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Appeals Court Sides with City of Goleta in Rent-Control Case

In a closely watched case, the Ninth Circuit judges affirm the constitutionality of the city's ordinance

The City of Goleta and its mobile-home residents received an early Christmas present Wednesday as the Ninth U.S. Circuit Court of Appeals issued its opinion in a long-standing mobile-home rent-control case.

The court sided with the defendant, the City of Goleta, which has been defending its rent-control ordinance against Daniel Guggenheim, owner of the Rancho Mobile Home Park in western Goleta, for nearly a decade.

“It’s really great that they upheld the positions we’ve taken over the years,” said Goleta Mayor Margaret Connell, who has followed the case since her first term on the Goleta City Council, when the city incorporated.

The opinion came after an en banc hearing — a hearing requested by the city to have the full panel of judges rehear the case — after a previous panel of three judges voted last April to side with the Guggenheim family.

Judge Andrew Kleinfeld wrote that “the Guggenheims bought a trailer park burdened by rent control, and had no concrete reason to believe they would get something much more valuable, because of hoped for legal changes, than what they had.”

The case goes back to about the time of Goleta’s 2002 incorporation, when Rancho Mobile Home Park, along with the rest of the city, was still in Santa Barbara County territory. Under the county, when Guggenheim purchased the park, it enjoyed rent control.

The city, upon incorporation, adopted the county’s rent-control ordinance, but for the property owner, Goleta’s ordinance amounted to something new — one that violated his right to increase rents on the tenants of the coastal property and that put an unfair burden on the park to supply the necessary affordable housing required by the state. While the tenants in the mobile home park paid relatively low rent to park their coaches, they could turn around and sell them at the market rate, with the added incentive of rent control.

“The City of Goleta has stripped a property owner of his property rights,” Robert Coldren, attorney for the Guggeheims, told Noozhawk. He said government is allowed to do that, but not without just compensation.

“Mr. Guggenheim has not been compensated; that’s the whole problem,” Coldren said.

The city sided with the tenants and lost — and then won, when a decision on a previous and related case was overturned. In the years that followed, there were appeals, moratoriums and even more lawsuits levied at the city for delays and damages as a result of the ordinance.

Meanwhile, the park’s residents found themselves in the position of trying to fend off the owner’s application for a condominium conversion, fearing that it, too, would eliminate the kind of protection they were getting under the rent-control ordinance. Finding little support in the ongoing legal machinations of the state, the city approved a development agreement with the Guggenheims, resulting in the withdrawal of litigation for more than $20 million worth in damages, but also the filing of another lawsuit against the city — this time by the residents of the park.

Goleta’s recent win in the Ninth Circuit Court of Appeals means vindication for the city after years of legal skirmishes, but it also has larger implications.

“If the Guggenheims had been successful in their case, then mobile-home owners throughout California could have been subjected to unlimited increases in their rents,” said attorney Fran Layton of Shute, Mihaly & Weinberger LLP, a San Francisco-based firm representing Goleta.

Without rent control, she said, not only would typically low-income residents be subjected to rent increases, but the value of their homes would be diminished. The decision extends to all states covered by the Ninth Circuit, including parts of Washington, Oregon, Idaho, Montana, Nevada, Hawaii, Arizona and Alaska.

“I think this case goes to the heart of the government’s ability to make decisions for the public good,” Layton said.

The case has been followed closely by other coastal mobile home parks, where tenants are facing the same actions from landowners.

“There’s a big case going on in San Rafael, here in Marin County,” Layton said. “That case was put on hold to see the results of this case.”

It’s too soon to tell whether this decision will be the end-all of the dispute for Goleta, its mobile-home residents and the Guggenheim family. Coldren said Wednesday that he and the Guggenheim family were still assessing the situation.

“As lead counsel for Dan Guggenheim, we are assessing the impacts of the decision and considering our review options,” Coldren said. “It has long been predicted, both in the industry and in the government circles, that this case would wind up at the U.S. Supreme Court.”

For the residents of Rancho Mobile Home Park, it’s a victory in battle, but not the war. While the Ninth Circuit decision declared them winner in this fight that started at that park nearly 10 years ago, the city’s February 2009 decision to approve a development agreement means the park is still subject to a condo conversion (other mobile home parks in the city are rent-control protected).

It’s a battle the tenants have taken to the local courts in a case against the city, who in this case are being supported by the Guggenheims. A decision, according to Monarch Country Mobile Home Owners Association President Ken Tatro, could come as soon as January.

Still, the recent decision is heartening to the park’s residents.

“It’s a big win for the little guy,” he said.

Noozhawk staff writer Sonia Fernandez can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk or @NoozhawkNews.

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