Amicus Curiae Brief — Kavanau v. Santa Monica Rent Control Board

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DEC 23 1997

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No. 97-852

In The ,

Supreme Court of the United States

October Term, 1997

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EARL W. KAVANAU,

Petitioner,

SANTA MONICA RENT CONTROL BOARD,

Respondent.

°

On Petition For Writ Of Certiorari To

The Supreme Court Of The State Of California

¢

BRIEF AMICUS CURIAE

OF THE MANUFACTURED HOUSING

EDUCATIONAL TRUST OF

SANTA CLARA COUNTY, INC.

IN SUPPORT OF PETITIONER

¢

*Davip SPANGENBERG, State Bar #123864

Lark L. Ritson, State Bar #117614

Law Firm Of SPANGENBERG & ASSOCIATES

285 Hamilton Avenue, Suite 430

Palo Alto, California 94301

Telephone: (650) 325-4491

Facsimile: (650) 325-4494

*Counsel of Record

Attorneys for Amicus Curiae

The Manufactured Housing

Educational Trust of

Santa Clara County, Inc.

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

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TABLE OF CONTENTS

Page

I. Identity and Interest of the Amicus Curiae ... 1

M. The Xeoenaw Decisions ............:.......- 4

is ES 565 65s Sooke 4

mW iss ck 6

ee TR a OF ee 8

A. Enforcement of an unconstitutionally confis-

catory rent regulation effects a taking ..... 8

B. The Court’s conclusion that the only basis

of Kavanau’s taking claim is the due pro-

cess violation ignores the economic impact

of confiscatory rent regulation........... 11

C. Future administrative rent-increase adju-

dications do not provide an adequate rem-

Cy ree eee. 14

D. Kavanau II makes rent-controlled property

owners’ inverse-condemnation claims ripe

for federal adjudication ................. 17

iM. SOM esi hick eee widkcss. oe 18

il

TABLE OF AUTHORITIES

Page

Cases

Agins v. Tiburon, 24 Cal.3d 266 (1979) (in banc),

affirmed on other grounds, 447 U.S. 255 (1980)....... 9

Birkenfeld v. City of Berkeley, 17 Cal.3d 129 (1976) ..2, 10

Cotati Alliance for Better Housing v. City of Cotati,

146 Cal App.5G Dee CIMRGE én iscccstaesvceeyecias 0

First English Evangelical Lutheran Church of Glendale

v. Los Angeles County, 482 U.S. 304 (1987)......... 14

Del Monte Dunes at Monterey v. City of Monterey,

920 Fad BOSS COU CU. Tire ss c8cke cteescc ces 16, 17

Fisher v. City of Berkeley, 37 Cal.3d 644 (1984) ....... 10

Hoehne v. County of San Benito, 870 F.2d 529 (9th

Ce SID gas Sv ke ei ee 17

Kavanau v. Santa Monica Rent Control Bd., 19

Cal.App.4th 730 (1993) (Kavanau I)...... 4, 5, 6, 8, 12

Kavanau v. Santa Monica Rent Control Bd., 16

Cal.4th 761 (1997) (Kavanau Il)................ passim

Lucas v. South Carolina Coastal Council, 505 U.S.

BE CRD 5.6 ok 5a edhe ena oes ce vs 12

MacDonald, Sommer & Frates v. County of Yolo, 477

Sh Se CRP oo ks inc bio eee eee aneeeweneekuceae 15

Nebbia v. New York, 291 U.S. 502 (1934)............... )

Pennell v. San Jose, 42 Cal. 3d 365 (1986), affirmed in

S06 US. | CO i vosis cases 2, 10, 11

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) ..... 8

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TABLE OF AUTHORITIES - Continued

Page

Richardson v. City and County of Honolulu, ___ F.2d

__ 97 D.A.R. 11, 674 (9th Cir. Sept. 8, 1997)...... 3

Williamson County Regional Planning Comm'n v.

Hamilton Bank, 473 U.S. 172 (1985)................ 16

Yee v. City of Escondido, £03 W.S. 519 (1992) ....... 8, 10

STATUTES

Cal. Government Code §65302 (a).................... 2

Sins CaemnINE OE MD ees beac ese cbse vens es 2

Cal. Government Code §65863.7...................4. 13

Unitep States CONSTITUTION

I IN guia hs do dew vas bas 6, 8, 14, 18

BRIEF OF THE MANUFACTURED HOUSING

EDUCATIONAL TRUST OF

SANTA CLARA COUNTY, INC.,

as AMICUS CURIAE

IN SUPPORT OF PETITIONER!

I. Identity and Interest of the Amicus Curiae.

Amicus Curiae, the Manufactured Housing Educa-

tional Trust of Santa Clara County, Inc. (“the Trust”), is a

trade organization for mobilehome parks.? The Trust rep-

resents the business interests of park owners, managers,

and the manufactured-housing industry within the

County of Santa Clara. Currently, the Trust represents 65

mobilehome parks, which include over 1100 mobilehome

sites.

The majority of these sites are rent controlled. Rent

control ordinances are in place throughout Santa Clara

County, and in at least 90 other cities and counties of the

State of California. Of 91 rent-control laws, 75 pertain

exclusively to mobilehome parks. Other forms of rental

housing in the same jurisdiction are unregulated.

Cities and counties enact rent regulations as a means

of achieving affordable housing, which is a statutory

requirement of their General Plans as mandated by the

1 The written consent to file this brief in support of the

petitium was granted by counsel for all parties, and has been

filed with the Clerk of the Court.

2 The Trust has not obtained financial support from any

other party or organization to submit this brief. The Trust is a

nonprofit, tax-exempt corporation organized under the laws of

the State of California, and is located at 777 North First Street,

Suite 600, San Jose, California 95112.

California Government Code.* Cities and counties also

enact mobilehome-space rent regulations to benefit

mobilehome residents, who frequently constitute a sub-

stantial voting block within the jurisdictions. “[A] pri-

mary purpose of rent control is the protection of

tenants.”4

While rent regulations are enacted for the stated leg-

islative purpose of maintaining affordable housing for

low-income and elderly citizens, rent controls are granted

irrespective of renters’ actual income or need for housing

support. This broad grant of below-market rents differen-

tiates rent control from other housing subsidies provided

or enforced by government.

In the case of mobilehome-space rent control, unless

the space control is enacted with a concurrent check on

the resale price of the on-site coach, the regulation

defeats its legislative purpose by inflating the resale price

3 See Cal. Gov. Code § 65302 (a) and § 65583. See also

Kavanau v. Santa Monica Rent Control Bd., 16 Cal.4th 761, 801

(1997) (Kavanau II), J. Baxter dissenting, and citing Birkenfeld v.

City of Berkeley, 17 Cal.3d 129, 160 (1976). As noted by Justice

Baxter, “rent control is constitutionally permissible precisely

because it is perceived as a means by which the adverse impact

on the public of a[n affordable] housing shortage may be cured

or mitigated.”

4 Kavanau Il, 16 Cal.4th at 801, J. Baxter dissenting, and

quoting Pennell v. San Jose, 485 U.S. 1, 13 (1988) [“[O]ne purpose

of rent control is ‘to protect persons with relatively fixed and

limited incomes, consumers, wage earners .. . from undue

impairment of their standard of living.” Also Pennell, 485 U.S. at

13 , “[W]e have long recognized tnat a legitimate and rational

goal of price or rate regulation is the protection of consumer

welfare.” ]

of the residents’ mobilehomes. The rent regulation trans-

fers a portion of the market value of the property to the

tenant, who is able to collect this premium on resale of

the coach.

In the Trust’s opinion and experience, the blanket

provision of a rent subsidy to all mobilehome residents

distorts the mobilehome-housing market: While the price

of the coach is inflated as a result of the below-market

space rents, the income on the park owner’s investment is

limited - many times severely. Limiting the park’s income

constrains the owners’ ability to maintain or improve the

property, to create new mobilehome spaces, or to sell the

park for a reasonable profit.®

The Trust believes review of the California Supreme

Court’s decision in Kavanau v. Santa Monica Rent Board

should be granted.” Unless an adequate just-compensa-

tion remedy is enforced against rent regulation that goes

too far, local governments have little or no reason not to

over-zealously enforce rent controls for the benefit of

voting tenants and the paper mandates of their General

° Compare Richardson v. City and County of Honolulu, F.2d

—__. 97 D.A.R. 11, 674 (9th Cir. Sept. 8, 1997) [“The absence of a

mechanism that prevents lessees from capturing the net present

value of the reduced land rent in the form of a premium, means

that the [rent control] Ordinance will not substantially further

its goal of affordable owner-occupied housing in

Honolulu. .. . The Ordinance thus effects a regulatory taking)”.

© Compare Cotati Alliance for Better Housing v. City of Cotati,

148 Cal.App.3d 280, 293, 295 (1983).

? Kavanau II, 16 Cal.4th 761 (1997).

Plans. The Kavanau II decision eliminates inverse con-

demnation in the State of California as a means of recov-

ering fair rents confiscated by a local government's

enforcement of an unconstitutional rent regulation. The

Kavanau decision thus forces park owners into federal

courts for a just-compensation remedy, and adds to the

distortion and decline of the mobilehome-park-housing

market.

Il. The Kavanau Decisions.

In 1988 Mr. Earl Kavanau purchased a 10-unit apart-

ment building in Santa Monica, California. Over the fol-

lowing year, Kavanau improved the property and

operated at a loss. He collected rents totaling $43,444 and

spent $33,565 operating and maintaining the property. He

also spent $82,934 improving the property, and $44,000

servicing debt on the property.®

A. Kavanau I.

Santa Monica’s rent control ordinance provides that a

landlord’s rents were to be increased to maintain the base

year net-operating income (MNOI), defined as gross

income less operating costs and expenses. In this manner,

the ordinance is intended to maintain the landlord’s fair

return earned presumably during the base year. At the

8 Kavanau v. Santa Monica Rent Control Bd., 19 Cal.App.4th

730, 733 (1993) (Kavanau I).

time of Kavanau’s apartment-building purchase, the ordi-

nance capped all increases at 12 percent annually.?

In November 1989, Kavanau applied to Santa Mon-

ica’s Rent Board for rent increases on nine of the apart-

ments. The Board’s hearing examiner determined

Kavanau was entitled to rent increases totaling approxi-

mately $35,000 per year in order to maintain a fair return

on the apartment complex. Complying with the ordi-

nance’s cap on any rent increase to 12 percent per year,

the hearing examiner approved a year’s rent increase

totaling only $5,184. Increases to cover balance of the

$35,000 were to be meted out over the next 8 years.!°

The consequence of the 12 percent limit as applied to

Mr. Kavanau was that he was to be denied the current use

of the full fair rental income that the hearing examiner

determined he was entitled to receive. He was also to

permanently lose whatever interest or other income he

would have earned on that money. Moreover, for 8 years

he would have been frozen at the level of income neces-

sary to earn a fair return in 1989, as any further increase

would have been denied on the basis that he was already

receiving the full 12 percent cap.!!

Kavanau petitioned the superior court for a writ of

administrative mandate, which the court denied. The

Court of Appeal reversed in Kavanau v. Santa Monica Rent

Control Bd., 19 Cal.App.4th 730 (1993) (Kavanau I).

9 Id., 19 Cal. App.4th at 732.

10 Id., 19 Cal.App.4th at 733.

11 Jd., 19 Cal.App.4th at 733 n.4.

In reversing the lower court, the Court of Appeal

observed that a rent regulation’s “fair return on invest-

ment standard was constitutional as applied only if the

regulation affords the Board sufficient flexibility to avoid

confiscatory results.” Santa Monica’s 12 percent limit was

so inflexible as to deprive Kavanau of “a just and reason-

able return.” !2

The Court of Appeal remanded, instructing the Supe-

rior Court to issue a writ “commanding the Board to

permit Kavanau to implement the balance remaining of

the increases determined by the hearing examiner to be

appropriate under the MNOI.”?> This was done. But Mr.

Kavanau had lost almost $150,000 in rental income and

interest between the time that Santa Monica’s Rent Board

capped his increase at 12 percent and the time the full

rent increase was implemented under the Court of

Appeal’s order.'4

B. Kavanau II.

The California Supreme Court denied review of

Kavanau I, and the decision became final. Mr. Kavanau

then filed the complaint underlying this petition for cer-

tiorari (Kavanau II).

Kavanau alleged in his complaint violations of the

Due Process Clause of the Fourteenth Amendment, and

the Takings Clause of the Fifth Amendment of the United

12 Id., 19 Cal.App.4th at 735-36.

13 [d., 19 Cal.App.4th at 736-737.

14 Kavanau II, 16 Cal.4th at 801, 803, J. Baxter dissenting.

ad

States Constitution, as well as the equivalent clauses of

the California Constitution. Kavanau sought “just com-

pensation” in the form of lost rental income and interest

caused by the temporary application of the 12 percent

limit before its invalidation by the Court of Appeal.’

The superior court dismissed Kavanau’s complaint.

Pursuing the inverse condemnation claim, Kavanau

appealed. The Court of Appeal! affirmed on the basis of

its opinion that there had been no taking because

Kavanau never lost “all use of his property.”?°

The California Supreme Court granted review. The

Court explained, “We granted review in order to consider

whether a taking occurred and what, if any, right to just

compensation Kavanau might have.” The Court dis-

agreed with the Court of appeal that “a property owner

must lose all use of his property in order to have a viable

inverse condemnation claim.” “Nevertheless, [the Califor-

nia Supreme Court concluded] Kavanau is not entitled to

maintain an inverse condemnation action, because he

may obtain a full and adequate remedy for any interim

loss flowing from the due process violation through an

adjustment of future rents under the rent regulation pro-

cess.” 17

15 Id., 16 Cal.4th at 767-68.

16 Jd., 16 Cal.4th at 768.

17 Id., 16 Cal.4th at 767-68.

Ill. Argument.

A. Enforcement of an unconstitutionally confisca-

tory rent regulation effects a taking.

The Takings Clause of the Fifth Amendment pro-

vides: “[NJor shall private property be taken for public

use, without just compensation.”'® Where the govern-

ment regulates the use of property, “compensation is

required . . . if considerations such as the purpose of the

regulation or the extent to which it deprives the owner of the

economic use of the property suggest that the regulation has

unfairly singled out to bear a burden that should be borne by

the public as a whole.”'9 In the words of Justice Holmes,

“while property may be regulated to a certain extent, if

regulation goes too far it will be recognized as a tak-

ing.”20

In Kavanau I, the Court of Appeal finally determined

that Kavanau’s due process rights were violated because

the 12 percent cap deprived Kavanau of rents sufficient to

provide a fair return on his property.?! But in Kavanau II,

the California Supreme Court exerts tremendous effort to

avoid the logical conclusion that Santa Monica effected a

18 U.S. Const., 5th Amend.; as quoted in Yee v. City of

Escondido, 503 U.S. 519, 522 (1992).

19 Yee v. City of Escondido, supra, 503 U.S. at 522, italic

emphasis added.

20 Id., 503 U.S. at 529, quoting Pennsylvania Coal Co. v.

Mahon, 260 U.S. 393, 415 (1922).

21 Kavanau I, 19 Cal.3d at 735-736; Kavanau II, 16 Cal.4th at

767, 779.

eC ——

taking during the time it enforced the confiscatory rent

regulation. The opinion makes little sense.

While seeking to justify its holding that a due-pro-

cess invalidation remedy for confiscation of fair rents

obviates a government taking, the California Supreme

Court in Kavanau II acknowledges the overlap in due

process and takings protections: “[T]he United States

Supreme Court has declared that a regulation of property

‘effects a taking if [it] does not substantially advance

legitimate state interests,’” the Kavanau II Court recog-

nizes.2* The Court also notes, “The similarity of this

takings standard to the due process requirement that a

regulation ‘have a reasonable relation to a proper legisla-

tive purpose’ . . . supports Kavanau’s argument that a

due process violation in this context constitutes a tak-

ing.”

In the case of rent-control regulation, the Court also

explains, due process guards against regulations whose

methods cause confiscation of the property owner’s rea-

sonable return.24 The takings protection guards against

regulation that “goes too far” in controlling rents in order

to further goals of government or “public use.”25 What

the Court fails to articulate, however, is the simple fact

that due process requires invalidation of rent regulations

22 Kavanau II, 16 Cal.4th at 781, citing Agins v. Tiburon, 447

U.S. 255, 260 (1980).

23 Id., 16 Cal.4th at 781, citing Nebbia v. New York, 291 U.S.

502, 537 (1934).

24 Id., 16 Cal.4th at 770-71.

25 Ibid.

10

which “go too far” in advancing local government's inter-

est in affordable housing as to cause a confiscation. When

a property owner is denied a reasonable return of profit

on property held specifically for its rent income, very

little economic use of the property remains. This fact

suggests that the property owner has, indeed, been

unfairly singled out “to bear a burden that should be

borne by the public as a whole.”26

In Pennell v. San Jose, the United States Supreme

Court recognized that rent control represents “a rational

scheme” when it “accommodate[s] the conflicting inter-

ests of protecting tenants from burdensome rent increases

while at the same time ensuring the landlords are guaran-

teed a fair return on their investment.”?7 In Birkenfeld v.

City of Berkeley, the California Supreme Court clearly

explained:

.... The provisions [of a rent control regu-

lation] are within the police power if they are

reasonably calculated to eliminate excessive

rents and at the same time provide landlords

with a just and reasonable return on their prop-

erty. However, if it is apparent from the face of

the provisions that their effect will necessarily

be to lower rents more than could reasonably be

considered to be required for the measure’s

stated purpose, they are unconstitutionally confis-

catory.78

26 Compare Yee v. City of Escondido, 503 U.S. at 522.

27 Supra, 485 U.S. at 13.

28 Supra, 17 Cal.3d at 165, italic emphasis added; see also

Fisher v. City of Berkeley, 37 Cal.3d 644, 679 (1984), citing Cotati

Alliance for Better Housing, supra, 148 Cal.App.3d at 287, 291.

11

An ordinance which creates a “forced subsidy

imposed on the landlord” such that it prevents the land-

lord from obtaining a reasonable return on property vio-

lates the Due Process Clause, which prohibit the taking of

property without just compensation.2? As a common-

sense corollary to this constitutional rule, an unconstitu-

tionally confiscatory rent-control ordinance surely must

effect a taking during the time it is enforced by govern-

ment. As recognized by the dissenting justices in this

case, there is “no reason in law or logic why a confisca-

tory rent control regulation, found to be unconstitutional

on due process grounds, would not result in a compens-

able taking if it were nevertheless enforced and a mone-

tary deprivation resulted. [There is] no clearer example of

a case where compensation should be paid then where

the government has illegally taken or diverted to its own

social goals the private property of one of its citizens.

Indeed, such a common sense result and statement of

principle should need no citation of authority.”%

B. The Court’s conclusion that the only basis of

Kavanau’s taking claim is the due process viola-

tion ignores the economic impact of confisca-

tory rent regulation.

In its efforts to relieve its cities and counties from the

just compensation burden of confiscatory rent regulation,

29 Kavanau II, 16 Cal.4th at 803, J. Baxter dissenting and

quoting Justice Mosk dissent in Pennell v. City of San Jose, 42 Cal.

3d 365, 376-377 (1986).

%° Id., 16 Cal.4th at 792-93, J. Baxter dissenting and quoting

dissenting J. Croskey.

12

the California Supreme Court proposes that “the 12 per-

cent could [constitutionally] . . . be one aspect of a com-

prehensive scheme that as a whole provided landlords a

fair return.”3! The Court’s suggestion that Kavanau I was

wrongly decided, ignores the bare financial reality of the

12-percent-increase. As Santa Monica planned to impose

the limit, Kavanau would have had to wait 8 years to

bring his rents to the amount deemed a “fair return” in

1989. This financial burden is one few landlords can

survive.

Dropping this line of reasoning, the California

Supreme Court concedes that Kavanau I is a final judg-

ment precluding relitigation. The Kavanau II Court thus

“accept[s] as true .. . that application of the Rent Board’s

12 percent limit on rent increases violated Kavanau’s

right to due process of law.”3? But the Court then opines,

that Mr. Kavanau’s allegations “if true, are not sufficient

to establish a taking” under “either of the ‘two discrete

categories of regulatory action’ that constitute a tak-

ing.”

The Court explains that Kavanau did not lose “all

economically beneficial or productive use of” his prop-

erty during the imposition of the 12 percent cap.*4 But the

Court does not describe what beneficial economic use is

left for a landlord owning rental property which has been

31 Jd., 16 Cal.4th at 777-78.

32 Id., 16 Cal.4th at 779.

33 Id., 16 Cal.4th at 780, citing Lucas v. South Carolina Coastal

Council, 505 U.S. 1003, 1015 (1992), and Agins v. Tiburon, 447 U.S.

at 260.

34 Id., 16 Cal.4th at 780.

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13

controlled below a return of profit. The financial impact

of Santa Monica’s temporary imposition of a 12 percent

cap on Mr. Kavanau was an loss of almost $150,000 in

rents and interest income after expenditure of $160,444 in

operation and maintenance ($33,565), capital improve-

ments ($82,934) and debt service ($44,000).

Previously in the Kavanau II opinion, the Supreme

Court listed the Court of Appeal’s findings that Kavanau

never lost “all use of his property” because he “continued

to receive rents and enjoy tax benefits, and he could

borrow against the property, hold it for investment, con-

vert it to condominiums, or sell it.”55 These options,

however, do not realistically show “beneficial economic

use.” A tax write-off generally does not provide a return

on rental property otherwise run at a deficit. Since the

value of mobilehome parks, and other rent-controlled

properties, is usually established based on the property’s

income stream, mortgages against the property or a

forced sell of the property do not provide for economic

recovery. State and local conversion ordinances fre-

quently prove to be financially prohibitive to conversion

of the property to another use.°* Moreover, the California

Supreme Court “disagree[d] that a property owner must

lose all use of his property in order to have a viable

inverse condemnation claim.”37

35 Jd., 16 Cal.4th at 768.

36 See Cal. Gov. Code § 65863.7 allowing local governments

to impose mitigation assistance to displaced residents as a

condition of a mobilehome park closure or conversion.

37 Kavanau II, 16 Cal.4th at 767, italic emphasis added.

14

The Kavanau II Court’s pat conclusions that applica-

tion of the 12 percent limit did not interfere with

Kavanau’s “primary expectation,” did not steer private

“resources to permit or facilitate uniquely public func-

tions,” or “extinguish a fundamental attribute of owner-

ship” are equally unconvincing.*® Kavanau’s “primary

expectation” was to earn income from his property, which

is the fundamental attribute of rental property. This

expectation and property right to rental income was

taken ty the city to further its social goals of maintaining

affordable housing for its citizenry.

C. Future administrative rent-increase adjudica-

tions do not provide an adequate remedy for

the taking.

The Fifth Amendment demands that when a govern-

ment’s rent regulation goes too far, just compensation

must be paid. “Even if the agency withdraws the regula-

tion,” the Kavanau II Court recognized, “the property

owner may have a right to just compensation for the

temporary taking while the regulation was in effect.”%9

The California Supreme Court in Kavanau II, how-

ever, evades both the conclusion that an unconstitu-

tionally-confiscatory rent regulation must surely effect a

taking of the property owner’s property during its

enforcement, and the just-compensation consequence of

38 Id., 16 Cal.4th at 780-781.

39 Id., 16 Cal.4th at 773, citing First English Evangelical

Lutheran Church v. Los Angeles County, 482 U.S. 304, 317, 321

(1987).

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the taking. The Court concludes, “we need not decide

whether a rent regulation that violates a particular property

owner’s right to due process also constitutes a taking.” The

Court explains, “assuming it otherwise might, we hold that a

remedy for the due process violation, if available and ade-

quate, obviates a finding of a taking.”4° The Court thus finds

that “Kavanau is not entitled to maintain an inverse condem-

nation action, because he may obtain a full and adequate

remedy for any interim loss flowing from the due process

violation through an adjustment of future rents under the

rent regulation process.”*!

As understood by the dissenting justices below, con-

fiscatory rent regulation — regulation that “goes too far”

in diverting private property to a government's social

goals — should be recognized as a taking, and remedied

through just compensation provided by the erring gov-

ernment.*? But the California Supreme Court relieves

local government from just-compensation liability. It does

so based upon the speculative theory that confiscated

rents may be recovered in the future from existing and

incoming tenants.

This Supreme Court has made clear that a property

owner should not be required to seek just compensation

through piecemeal litigation or unfair procedures.*

Moreover, “a reasonable, certain and adequate provision

40 Id., 16 Cal.4th at 782.

41 Jd., 16 Cal.4th at 767.

42 Id., 16 Cal.4th at 792, J. Baxter dissenting with J. Brown

concurring in dissent.

43 MacDonald, Sommer & Frates v. County of Yolo, 477 U.S.

340, at 350 n.7 (1986).

16

for obtaining compensation [must] exist at the time of the

taking.”** But the California Supreme Court’s deferred

“remedy” of increasing space residents’ rents in the

future for a local government's past enforcement of con-

fiscatory rent regulation provides a protracted and illu-

sory remedy. The remedy forces park owners to survive

further rent loss as they submit to repetitious administra-

tive rent-increase hearings, opposed by tenants and con-

trolled by city and county councils bent on denying

increases to maintain a stock of affordable housing.

As stated by dissenting Justice Baxter, “the majority’s

holding that increasing the allowable rents allowed for

plaintiff’s rental units is an adequate alternative to an

action in inverse condemnation, rests entirely on specula-

tion that plaintiff will someday recover the amount he

allegedly lost from past tenants who will remain tenants

even though the permitted rent increases will of necessity

fix their rents at a figure above that otherwise permitted.

It should be apparent to all that this illusory alternative

remedy will not and cannot be considered an offsetting

benefit that mitigates plaintiff’s loss and relieves the

Board of its obligation to pay for taking plaintiff’s prop-

erty. The increased rents “remedy” neither precludes a

finding that there has been a taking nor satisfies the

constitutional command that just compensation be paid

when a taking occurs.”4

44 Williamson County Regional Planning Comm'n v. Hamilton

Bank, 473 U.S. 172, 194 (1985), as quoted in Del Monte Dunes at

Monterey v. City of Monterey, 920 F.2d 1496, 1507 (9th Cir. 1990).

45 Kavanau II, 16 Cal.4th at 804, J. Baxter dissenting with J.

Brown concurring in the dissent.

17

D. Kavanau II makes rent-controlled property

owners’ inverse condemnation claims ripe for

federal adjudication.

In Agins v. City of Tiburon, the California Supreme

Court held that property owner’s had no right to bring

inverse condemnation actions for a regulatory taking of

property.* In First English Evangelical Lutheran Church of

Glendale v. County of Los Angeles, this Supreme Court

expressly disapproved the Agins rule prohibiting prop-

erty owners from pursuing inverse condemnation

claims.*” But after Agins and before First English, Califor-

nia property owners regulatory takings claims were made

ripe for federal adjudication due to the fact a just com-

pensation remedy did not exist in California at the time

the claims arose. Thus, the Ninth Circuit regularly held,

“Because no remedy in inverse condemnation existed at

the time of the alleged taking in this case, the district

court erred in ruling that the [property owners] were

required to pursue state compensation procedures before

filing for federal court review.”48

Where a state does not provide a compensation rem-

edy for government takings or where the remedy is

46 Supra, 24 Cal.3d 266, 275-77, 157 Cal.Rptr. 372, 375-76,

(1979) (in banc), affirmed on other grounds, 447 U.S. 255 (1980).

47 Supra, 482 U.S. at 310-311.

*® Hoehne v. County of San Benito, 870 F.2d 529, 533-34 (9th

Cir. 1989); accord Del Monte Dunes at Monterey v. City of Monterey,

supra, 920 F.2d at 1507.

18

inadequate, a property owner’s claim for inverse con-

demnation is ripe for federal adjudication.*? In Kavanau

II, the California Supreme Court has foreclosed property

owners from seeking just compensation for takings

caused by the enforcement of confiscatory rent regula-

tions.°° Just as Mr. Kavanau is turning to this Supreme

Court for relief from the denial of just compensation in

this instance, mobilehome parks and other rent-con-

trolled property owners will turn to federal courts for a

fairer resolution of their right to receive a fair return

through enforcement of an actual and adequate just-com-

pensation remedy.

IV. Conclusion.

Unless Fifth Amendment Takings Clause scrutiny is

provided by the courts — and enforced with a just com-

pensation remedy — local governments have little reason

to do other than regulate rents at levels that put the

property owner’s fair return to the government's use. In

the context of mobilehome-space rent control, the end

result of this confiscatory rent-control regulation is a

depletion of mobilehome park housing as parks are

driven from business, and an increase in federal court

litigation. As a representative of the mobilehome park

industry, the Trust respectfully urges this honorable

49 Ibid.

5° 16 Cal.4th at 767.

19

United States Supreme Court to accept Mr. Kavanau’s

petition for review.

Dated: December 23, 1997.

Respectfully submitted,

*Davip SPANGENBERG, State Bar #123864

Lark L. Ritson, State Bar #117614

Law Firm OF SPANGENBERG & ASSOCIATES

285 Hamilton Avenue, Suite 430

Palo Alto, California 94301

Telephone: (650) 325-4491

Facsimile: (650) 325-4494

*Counsel of Record

Attorneys for Amicus Curiae

The Manufactured Housing

Educational Trust of

Santa Clara County, Inc.