An Answer to Endless Rent Hikes : Mobile Home Residents Uniting to Buy Parks

Like tens of thousands of other mobile home park residents in San Diego County, Jamie Jameson felt he had become trapped in the mobile home park where he lives in Escondido.

What was an alluring life style 17 years ago--renting a relatively inexpensive plot of land on which to plop down his own, relatively inexpensive and low-maintenance mobile home--had soured in recent years with a steady stream of rent increases.

He couldn’t afford to move his mobile home elsewhere and watched helplessly as the park changed ownership every few years--inevitably leading, Jameson said, to still more rent increases to cover the always-rising sale price of the park.

To Jameson and the others at the park, there was no relief in sight. A citywide initiative in 1984, to give the Escondido City Council some control over rent increases at mobile home parks, was defeated after record spending by park owners. And the council has yet to establish a rent stabilization ordinance for mobile home constituents, although a council subcommittee is discussing one now.

So, Jameson and the other residents of Rancho Escondido mobile home park took matters into their own hands: They bought the mobile home park.

Escrow is expected to close in a few weeks--about two years after the owner first said he would sell the park to them.

The park sold for $11.8 million, or about $35,000 per space. Residents say they paid a premium for the park, but that it was worth it to get out from under a landlord-tenant system that clouded the economic security of their retirement. Finally, they own not only their mobile homes, but the land they sit on.

Many of the residents will initially pay higher mortgage principal and interest payments and homeowner association fees than they would have in rental payments, depending on the financing packages to be worked out individually between the new owners and their lenders.

But Jameson figures that, after a few years, the residents will be paying less than what the rent would have been by then, and they’ll have built up equity besides.

“We’ll finally have control over our own destiny and our park,” a beaming Jameson said. “It may have been a little more expensive than we had hoped. But now we can wake up in the morning and have the satisfaction that the property your bed’s sitting on belongs to you.”

The sale of Rancho Escondido by the owner to his tenants is the latest in a growing number of such sales up and down the state, industry observers said. And, they noted, San Diego County is leading the way.

Of about 25 conversions of existing parks from single ownership to tenant ownership in California, a dozen or so have occurred or are currently under way in San Diego County. The reason for the high number in San Diego County, industry observers said, is that San Diego’s mobile home residents generally are more affluent than mobile home residents elsewhere in California, and better able to negotiate for the purchase of the parks.

Plus, there are at least three San Diego consulting firms that, for a fee, will assist residents in buying their parks by helping them assess the mood of their neighbors in putting a deal together, “educating” them on the benefits of own-your-own parks, negotiating with the owner on the price, dealing with government agencies for zoning approval and helping the residents arrange financing for the purchase.

The conversions are occurring with the help of state, county and city-backed low-interest loans to help the poorer residents come up with enough money to buy their spaces. Virtually every conversion contract includes provisions that no residents will be involuntarily displaced from their park for want of money to buy the space they may have faithfully rented for 5, 10, 15 years or more.

State legislation has been adopted specifically so that the sale of the mobile home lots will circumvent the terms of Proposition 13, which ordinarily calls for a reassessment of property value--and a resulting jump in taxes--upon transfer of ownership.

In order to give mobile home owners a better chance to buy their lots, a new state law requires that, if a park owner is going to list his park for sale, he must first offer it to the residents if--and this is a big if--they first have formed a property owners association that is willing to wheel and deal on a sale within 30 days of the notice.

For that reason, many mobile home residents around the county have established, or are considering establishing, formal property owners associations--complete with officers, articles of incorporation and by-laws--so they won’t miss an opportunity to buy their parks should it arise.

That’s the case at the 150-space Views mobile home park in Escondido, where resident Donald Carlson says 71% of the residents have voted to proceed with the idea of buying the park and to hire a consulting firm even though the owner, Jim Durkin, said he has no plans to sell the park.

“We’re going to actively talk to him and try to convince him to sell us the park,” Carlson said. “We’re ready to move.”

In contrast, the residents of the 457-space Lawrence Welk Resort Village mobile home park north of Escondido were caught off-guard earlier this year when, out of the blue, Teleklew Productions Inc., the bandleader’s company, announced that it had sold the park to Park Homes Inc. Bob Holland, Park Homes president, had previously bought--and converted to resident-ownership--a mobile home park in Fallbrook. The announcement at Lawrence Welk Resort Village came when park residents had been meeting with Teleklew on proposals for new, long-term leases. Residents were stunned by the news of the sale.

“All of a sudden, the Welk father image is taken away and in its place is an unknown developer,” said Bob Weaver, president of the park’s homeowners association.

Holland met with suspicious--and concerned--residents within days of the announcement and said he didn’t want to be a landlord and intended to sell the lots to individual mobile home owners. He said he would retain ownership of those lots that didn’t sell, and would offer long-term leases--with built-in 7% annual rent increases--to those who couldn’t afford to buy their lots but wanted to stay in the park.

What caused a collective gasp among the residents was the announced price range of the individual lots, from a low of $36,900 to a high of $64,900. The average lot will cost more than $50,000.

Still, after the dust settled, about 72% of the park’s residents have put down deposits to buy their spaces, Holland said. Those who lease will face average monthly rents and maintenance fees of about $405 a month, compared to the current average rent of about $325.

One resident, who asked not to be identified, said he initially considered moving from the park rather than meeting Holland’s sale price. But now he has decided to grin and bear it.

“Everyone thinks of his options, pro and con, and finally the day of decision comes,” he said. “The prices seemed rather high, but after you get over the shock and you look to see where else you could find a park as good as this one, and the life style you buy with it, then you decide you can’t do much better.”

Another resident--again requesting anonymity--said she plans to move from the park because of the sale to Holland.

“They’ve got us over a barrel,” she said. “The barrel isn’t so much Bob Holland, but the fact that the land was priced unreasonably high as far as most of us are concerned.

“My coach is worth $100,000 and they want $60,000 for the lot. For that kind of money, I can buy a home by Lake San Marcos and not live in a mobile home park at all.”

Indeed, when news of the sale first surfaced, there was rebellious talk among some residents of trying to block it, either through court action or through a public relations campaign intended to embarrass the bandleader and his company. But a straw vote among park residents resulted in the decision to cooperate with Holland and make the best of the sale.

In answer to concern that the residents would lose access to some of the resort village’s amenities, including a clubhouse, swimming pool and tennis courts, Holland has agreed to expand another existing clubhouse, to build a new and enlarged swimming pool and to build two new tennis courts for the exclusive use of the residents.

Furthermore, Holland already has repaved the streets, has expanded a popular picnic area, doubled the size of the park’s storage yard for recreation vehicles and promised to improve the park’s cable television reception. Holland estimates the cost of all the improvements at $1 million or more, and insists that they were not previously figured into the sale price of the lots but were later agreed to by him to help encourage sales.

“Things could have turned out a lot worse for us,” said Tom Hunt, president of the new Champagne Village Property Owners Assn. “The majority of us feels that this (conversion) is the best situation we can have. Whether we lease or buy, we’re all better off.”

The price of the lots undoubtedly would have been significantly cheaper--some say by $10,000 a lot--if the residents were given the chance to negotiate directly with Teleklew rather than having to deal through middleman Holland.

But Ted Lennon, executive vice president of Teleklew, said the company--which is divesting its interest in residential income properties--had no experience in mobile home park conversions and did not want to have to negotiate the deal with 457 homeowners, even if it was through a committee.

Holland approached Teleklew with the conversion idea and working directly with him “was a cleaner deal” for Teleklew, Lennon said.

Park residents themselves say they aren’t sure they could have worked together to buy the park.

“That would have been an almost impossible job,” Weaver said. “The money that it cost us for our lots, as opposed to us buying them ourselves (without Holland’s intervention), is money well spent. I can’t imagine 450 people going through what Holland has gone through to get this done.”

Technically, Park Homes Inc. purchased the property from Teleklew for nearly $20 million but extended to the property owners association options on the individual lots. For those who accept those options and buy their lots, the title will pass directly from Teleklew to the residents via the property owners association, bypassing Park Homes. In that manner, the buyers will avoid property reassessment, thereby saving themselves $25 or so monthly in increased property taxes, Holland figures.

So, for all intents and purposes, Holland is simply a sales agent receiving a commission to ease the conversion process, said David Dunbar, the attorney for the property owners association. Park Homes is expected to make $2,500 to $3,000 on every lot that is sold.

Park Homes will buy from the property owners association those lots that are not sold, thereby remaining a landlord for some residents.

Given the choice, most park owners would rather sell to a single buyer than to park residents because the process generally is quicker.

Through lobbying groups in Sacramento, legislation was proposed that would have required that park owners extend the right of first refusal to the residents. But in the face of strong opposition by park owners, the bill was significantly watered down to the point where park owners are given the first chance to buy the park if the park is listed for sale and they themselves have organized the property owners association.

Even if the residents at Lawrence Welk Resort Village had had such an association, which they didn’t, they still would not have been given the first option to buy the park directly from Teleklew because the park was not listed for sale; Teleklew simply accepted an off-the-street offer by Park Homes.

“Since the sale of a park to residents can take from six months to a year, most owners don’t want to fuss around with that unless there’s a benefit to them--more money,” said John Tennyson, staff consultant to the state Senate Select Committee on mobile homes, chaired by Sen. William Craven (R-Oceanside).

“Of course, the residents might be willing to pay a premium for the park because they have a greater stake in it than someone on the outside. Every time someone on the outside buys the park, the rents go up, sometimes substantially. And there are more subtle changes, like in rules and regulations and policies right down to the hours of the clubhouse being open. Those are all reasons why park residents might be willing to pay a little more.”

That pressure came to bear in the sale of Rancho Escondido, Jamie Jameson said.

George Garty, the owner, “was telling us that if we didn’t want to buy it at his price, he had someone in the wings who would pay that kind of money,” Jameson said. “We couldn’t be sure if he did or didn’t, but we didn’t want to jump from the frying pan into the fire so we paid his price. We think he got more than he was entitled to, but we were between a rock and a hard place.”

Garty declined to be interviewed for this story.

To assist lower-income residents at the park in buying their spaces, the state of California offered, through its Mobilehome Park Assistance Program, $1 million in low-interest mortgage loans. The City of Escondido offered an additional $500,000 in loans through its redevelopment agency, which is required by state law to earmark 20% of its revenue for the housing needs of low- and moderate-income people.

A consulting firm that has handled several park conversions in San Diego County, including Rancho Escondido, is Continental Associates, which charges $1,000 to $1,500 a space to represent, advise and assist residents in buying their spaces.

Sue Loftin, an attorney with Continental, said one of the functions of the consulting firm is to educate the residents on the economic advantages of buying their spaces even though they initially will be paying more as owners than as renters.

“This is a new industry and, like any new industry, there are some horror stories that have occurred that have made people afraid to get involved in conversions,” she said. “But as the rents keep going up and we hear more conversion success stories, more and more people will become interested.”

Continental Associates also assisted with the conversion of Madrid Manor, a 330-space park in San Marcos that had battled in court with the city’s mobile home rent review commission over whether its history of rent increases were justified.

Last year, the owner agreed to sell the park to the residents rather than to continue the battle over rents.

“But we were getting absolutely nowhere in our negotiations with him,” said resident Syd Notkin. “It was a little one-sided; he had his lawyers and experts and we were just a bunch of lay people.”

The residents retained Continental Associates “and the whole ballgame changed,” said Notkin, who has since been hired by the company to deal with residents of other mobile home parks.

Of the 330 spaces, all but 19 have since sold to the residents. Two of the 19 are owned by the homeowners association and rented, and 17 were purchased by the City of San Marcos, which turned around and rented them, at no financial gain to the city, to low-income residents. When those residents eventually leave the park or die, the city will sell the spaces and presumably make a profit based on appreciation of the property value.

The average space cost $22,500. As is true with other park conversions, the value of the entire park increased virtually immediately because it would be appraised not as rental property but as condominium property, industry observers note.

Madrid Manor, for instance, sold for $7.4 million and is now estimated to be worth $9.7 million, equating to a $7,000 increase in value for each space, Notkin said.

Meanwhile, at Rancho Escondido, Jameson says it may be just as well that voters in Escondido defeated the 1984 measure to establish a rent control commission.

“The bottom line is, if you want to get away from greedy, unreasonable landlords, you’ve got to buy your own park. Now we don’t have landlords anymore,” Jameson said.

“We can start putting our own ideas into effect at the park, instead of the owners’. We can collect newsprint--imagine 338 spaces, each getting a newspaper!--and tin cans to make some money and maybe even get back to our Monte Carlo nights and have some fun around here.”