Newport Beach : Arbitration Ordered in Land Leases Dispute

An ongoing rent dispute between some residents of Newport Shores in Newport Beach and Signal Landmark Inc., which owns the property on which their homes sit, will be settled through arbitration, a Superior Court judge ruled Wednesday.

Judge Judith Ryan granted Signal Landmark’s petition asking the court to compel the approximately 200 homeowners leasing their land to submit to arbitration. Ryan ordered both parties to select arbitrators within 10 days.

Under the arrangement, Signal Landmark and the Newport Shores Homeowners Assn. are to choose arbitrators. If the two arbitrators deem it necessary, they will in turn pick a third, to act as a tie-breaker. The trio will then come to agreement on fair market value for the properties.

The dispute arises from a provision of the original lease agreements, written in 1959, that required leaseholders to pay Signal Landmark 6% of the market value of the property per year, with a rent adjustment after 25 years. For many homeowners, rent has amounted to about $22.50 per month, said Craig Boucher, Signal Landmark’s vice president and counsel. With land values in Newport Beach up sharply over the last quarter century, however, many homeowners found themselves facing steep rent increases last year. Boucher said the average lot is worth between $100,000 to $105,000.

The homeowners have maintained that Signal is asking for too much money and that the property values it cited are inflated. Many leaseholders contend the property should be appraised before improvements, which would bring market values of the lots, many of which were swampland before the houses were built, to well below what Signal claims they are worth.

According to Boucher, the homeowners were to have begun making the increased rent payments last December, but Signal Landmark reached informal agreements with individual homeowners forestalling the rent hikes until arbitration is completed.