Newport Beach : Reject Arbitration, Leaseholders Urge

A request to overturn a Superior Court order calling for arbitration in a Newport Beach lease dispute has been filed by attorneys representing about 180 residents of the Newport Shores section of the city.

The writ of mandate is the latest move in a long-running quarrel between the Newport Shores leaseholders and Irvine-based Signal Landmark Inc., which owns the land under their homes. It asks the 4th District Court of Appeal to overturn an April 3 ruling by Superior Court Judge Judith Ryan ordering arbitration in the dispute. It also seeks a stay of her order until the appellate court issues a ruling.

Ron Beck, the Long Beach attorney representing the leaseholders, said arbitration is the wrong way to settle the problem. “These are things that need to be decided in a court of law, not by appraisers or arbitrators,” he said.

Judge Ryan’s order mandated that the leaseholders be represented in the arbitration hearings by the Newport Shores Community Assn. But because about half of its members own their lots, attorneys for both renters and owners argue that having the community association hire an arbitrator to keep rents low would create a conflict of interest for those residents who own their own land and have an interest in keeping property values as high as possible.

Stanley Feldsott, the attorney representing the association, said it has complied with the order and selected Raymond Ikola, a Newport Beach attorney, to act as its arbitrator. Feldsott said he plans to ask the Superior Court to require the leaseholders to contribute $100 to $200 each to the association to help pay for the arbitration, which he estimated could run as high as $30,000.

The battle between the leaseholders and Signal Landmark stems from the original lease agreements, written in 1959. According to those agreements, the leaseholders were required to pay Signal Landmark 6% of the market value of the property per year, with a rent adjustment after 25 years. Although both parties agree that the arrangement calls for a rent increase, they disagree on the value of the property.

Signal maintains that the increases should be based on the current market value of the individual lots, which the company claims are worth an average of about $100,000. The leaseholders contend that the agreements call for the rent increases to be tied to the value of the lots before grading, filling and other improvements, Beck said.