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A hitch in the plan

When mobile home parks start selling spots, many rent control rules hit the road.

October 15, 2006|Gayle Pollard-Terry | Times Staff Writer

COLONY COVE Mobile Estates resembles a quaint village with its narrow lanes and pastel homes, including some with porches and attached garages. There are ficus, twisted juniper, Italian cypress, eucalyptus, palm, pine, jacaranda, lemon, orange, gardenia and bird of paradise.

The seniors-only park in Carson has more than 400 spaces, and residents pay about $400 monthly for renting the land on which their manufactured homes sit, plus access to a clubhouse, pool, hot tub, gym and picnic area. Most own their two- and three-bedroom homes, but all lease the land beneath them.

Now, the mobile home development could "go condo." No, owner James F. Goldstein isn't evicting elderly residents to put up new condominium buildings. Everyone is welcome to stay in the mobile homes already on the property. They will have the choice of buying the piece of land beneath them or continuing to rent. But the plan is not without controversy. The moment that even one owner buys the pad on which his or her home sits, the complex will no longer be governed by local rent control.

Goldstein's lawyers, however, point to state protections that would keep the rent from ballooning for low-income residents. They also explain that some buyers who qualify for various homeowner programs would pay less for a mortgage than they are paying to rent.

As park residents contemplate their future, they want real numbers. None are available.

Under state law, the sales price can't be set until the process is much further along. But L. Sue Loftin, a Goldstein attorney, provided one example when she recently addressed a packed meeting of residents. At a Palm Springs mobile home park that Goldstein converted from rental to resident ownership three years ago, she said, spaces sell today for $129,000 to $169,000, based on size and location of the lot.

Conversions of mobile home parks are taking place across the country. The process changes the form of ownership and the legal description of the property, which is subdivided into individual parcels, but it doesn't change the use.

Although no organization tracks how widespread the trend is, Richard Close, another lawyer representing Goldstein, is working on 18 conversions for owners across Southern California.

Tenant groups and nonprofits also initiate these conversions.

"It's one thing if the residents of the park favor converting ... so they can buy their lots and preserve affordable housing. But when park ownership initiates such a conversion, it's usually done to maximize their profit," said Maurice Priest, president of the nonprofit housing corporation Resident-Owned Parks Inc., based in Sacramento. "It's one way to break out from local rent control."

Park owners, of course, see things differently.

Goldstein declines interviews about his business dealings, according to Close, so the attorney explained the benefits.

"When park owners convert," he said, "they can sell some units and retain for future appreciation units that residents do not want to buy." The lawyer said residents benefit because they own the land rather than rent, they control and manage the park through a homeowners association after a majority of the units have been sold and they, instead of the park's proprietor, gain the future appreciation of the land.

A kind of a condo

If Goldstein's application to convert the park is approved by the state Department of Real Estate, he can sell what will be known as single-family manufactured-housing condominium units -- basically the individual parcel on which the home sits and a proportional share of the common areas and amenities. If tenants do not buy, he will continue to own the lots and their fractional shares of the common areas.

Because the land is included in the purchase, mobile home condominium units qualify for mainstream mortgage financing and are assessed county real estate property taxes. Without the land, lenders generally finance mobile homes with personal property loans that carry higher interest rates. Owners of manufactured homes who rent space typically pay personal property taxes or, if they purchased before July 1, 1980, state vehicle license fees.

A pioneer of owner conversions, Goldstein applied in 1993 to change the 377-unit Palm Springs mobile home park El Dorado Country Club Estates despite significant resident opposition. The city of Palm Springs attached conditions to the conversion, which would have required him to continue local rent control until escrow closed on at least 120 units, to hire a specific appraiser to determine the sales price and to provide financial assistance to all residents to help them purchase the lots, according to 2002 court documents.

Goldstein's lawyers, including Close, successfully argued that the city lacked the authority to impose the conditions. The first lot was sold at El Dorado in 2003.

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