a last-minute request by the owner of the Surf and Sand Mobile Home Park to continue negotiations caused the Capitola’s council to extend the public hearing on his subdivision request to Apr. 7. should the current park residents reach a purchase deal with the park owners, then the much-debated subdivision plan would be abandoned.
The Reed family and the residents who rent spaces for their homes have been locked in a battle over the park’s future.
The Reeds are currently asking to convert the 73 rental spaces to individual lots and sell them in a subdivision meant to accommodate mobile homes. The city denied a request last year to simply close the park, based on the loss of housing for low and moderate income households in the coastal zone.
Fearing a loss of the investments they’ve made in their homes, the residents have made several attempts over the years to buy the park outright, and in February the City Council asked both sides to try to reach a compromise before the council makes its decision on the subdivision.
While Bob Reed and his attorney indicated that they did not plan to make changes to the subdivision application, the residents quickly put together a new offer on the park for $6.75 million, or $92,500 a lot.
This figure reflects the maximum price based on likely available financing, according to residents’ attorney William Constantine.
At first the residents considered a higher offer, he noted, but reached this figure working with a specialist in mobile home park acquisitions and loans.
However, Constantine also offered the suggestion that a “friendly condemnation” by Capitola could help the owners realize significant tax savings compared to subdivision sales. The park is in dilapidated condition.
In that scenario, the city would acquire the property, then turn it over to the residents.
Murky Legal Decisions
The council’s decision to encourage the sides to find a compromise is the final hope for a happy ending.
The question of subdividing a rent-controlled mobile home park faces constant legal challenges and interpretations throughout California. The state code describing the process includes a requirement that residents be surveyed for support and that the survey be considered in the decision process.
Surf and Sand residents nearly unanimously oppose the subdivision.
Is that enough for the city to deny the request?
Lawyers and judges around the state continue to debate that question. And the law is inconclusive enough that either side could challenge a decision that doesn’t go their way in court.
The Reeds have already sued the city on related matters, and on Mar. 24 as the council waited to hold over its decision, a resident of another rent-controlled park in the city said he would sue if the city did not act to uphold rent control.
Irving Richmond of Cabrillo Mobile Home Estates said he will ask for the return of the annual $240 fee Capitola charges for rent control legal defense as well as for equity lost in his home.
Although the continuation request came from community development director and soon-to-be city manager Jamie Goldstein, he confirmed prior to the meeting that the Reeds’ attorney asked for a postponement. That decision surprised many. has the financing question caused the family to rethink subdivision?
Under a subdivision, park owners can ask whatever price they wish for the individual lots. they must first be offered to residents that own the homes sitting on the lots. If the residents don’t buy them, the park owner can retain ownership or sell to another investor.
The problem is whether residents or others can get loans to buy the lots.
Park purchase specialist Deane Sargent looked at the financing possibilities at the request Constantine. Using income examples of residents, many of whom are already paying mortgages, he calculated that few would qualify to buy lots priced at $200,000 because their debt ratio would be too high.
Other potential buyers may also have trouble getting loans at the higher prices, according to local lender Bay Federal Credit Union.
A lender will look at the total value for the combination of the home and land. And, remember these are predominantly single-wide small lots, unlike ones in nearby Capitola parks such as Brookdale Terrace, which are larger.
And Bay Federal also has a stake in the outcome. Bay Federal holds a number of the mortgages in the park, according to residents, and could face a significant loss if those loans default because the residents can’t sell their homes.
Low-income residents who do not buy lots continue to have the protection of rent control as long as they live there, but rents could rise when they sell their homes. That can cause the homes’ value to drop.
Homeowners who can’t buy the land but do not qualify as low-income could face annual rent increases to an undetermined “market rate” over four years.
If they can’t afford the rent, what has happened elsewhere is the homes, and any mortgages, are abandoned.
Mobile Home Subdivision decision Postponed — will Owner Decide to Sell to Residents?
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