In Equity Lifestyle Properties Inc. v. County of San Luis Obispo, (— F.3d —, C.A.9 (Cal.), Nov. 25, 2008), the United States Court of Appeals considered the challenge of a mobilehome park owner to a county’s rent control ordinance on the grounds that the ordinance amounted to an uncompensated taking of rental income and violation of due process and equal protection rights. The court ruled the owner’s takings claim was unripe for federal court because the owner had not sought available relief through state channels, and ruled further that the county ordinance did not violate the owner’s constitutional rights because it served legitimate government purposes and did not unreasonably single out mobilehome park owners for unfair treatment.
Equity Lifestyle Properties, Inc. (“Equity”) owned the Sea Oaks Manufactured Home Community (“Park”), a mobilehome park in San Luis Obispo County (“County”). In 2002, Equity informed park tenants that rent on their lots would increase by 185 percent. The tenants protested that the county’s mobilehome rent stabilization ordinance (“Ordinance”) prohibited that large an increase. The county’s mobilehome rent review board agreed with the tenants and the county Board of Supervisors upheld that finding.
Equity filed suit in federal district court alleging the ordinance amounted to an uncompensated taking of its rental income and violated its due process and equal protection rights. The district court dismissed the complaint, and Equity appealed.
The court outlined a two-pronged test to determine whether a federal takings claim is ripe: first, that the underlying administrative action must be final before it is judicially reviewable; and second, that the claimant must have unsuccessfully sought just compensation through procedures provided by the state. Equity passed the first prong because the County’s actions were final, but failed the second prong because it had not exhausted available state procedures, the court said. The California Supreme Court established such a state procedure in Kavanau v. Santa Monica Rent Control Bd., 941 P.2d 851 (Cal. 1997). Kavanau outlined a procedure that adjusts future rents by taking into consideration past confiscatory rents. Equity had not sought relief under the state’s Kavanau procedure, rendering its federal action unripe, the court found. The court dismissed Equity’s protest that such an effort would be futile because California courts have not granted such stays. That allegation at best produces uncertainty, the court found, and “uncertainty does not equal futility.”
Equity also argued that its due process rights were violated because the county ordinance existed for the sole purpose of transferring the value of its property to a select group of tenants. But courts have long found that such ordinances serve a legitimate public interest of protecting tenants from burdensome rent increases while providing landlords a fair return, the court said. The due process claim therefore lacked merit, the court found.
Equity’s equal protection challenge, that mobilehome park owners were singled out to bear the costs of providing economic benefits to tenants, failed for the same reason, the court added. “Under rational-review basis, where a group possesses distinguishing characteristics relevant to interests the State has the authority to implement, a State’s decision to act on the basis of those differences does not give rise to a constitutional violation,” the court said, quoting Hotel & Motel Ass’n of Oakland v. City of Oakland, 344 F.3d 959 (9th Cir. 2003). Here, the shortage of spaces for mobile homes in the county, and the high cost and impracticability of moving mobile homes, provided a legitimate public interest, and therefore, imposing a regulation only upon mobilehome park owners to serve that interest was not unconstitutional, the court said.
With the takings claim unripe for federal court, and the due process and equal protection claims failing on their merits, the district court was correct to dismiss Equity’s complaint. The ruling was affirmed.
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