San Juan Capistrano Rent Control Upheld

A recent appeals court decision has upheld San Juan Capistrano’s action two years ago to restrict rent increases at a local mobile-home park. But the legal battle may continue.

San Juan Capistrano City Atty. John R. Shaw said in a letter to officials this week that the city “won a sweeping victory on every point” in a recent appeals court decision upholding city action on rent control at the Capistrano Terrace Mobile Home Park.

However, Jim P. Mahacek, the attorney for the mobile-home park owner, said Thursday that “we are very, very seriously considering an appeal to the (state) Supreme Court.”

In a decision filed June 29, the 4th District Court of Appeal ruled in favor of the city and against Richard A. Hall, the owner of Capistrano Terrace Mobile Home Park.

Disagreed With City

Hall, who purchased the 150-tenant mobile-home park in 1985, disagreed with the City Council’s action in 1987 to restrict him to a 3% rent increase for his tenants.

Hall sought unsuccessfully to get a court order in his favor in Orange County Superior Court, and he appealed the case to the Court of Appeal. In its June 29 ruling, the appellate court said, “The monthly rentals generated by this park, combined with the tax advantages inherent in property ownership, is more than enough to satisfy a reasonable investor, at least for the relatively short term,” until it begins to make a profit.

Losing Money on Park

The park’s attorney said Thursday that the court’s decision acknowledges that Hall will be losing money on the park for a period of time. Mahacek said the state Supreme Court has never defined how long it is constitutionally permissible for a landowner to be deprived of a profit under rent control. He said the appeal is being considered on those constitutional grounds.

“We have 30 days to decide whether to appeal,” Mahacek said. “We are not attacking the legality of the rent-control ordinance. What we are attacking is the method in which it was applied in this case.”

City Atty. Shaw, in his letter this week, called the appellate court decision “a major victory upholding the integrity of the rent-adjustment process in San Juan Capistrano.” Shaw added, “The key part of the decision appears to rest heavily on the court’s view that Hall would sustain a negative cash flow only for a limited duration.”