1 through 24 of this act constitute a new chapter in Title 59 RCW.
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