BILL REQ. #:  S-0427.1 

Read first time 01/24/11.   Referred to Committee on Financial Institutions, Housing & Insurance.

     AN ACT Relating to manufactured/mobile home park rent adjustment; amending RCW 35.21.830; 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 manufactured/mobile home tenants have a substantial investment in their residences and appurtenances for which a space or lot is rented in a manufactured/mobile home park. Alternate sites for the relocation of manufactured/mobile homes are difficult to find due to the shortage of vacant spaces, new park development, and the restrictions of age, size, or style of homes permitted in many parks. Likewise, the cost of moving a home is substantial and the risk of damage when moving is significant. These conditions result in the creation of a captive market of tenants. This captivity contributes to an imbalance in the bargaining relationship between park owners and tenants in favor of the park owners.
     (2) The legislature also finds that because homes in parks 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 or lot rent increases in parks diminish the value of the investment of tenants. State law permits park owners to require tenants to make modifications to their homes for a variety of reasons that constitute capital improvements, which accrue to the benefit of the park owner by increasing the market value of the park itself. Additionally, many tenants make voluntary improvements to their spaces or lots that are permanent and affixed to the space or lot rented. These improvements inure to the benefit of the park owner and become the property of the park owner when the tenant leaves. Further, in many instances, rents in parks have been raised to such a level that tenants are unable to find purchasers for their homes, resulting in a serious reduction in the sale price of their home, which makes them captives in the park and has them face a significant or total loss of equity in their homes if they leave.
     (3) Therefore, the legislature intends to facilitate and encourage fair bargaining between tenants and park owners to achieve mutually satisfactory agreements regarding space or lot rents in parks. Absent such agreements, the legislature further intends to protect the tenants from unreasonable space or lot rent increases while simultaneously recognizing and providing for the need of park owners to receive a just and reasonable return on the investment in their property.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Base rent" means the space or lot rent in effect on January 1, 2011, as determined under this chapter.
     (2) "Base year" means a base rent charged or collected in any park for the first year following the date of the space rent ceiling.
     (3) "Base year rent" means the space or lot rent charged or collected in a park for a base year.
     (4) "Board" means the manufactured/mobile home park rental review board established by the department under section 8 of this act.
     (5) "Consumer price index" means the consumer price index for all urban 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.
     (6) "Department" means the department of commerce.
     (7) "Director" means the director of the department of commerce.
     (8) "Manufactured/mobile home" or "home" means a structure designed for human habitation and for being moved on a street or highway, but does not include a recreational vehicle unless the recreational vehicle is located on a space or lot in a park or community and is occupied by a tenant on a permanent basis. As used in this subsection, "recreational vehicle" means a type of manufactured/mobile home if it is located on a space or lot in a park and is occupied by a tenant on a permanent basis. As used in this subsection, "permanent basis" means occupancy for a period in excess of six months per year.
     (9) "Manufactured/mobile home park" or "park" means any parcel of land where two or more manufactured/mobile home spaces or lots are rented or held out for rent to accommodate homes for human habitation.
     (10) "Manufactured/mobile home park owner" or "park owner" means the owner, lessor, landlord, operator, or manager of a park.
     (11) "Manufactured/mobile home space or lot" or "space or lot" means the site within a park intended, designed, or used for the location or accommodation of a home for human habitation.
     (12) "Manufactured/mobile home tenant" or "tenant" means any person who owns or is entitled to occupy a manufactured/mobile home.
     (13) "Net operating income" means the gross income of a manufactured/mobile home park less allowable operating expenses. As used in this subsection, "gross income" means the sum of: Gross rents; interest from rental deposits, unless directly paid by the park owner to the tenants; income derived from any source related to or operated on the park including, but not limited to, laundry facilities, vending machines, amusement devices, cleaning fees or services, and garage and parking fees; and all other income or consideration received or receivable for or in connection with the use or occupancy of a manufactured/mobile home space or lot.
     (14) "Operating expenses," for a manufactured/mobile home park, means the following: Real property taxes; utility costs; management fees actually paid if management services are contracted for, or the reasonable value of management services performed by the park owner, limited to no more than four percent of the gross income of the park; normal repair and maintenance expenses; license and registration fees paid by the park owner and not the tenants; and other operating expenses deemed reasonable by the board.
     (15) "Rent increase" means any additional consideration demanded from a tenant for a manufactured/mobile home space or lot.
     (16) "Space or lot rent" means the consideration demanded or received for the use or occupancy of a manufactured/mobile home space or lot exclusive of any consideration paid for the occupancy of the home itself. The payment of space or lot rent entitles the tenant to the full use and enjoyment of all of the park's amenities, facilities, services, and utilities that are not individually metered and separately billed to the tenant.
     (17) "Space rent ceiling" means the amount determined under section 4 of this act.

NEW SECTION.  Sec. 3   (1) This chapter applies to every home located in a park except for those parks that are specifically excluded from coverage by the director.
     (2) This chapter does not apply to any park that the director finds is (a) owned and operated by the residents of the park or (b) is owned and operated by a nonprofit corporation granted tax-exempt status by the internal revenue service.
     (3) Exemption from this chapter is granted only upon approval of an application for such status made to the director by the tenants of the park or their representatives or by the nonprofit corporation. Any park where one or more lots are not owned by a tenant and are rented by the nonprofit corporation are not exempt from this chapter.

NEW SECTION.  Sec. 4   (1) Within sixty calendar days after the effective date of this section, a park owner must submit to the department: A rent schedule of space or lot rents within the park on January 1, 2011; a schedule of any other charges paid by tenants within the park; the amount of the charges and to whom paid; the name, address, e-mail, and telephone number of the park's manager, if any; and the name, address, e-mail, and telephone number of the park owner. A park owner shall also update the registration of the park within thirty days of any change to the information previously filed for the park with the director and the department of licensing. A park owner shall also provide any further information as required by resolution of the board.
     (2) A park owner is not eligible to receive a space rent ceiling adjustment under this chapter unless the current registration as may be required for the park is on file with the director and the department of licensing, and complete with the board, prior to the time a petition for a space rent ceiling adjustment is filed.
     (3) At the time of any registration of a park with the director, a park owner must have paid any registration fees required by the department of licensing or under chapter RCW 59.30 RCW.
     (4) The board shall not accept any petition from a park owner for a space rent ceiling adjustment or commence a proceeding under section 9 of this act if the park owner has not paid the required registration fees to the director or to the department of licensing.

NEW SECTION.  Sec. 5   A park owner shall file an annual report with the board on a date as determined by the board. The report must contain all pertinent financial information related to the operation of the park. The report must include a history of space or lot rent increases, or increases in space or lot rent for capital improvements, for the previous five years of operation of the park. The report must be made available for review and photocopying at the place of business of the board. The board may charge a reasonable fee for photocopying any report.

NEW SECTION.  Sec. 6   (1) Beginning on the first day of the first month following the effective date of this section, a park owner shall not charge or collect space or lot rents for any manufactured/mobile home spaces or lots in an amount more than the space or lot rents in effect on January 1, 2011, except as provided in this chapter.
     (2) Any park owner or tenant may petition the board for the purpose of determining the base rent in effect, in any existing park on January 1, 2011, or in any park developed subsequent to January 1, 2011.
     (3) After the effective date of this section, a park owner who has established the base rent for the park is entitled to one annual adjustment in the base rent charged for each space or lot in a park equal to 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 park owner's petition. The annual space rent adjustment may not exceed five percent, with a minimum increase set at three percent or the annual cost of living adjustment for social security as measured by the consumer price index for urban wage earners and clerical workers prepared by the bureau of labor statistics, United States department of labor, whichever is lower. There may not be an additional increase in rent under this subsection unless the consumer price index increase exceeds ten percent. If the consumer price index increase exceeds ten percent, the rent increase must be one percent for each one percent that the consumer price index exceeds ten percent. The one percent rent adjustment must contain the park owner's calculations supporting the amount of the permissive annual adjustment.
     (4) A park owner may increase a tenant's rent more than once per year for a pro rata share of any increase in the manufactured/mobile home park's real property taxes or utilities in accordance with RCW 59.20.060(2)(c) if the tenant's rental agreement also provides for a pro rata reduction in the tenant's rent if the manufactured/mobile home park's real property taxes or utilities decrease.
     (5) A park owner may petition the board for an extraordinary adjustment of the space rent ceiling. The petition must contain the amount of and the basis for the requested adjustment. The park owner shall submit as part of the petition process proof of gross income, operating expenses, costs of capital improvements, and net operating income of the park for the previous three full calendar years. It is assumed as part of the park owner's petition that a typical industry standard of operating expenses for a park is set between thirty-five and forty percent of gross receipts for Washington state, and a reasonable return on the park owner's net operating income is set at 9.5 percent. Excluded from operating expenses are: Costs due to deferred maintenance; debt service expenses; depreciation; any rehabilitation of homes a park owner gains title to or typical real estate selling, recording, and title expenses; land lease expenses; and any attorneys' fees or court costs of any kind.
     (6) An adjustment of the base rent in any 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.

NEW SECTION.  Sec. 7   (1) A minimum of fifty percent of the tenants of a manufactured/mobile home park under this chapter may petition the board to determine whether the base rent of adjustments applicable to the tenant's manufactured/mobile home spaces or lots are valid under this chapter. The petition must contain the names, addresses, and telephone numbers of the 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 must be signed by the tenants submitting the petition, accompanied by proof that the petition was personally served or mailed to the park owner or manager and by the payment of a petition fee, if any, as established by resolution of the board.
     (2) Any park owner under this chapter may petition the board to determine whether the base rent or proposed adjustments of the base rent applicable to any manufactured/mobile home space or lot within the owner's park are valid under this chapter. The petition must contain the name, address, e-mail, and telephone number of the park owner filing the petition and the tenants of the 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 must be signed by the park owner submitting the petition, accompanied by proof that the petition was personally served or mailed to each tenant and by the payment of a petition fee, if any, as established by resolution of the board.
     (3) The board may designate the form of the petition submitted by a tenant or park owner under this section. If the board designates the form, each tenant and park owner must submit his or her petition on the form and no other form is acceptable.
     (4) A petition may not be accepted by the board unless it is accompanied by the payment of a one hundred dollar fee payable to the department.

NEW SECTION.  Sec. 8   (1) The manufactured/mobile home park rental review board is established by the department. The board must be composed of five members. Two members must be tenants of a park and be officers of an organization established for the education and service to tenants in parks. Two members must be park owners, as designated and recommended by mobile home communities of Washington state. One member must be a representative of the department. Board members must be selected by the director and shall serve for a term of three years. Board members may not receive compensation from the department.
     (2) The board has the following duties and powers:
     (a) Subject to the approval of the department, the board may adopt 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 manufactured/mobile home rent review director who shall administer and carry out the purposes and policies of this chapter. The rent review director must 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: Require registration fees for each park, with the fee amounts to be determined by the department of licensing; designate the form of petitions; collect a petition fee of one hundred dollars payable to the department; and determine the acceptability of petitions filed.
     (e) The board shall determine the validity of base rents and adjustments to the base rents of all manufactured/mobile home spaces or lots within all parks.

NEW SECTION.  Sec. 9   (1) The proceedings of the board are initiated by the filing and acceptance of a petition under this chapter. Upon the filing and acceptance of a petition, the board shall establish the date and time to consider the petition. A proceeding must 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 forty-five day period. The board shall mail a written notice of its proceedings to all parties affected by a petition at least fifteen days before the date and time designated.
     (2) Each party to a proceeding may be assisted by an attorney or another representative designated by the party. Any costs for the attorney or another representative must be borne by the respective party.
     (3) Formal rules of evidence do not apply, but all testimony must be given under oath. The board may compel, by subpoena, the production of documents and the attendance of witnesses at its hearings.
     (4) If a party fails to appear at a duly noticed proceeding, the board may hear and review any evidence that may be presented and may make determinations and findings as supported by the evidence presented.
     (5) The board shall determine the validity of the space rent ceiling or space rent ceiling adjustments and may grant or deny other relief requested by the petition relating to the proceeding.
     (6) The board shall make written findings, based on the evidence presented, on all issues relevant to the determinations.
     (7) 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 park rents is not allowed without a board decision.
     (8) The decision of the board must be supported by the evidence submitted at the hearing. The petitioning party has the burden of proof in such proceedings.
     (9) The proponent of any adjustment to a base rent has the burden of proof by a preponderance of the evidence.
     (10) The determinations and findings of the board constitute a final administrative action. The determinations and findings of the board must be mailed to each party to a proceeding. The decision becomes effective upon the date it is mailed to the parties unless otherwise stated.

NEW SECTION.  Sec. 10   (1) Upon written request from the park's tenant's association, or a majority of the park's tenants, the park owner, park manager, or a representative from the park owner's management company must meet and discuss any capital expenditure with the tenants between ten and thirty days after the park owner has given the tenants notice of an increase in the tenants' monthly occupancy charges.
     (2) The park owner shall provide reasonable evidence of the cost of a capital expenditure for any requesting tenant's association or a majority of the park's tenants. The cost of any capital expenditure must include the actual cost of the capital expenditure, legal and engineering fees, interest, points, and other borrowing costs incurred to make the capital expenditure, if the park owner uses funds borrowed from a financial institution.
     (3) Capital expenditures, which may be used to increase a tenant's rent or occupancy charges, are divided into three categories:
     (a) Capital improvements. Capital improvements are the addition of improvements where none existed before, such as the construction of a new clubhouse, swimming pool, or other such amenity, or an addition to an existing clubhouse, swimming pool, or other amenity. The park owner shall notify all tenants in writing of the intent to make a capital improvement in excess of ten thousand dollars. The park owner must absorb the first five thousand dollars of capital improvements during any one calendar year.
     (b) Capital replacements. Capital replacements are the major repairs, replacements, or renovation of any existing improvement in the park, such as utility systems, streets, and common buildings. Capital replacements also include the addition of items like water, gas, and septic or electric systems or meters. The park owner may make capital replacement expenditures without the consent or vote of the tenants. The park owner shall apply any insurance proceeds received in connection with a capital replacement item before seeking any increase in rent or occupancy charges from the tenants. The park owner must absorb the first five thousand dollars of any capital replacements during any one calendar year.
     (c) Capital mandates. A capital mandate can be either a capital improvement or a capital replacement that is required: (i) By a governmental entity, quasi-governmental entity, utility company, or other service provider, such as water, sewer, septic, telephone, cable television, or garbage; (ii) due to fire, flood, earthquake, or other similar casualty loss or natural disaster; or (iii) to protect the health and safety of the tenants or to permit the continued occupancy or operation of the park in compliance with applicable law. The park owner may make capital mandate expenditures without the consent or vote of the tenants. The park owner shall apply any insurance proceeds received in connection with a capital mandate item before increasing the rent to the tenants for a capital mandate.

NEW SECTION.  Sec. 11   (1) It is presumed that the net operating income produced by a park owner during the base year provides a fair return on park property. The park owner bears the burden of proving that any increase in rent to a tenant is justified to realize a fair rate of return.
     (2) 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 may be adjusted accordingly. In order to make such a determination, the board must find that the park owner's operating and maintenance expenses in the base year were unusually high or low in comparison to other years. Adjustments to the base rent may be made in calculating these expenses so that the base year operating expenses reflect average expenses for the park property over a reasonable period of time, including factors as determined by the board.

NEW SECTION.  Sec. 12   (1) To determine the net operating income of the base year, a sum equal to the operating expenses for the base year must be deducted from the actual or realized gross income in the base year.
     (2) If the park owner did not own the subject property during the base year, the operating expenses for the base year must 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 determination is available; or
     (b) Actual operating expenses for the first calendar year of ownership, discounted to the current calendar year.
     (3) To determine the net operating income for any year subsequent to the base year, a sum equal to the actual operating expenses for the particular year must be deducted from the actual or annualized income, determined by analyzing the monthly rents in effect at the time of filing a petition.
     (4) While the net operating income formula should operate to allow 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. 13   (1) A space or lot rent increase is not valid when any petition is pending before the board or any proceeding on any petition is being conducted by the board. A space or lot rent increase is also 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 may be payable during such judicial review.
     (2) A park owner shall not increase space or lot 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, registration penalties, or petition fees; or
     (b) Has failed to comply substantially with any applicable state or local housing, health, or safety law, or has been found in violation of chapter 59.20 RCW by ruling of the attorney general's dispute resolution program.
     (3) A park owner shall not increase space or lot rents unless the notice to increase space or lot rents contains a statement in substantially the following form: "The undersigned (owner) certifies that this manufactured/mobile home space or lot 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 law issued by any government official or agency, or has been found in violation of chapter 59.20 RCW by ruling of the attorney general's dispute resolution program."
     (4) If a park owner fails to comply with this section, a tenant may refuse to pay the space or lot rent increase, seek administrative or civil remedies under this chapter, or raise the park owner's noncompliance as an affirmative defense in any resulting unlawful detainer action filed by the park owner. If a tenant pays a rent increase subsequently found by the board to be in violation of this chapter, the park owner must credit the affected tenant's rental account by any overpayment of rent determined by the board.

NEW SECTION.  Sec. 14   A park owner shall not reduce the level or kind of services provided to tenants in effect on January 1, 2011, or take any action in retaliation for the exercise by tenants of any of the rights granted under this chapter.
     (1) 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, garbage, or cable television, and attempts to charge separately for these services by any means of transferring to the tenant the obligation for payment for these services, the cost savings must be given to the tenant by a space or lot rent reduction equal to the actual reduction of the park owner's cost of the 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 the change. Failure to comply with this subsection precludes a park owner from seeking and receiving any relief under this chapter until compliance occurs.
     (2) In determining the cost savings to be given to tenants in the form of decreased space or lot rents, the cost of installation of separate utility meters or other costs incurred by the park owner do not constitute a deduction against space or lot rent reduction. However, this does not prohibit the consideration of those costs as an increased operating expense.
     (3) If a service other than a utility or similar service is reduced or eliminated or 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 the action. The petition must be filed within one year of the date on which the service was reduced or eliminated.

NEW SECTION.  Sec. 15   (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 the 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 or lot 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 a park 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, tenants, and park owners may seek relief from the appropriate court within the jurisdiction within which the 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 the rights granted under this chapter, whether oral or written, is void as contrary to public policy.
     (5) A park owner or tenant aggrieved by any action of the board may seek judicial review by appealing to the appropriate court within the jurisdiction. This chapter prevents any interference or retaliatory acts against any individual tenant, group of tenants, or tenant's association. If the board determines that the park owner has interfered with or retaliated against any individual tenant, group of tenants, or tenant's association, the park owner is subject to fines of up to one thousand dollars per incident, which must be paid to the department.

NEW SECTION.  Sec. 16   The initial cost of the administration of this chapter must be funded by the payment of three dollars per space or lot, occupied or vacant, in all manufactured/mobile home parks. The three dollar payment must be paid annually by the park owner to the department beginning the effective date of this section. The payment may be increased as determined by the department.

Sec. 17   RCW 35.21.830 and 1981 c 75 s 1 are each amended to read as follows:
     The imposition of controls on rent is of statewide significance and is preempted by the state. Except for space or lot rents, as defined in section 2 of this act, in manufactured/mobile home parks, as defined in section 2 of this act, no city or town of any class may enact, maintain, or enforce ordinances or other provisions which regulate the amount of rent to be charged for single family or multiple unit residential rental structures or sites other than properties in public ownership, under public management, or properties providing low-income rental housing under joint public-private agreements for the financing or provision of such low-income rental housing. This section shall not be construed as prohibiting any city or town from entering into agreements with private persons which regulate or control the amount of rent to be charged for rental properties.

NEW SECTION.  Sec. 18   This chapter must be liberally construed to achieve its purposes and to preserve its validity.

NEW SECTION.  Sec. 19   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. 20   If specific funding for the purposes of this act, referencing this act by bill or chapter number, is not provided by June 30, 2011, in the omnibus appropriations act, this act is null and void.

NEW SECTION.  Sec. 21   Sections 1 through 16 and 18 through 20 of this act constitute a new chapter in Title 59 RCW.