The City of Palm Springs added improper conditions to a subdivision map approval when it considered a property owner's proposal to subdivide a mobile home park so that the park could be converted to resident-owned, the Fourth District Court of Appeal has ruled.

In approving the project, the City Council determined the subdivision map would not become effective until about one-third of the lots were sold. The council also required that the sale price of lots be determined by an appraiser paid by the project proponent, and that the current owner provide more than $1 million in assistance to help residents purchase their lots.

The court ruled the city only had authority to determine if the project was consistent with the Subdivision Map Act, and the city could not add the three conditions. The court directed the City Council to reconsider the application for its consistency with the appropriate statute.

The dispute concerned El Dorado Mobile Country Club, whose owner and residents have been in court for a variety of disputes over the years. In 1993, owner El Dorado Palm Springs Ltd. (known as El Dorado) filed an application to subdivide the 377 units within the park. The application was the first step in converting the park to a resident-owned facility. The city finally accepted the application as complete in 1999. If approved, the park would no longer be subject to the city's mobile home rent control regulations, which do not apply to resident-owned parks.

Typically, residents are behind the conversion of a mobile home park to resident-owned. But in this case, the property owner proposed the conversion. The City Council feared the conversion was a sham to avoid rent control regulations, so it added conditions to protect residents.

El Dorado sued the city. Riverside County Superior Court Judge Lawrence Fry ruled for the city — a decision the unanimous three-judge appellate panel overturned.

The central issue in the case was what section of the Subdivision Map Act governed the city's consideration of the tentative map application. The park owner argued that Government Code § 66427.5 contained the controlling language. It limits the City Council's consideration to determination of the tentative map application's compliance with that section. The city and the park residents argued that § 66427.4, subdivision (c) governed the matter. That subdivision authorizes the city to require the owner "to take steps to mitigate any adverse impact of the conversion on the ability of displaced mobilehome park residents to find adequate space in a mobilehome park."

The Fourth District ruled that El Dorado was correct and § 66427.5 applied. Both sections apply to conversions of mobile home parks. But the city's favored section applies only if the park is being converted to another use, such as a shopping center, the court ruled. "[A] change in ownership is not a change in use," the court ruled.

The park owner's preferred section (§ 66427.5) states that it applies to "the conversion of a rental mobilehome park to resident ownership."

"[T]he City Council, in acting on El Dorado's application for approval of the tentative subdivision map, only had the power to determine if the El Dorado had complied with the requirements of the section. (§ 66427.5, subd. (d).) It therefore had no power to impose the three further mitigating conditions on El Dorado," Justice Thomas Hollenhorst wrote for the court.

The court agreed that the law could be used for sham conversions that would allow the property owner to avoid local rent control ordinances. That loophole "may be a legislative oversight," but it does exist. Still, the applicable section offers some protection to residents. The law requires the subdivider to offer existing tenants the option to purchase their lots or remain as tenants. And the law requires that rent increases to market levels be phased in over four years, the court noted.

As for when the conversion is complete — and the local rent control ordinances no longer apply — the court said the conversion occurs when the first parcel of the new subdivision is sold. The court pointed to the state Supreme Court's decision in City of West Hollywood v. Beverly Towers, Inc., (1991) 52 Ca.3d 1184 (see CP&DR Court Cases, April 1991). In that case, the Supreme Court "found the decisive date was the date the developer secures final subdivision map approval and permission from the Department of Real Estate to sell units. The court also noted that a single conveyance completes the conversion process under Civil Code § 1352," Hollenhorst wrote. The city does not have authority to change that date.

In other issues, the court rejected El Dorado's argument that its tentative map application was "deemed approved" because the city had not acted by the statutory deadline. The court ruled that although the City Council adopted a resolution one month after the deadline, the City Council had voted its intent by the deadline. Also, the court rejected the argument from residents that El Dorado, when it applied for a tentative map, had to disclose the tentative purchase price for parcels and the market rents it will charge. The applicable section of the Subdivision Map Act does not require such disclosure, the court held.


The Case:
El Dorado Palm Springs, Ltd., v. City of Palm Springs, No. E029198, 02 C.D.O.S. 2418, 2002 DJDAR 2937. Filed March 14, 2002.

The Lawyers:
For El Dorado: James Colbert III, O'Melveny & Myers, (213) 430-6000.
For the city: William Wynder, Burke, Williams & Sorensen, (949) 863-3363.
For the residents: Robert McFadden, McFadden & Associates, (760) 327-4731.