RENT CONTROL ATTACKS Part 1 – Revenue Issues


Part 1 – Revenue Issues – What to look for

If you live in a rent-controlled mobile home park, sooner or later, your owner is going to try to raise your site rent by filing an appeal to the Rent Control Board (RCB), challenging your Rent Stabilization Ordinance (SRO).

Many park owners are getting very creative in challenging RSO. Their desire is to obtain site rent increases greater than they might otherwise get under the normal annual increases.

So, what do you do?
Usually park residents receive notices from the owner that the local RSO is being appealed. Such notices are often accompanied with a bunch of documents ‘justifying’ the owners position. (Note that often these documents are shown in very (very) small print, so old folks like us can’t read them very well.)

The ‘Name of the Game’ that the park owners are playing is to show the RCB that the Net Operating Income (NOI) of the park doesn’t meet the levels set in the RSO.

That means the owners want to show LOWER revenue and HIGHER expenses (thus lowering the NOI) and get a big rent increase.

The BOTTOM LINE FOR YOU is to smell out what they are doing to determine if your park residents have a defense.

If you think you have a defense, you will need to hire representation to fight the proposed increase (see below for a suggestion).

But, how do they lower revenue and increase expenses? [REMEMBER, the numbers being shown to the RCB are often NOT the ‘real’ dollars that the owner puts in his pocket.]

This can be confusing, since owners typically don’t outright lie; they just interpret EVERYTHING in their favor and make ‘adjustments’ based upon THEIR logic.

First, they mess around with the revenue – the lower the revenue, the lower the NOI:

They manipulate the total rents – The lower the revenue, the lower the NOI, thus the higher rent increase they are applying for.

They manipulate the vacancy factor – the higher the vacancy factor, the lower the NOI.

They exclude certain income categories (such as ‘park-owned’ rental homes or self storage containers) as not being applicable under the SRO. Often, these other income categories can be a substantial portion of the actual NOI. Even if justified, make sure any related expenses are also excluded.

They manipulate the Utility Income and Expense, or attempt to exclude it altogether. Owners usually make a profit on the utilities, so if they can exclude it, the NOI is lowered.

They fiddle around with other miscellaneous items like bad debts, RV storage, etc.

In my next installment, I’ll discuss how owners manipulate EXPENSES to increase them such that NOI is lowered. (I’ll send Part 2 – Expense Issues – at a later date.)

NOTE: A strong SRO makes your park LESS attractive to other park investors who might normally want to buy it. This means that THE RESIDENT GROUP IS OFTEN THE MOST ATTRACTIVE BUYER. If you want to discuss how to buy your park, check the contacts provided below.

Rent Control Attacks:
Bruce Stanton, attorney and GSMOL General Counsel: 408-224-4000

Resident Park Purchases:
Dave Loop, attorney and GSMOL VP – Resident Owned Parks: 831-688-1293
Deane Sargent, finance and organization guy: 415-271-3919

Deane Sargent
PMC Financial Services
3165 Chandler Egan Drive
Medford, OR 97504
415-271-3919 Deane Cell
CA license 01040463

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