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Ord 1917 - Regarding Rent Increases and Dispute Resolution in Mobile Home Parks and Amending the Town's Rental Dispute Mediation and Arbitration Ordinance to Exclude Non-Park Owned Mobile HomesORDINANCE 1917 ORDINANCE OF THE TOWN OF LOS GATOS REGARDING RENT INCREASES AND DISPUTE RESOLUTION IN MOBILE HOME PARKS AND AMENDING THE TOWN'S RENTAL DISPUTE MEDIATION AND ARBITRATION ORDINANCE TO EXCLUDE NON -PARK OWNED MOBILE HOMES The Town Council of the Town of Los Gatos does hereby ordain: SECTION I Article VIII.V is hereby added to Chapter 14 to read as follows: ARTICLE VIII.V MOBILE HOME RENTAL AND OTHER TENANT/ LANDLORD DISPUTES Division 1. Generally Section 14.85.010. Title. This article shall be cited as the Mobile Home Ordinance. Section 14.85.015. Purpose and Findings. (a) Mobile home tenants, unlike apartment tenants or residents of other rental stock, are in the unique position of having made a substantial investment in a residence for which space is rented or leased. Removal and /or relocation of a mobile home from a park space is not a practical alternative to accepting an excessive rent increase in that it can only be accomplished at substantial cost, and in many instances may cause extensive damage to the mobile home and loss of appurtenances such as integrated landscaping and supporting structures inconsistent with the new location. Because mobile homes are often owned by senior citizens, persons on fixed incomes, and persons of low and moderate income, exorbitant rent increases fall upon these individuals with particular harshness. (b) The Town Council declares that it is now necessary in the public interest to establish a means by which to resolve the occasionally divisive and harmful impasse between park owners and mobile home tenants. After consideration of numerous factors, including the mandates of state law, regulations which best fit the needs of the Town have been selected. (c) Rent control regulations are consistent with the Town's policy to encourage a variety of housing types, prices and densities within the community, respond to the need to preserve existing housing stock and assist in providing housing for low and very low income households. (d) Rent control regulations can assist in protecting affordable housing in combination with Town programs and actions designed to reduce costs to the consumer which help to provide a variety of housing types within a range of costs to meet the needs of all income groups. (e) The regulations which are set forth in this article are designed to produce stability in rent increases for mobile home park tenants while recognizing the rights of mobile home park owners to receive a just and reasonable return. (f) The Council finds that the adoption of the ordinance codified in this article will not have a significant, substantial or adverse effect on the physical environment of the community because enactment of this article involves no deviation from the general plan and no change in the present use of any property within the Town., Section 14.85.020. Definitions. For the purposes of this article, unless otherwise apparent from the context, certain words and phrases used in this article are defined as follows: Arbitrator. An individual designated by the Town Manager or the Town Manager's designee to conduct the hearing procedures of this article and to determine the reasonableness of rent increases. Affected tenants. All mobile home tenants in a mobile home park who have been notified by the park owner that a rent increase (including service reduction) is to become effective on the same date. Capital improvements. The installation of new improvements and facilities or the replacement or reconstruction of existing improvements and facilities which consist of more than ordinary maintenance or repairs. Consumer price index (CPI). The consumer price index for all urban consumers for the San Francisco /Oakland /San Jose Area (all items) index (1967 equals 100) as reported by the U.S. Bureau of Labor Statistics. CPI rent increase. An annual rent increase equal to the amount of increase in the CPI in the previous 12 months up to 5% as calculated in Section 14.85.115. Housing services. Those services provided and associated with the use or occupancy of a mobile home space, including but not limited to repairs, insurance, maintenance, OA replacement, painting, light, heat, water, laundry facilities and privileges, refuse removal, parking, recreation facilities, security service and any other benefits, privileges or facilities. Mobile home. A structure designed for human habitation which is transportable in one or more sections along a street or highway, commonly referred to as a mobile home. Mobile home owner or tenant. Any person owning a mobile home who has a tenancy or right of use or occupancy of a mobile home space in a mobile home park. Mobile home park. An area of land where two or more mobile home spaces are rented, or held out for rent, or made available for use, to accommodate mobile homes used for human habitation. Mobile home park owner or owner. The owner, lessor, operator or manager of a mobile home park in the Town. Mobile home space or space. The site within a mobile home park intended, designed, or used for the location or accommodation of a mobile home and any accessory structures or appurtenances attached thereto or used in conjunction therewith where public utilities are provided. Owner's petition. A petition filed by an owner seeking a supplemental rent increase. Rental agreement or lease. An agreement entered into between the park management or owner and a mobile home tenant establishing the terms and conditions of a mobile home park tenancy. Service reduction. Any reduction in housing services which results in a cost savings to owner without a corresponding reduction in the monies demanded or paid for space rent. Space rent. The total consideration, including any bonus, fees, surcharges, benefits or gratuity demanded or received in connection with the use or occupancy of a mobile home space in a mobile home park, or for housing services provided, and security deposits, but exclusive of any amount paid for the use of the mobile home as a dwelling unit. Space rent increases. Any additional rent above the base space rent which is demanded of or paid by a tenant for a mobile home space including service reductions. Supplemental rent increase. An increase in space rent in excess of the annual CPI Rent Increase, determined by the arbitrator to result in a fair and reasonable return to the Owner. 3 Tenant's petition. A petition filed by one or a group of tenants seeking stabilization or reduction of rent because of a service reduction Town's agent. The individual or agency designated by the Town Council to perform the services defined herein. Section 14.85.025. Exceptions to article provisions -- Partial vacancy decontrol. The provisions of this article shall not apply to the following: (a) Space rent or space rent increases during a thirty -day period commencing upon the completion of a new mobile home space or mobile home space first rented after December 1, 1992. (b) Nothing in this article shall operate to restrict the rights of tenants and owners who have entered into agreements providing for a fixed term and /or a fixed rent for mobile home tenancies, beyond a 12 -month duration. (c) Nothing in this article shall operate to restrict the rents charged by owner in the case of voluntary termination, abandonment of a mobile home in place, removal as a result of dealer pull out, eviction, or sale of a mobile home owned by the mobile home park owner. (d) In the case of an in -place sale of a mobile home, the initial space rent to be charged the new mobile home tenant may be increased to an amount equal to the average rent of all spaces in mobile home parks in Los Gatos or by $25.00, whichever is greater, except that for any space in the top ten percent of all spaces in Los Gatos, the initial space rent to be charged the new owner shall be the same as the last space rent. For any space occupied by a mobile home owned by the park owner or vacant spaces, the space rent shall be deemed to be the average rent of all spaces rented by tenants owning their mobile homes. Section 14.85.030. Regulatory fee. For the sole purpose of reimbursing the Town for the costs of administering this article, there is hereby imposed on each mobile home space, subject to the provisions of this article, a regulatory fee in such amount as established by the Council by resolution from time to time which shall be paid annually when the mobile home park owner's business license fee is due. A mobile home park owner who fails to pay the fee within thirty (30) days after the Town mails its bill shall pay a twenty -five (25) percent penalty, plus an additional twenty -five (25) percent for every additional thirty (30) days the fee and penalties are not paid, and shall not be entitled to any rent increase until the full fee and penalties are paid. The Town Manager shall report to the Council in time for 2 budget hearings each year the recommendation as to the amount of the regulatory fee necessary to recover such costs. Section 14.85.035. Violation -- Penalty. (a) Criminal Penalty. No person shall demand, accept, receive or retain any rent in excess of the amounts allowed under this article. Any person may file a complaint regarding an alleged violation of this article with the Town's agent. The Town Attorney is authorized, in his /her discretion, to investigate and prosecute any such complaints. Any person found to have demanded, accepted, received or retained any rent in excess of the amounts allowed under this article is guilty of a misdemeanor. (b) Civil Action. Any person who demands, accepts, or retains any payment of rent, in violation of the provisions of this article shall be liable in a civil action to the person from whom payment is demanded, accepted or retained, for damages in the sum of three times the amount by which payment exceeds the maximum rent which could lawfully be demanded, accepted or retained. Section 14.85.040. Waiver of Rights. (a) Any tenant's waiver or purported waiver of rights under this article, prior to the time when said rights may be exercised, shall be void as contrary to public policy, except as provided in this section. (b) It shall be unlawful for an owner to require or attempt to require, as a condition of tenancy in a mobile home park, a tenant, or prospective tenant to waive in a lease or rental agreement, the rights granted to a mobile home tenant by this article. (c) It shall be unlawful for an owner to deny or threaten to deny a tenancy in a mobile home park to any person on account of such person's refusal to enter into a lease or rental agreement or any other agreement under which such person would waive the rights granted to a tenant by this article. (d) Nothing in this section shall preclude an owner or tenant, or prospective tenant, from entering into a lease or rental agreement described in Section 14.85.025 provided that such lease or rental agreement is not procured by a requirement that it be entered into as a condition of tenancy in the mobile home park, and is not procured under a threat of denial of tenancy in the mobile home park. Section 14.85.045. Permissible reasons for eviction. A tenant may refuse to pay any rent. in excess of the maximum rent established pursuant to this article. The fact that the unpaid rent is in excess of the maximum rent shall 5 be a defense in any action brought to recover possession of a mobile home space for non - payment of rent or to collect the illegal rent. Section 14.85.050. Extension of time -- Mutual agreement. By written agreement of the parties or upon application to the Board and for good cause shown, the time frames provided for under this article may be .extended. Section 14.85.055. Duty of owner to provide copy of article and rental data. (a) It shall be the duty of every owner to provide a copy of this article to each tenant who rents or leases a space from the owner. A single copy will be provided each owner by the Town for reproduction by the owner. (b) All mobile home park owners shall cause documentation of the rent charged for each space in 1985 and 1992 to be filed with the Town's agent by February 1, 1993. By February 1 of each year thereafter, the mobile home park owner will document the rent charged in December of the previous year, for each space occupied by a tenant -owned home . Section 14.85.060. Severability. If any section, subsection, sentence, clause, phrase, or portion of this ordinance is for any reason held invalid or unconstitutional by any court of competent jurisdiction, such portion shall be deemed a separate, distinct and independent provision and such decision shall not effect the validity of the remaining portion thereof. Division 2. Mobile Home Hearing Process Section 14.85.100. Hearing Process -- Established. There is established the mobile home rental dispute hearing process. Section 14.85.105. Space rent increase -- Notice. (a) The mobile home park owner shall notify all affected tenants of any rent increase scheduled to take place during the following calendar year. All notices shall be given on the same day each calendar year although increases may take effect on different dates. The purpose of this requirement is to avoid the possibility of multiple disputes over rent increases for the same park within a given year. (This requirement does not apply to increases pursuant to existing leases and leases identified in Section 14.85.175.) 6 - (b) Any notice of space rent increase shall include notice of the tenant's right to participate in the rent review process and shall provide the business address and telephone number of the Town's agent. (c) The park owner shall, upon request, provide to any affected tenant a list of all tenants with their respective space numbers who received a notice of rent increase. Section 14.85.110. Space rent increases -- Limit on annual increases. The space rent of any mobile home space may not be increased more than once in any twelve -month period. Section 14.85.115. Space rent increases -- Hearing required for supplemental rent increase. Except as provided in this article, any space rent increase, after December 1, 1992, which exceeds the increase of the CPI for the twelve -month period ending within ninety days before notice of such rent increase is given or five percent, whichever is less shall be deemed a supplemental rent increase and shall be subject to review under the hearing process. Section 14.85.120. Hearing process -- Submission of owner's petition. Any owner who seeks a supplemental rent increase shall file a petition with the Town's agent. Section 14.85.125. Hearing process -- Submission of tenant's petition. (a) Any tenant who wishes to limit any CPI rent increase or to reduce current rents to compensate for a reduction in service may file a written petition with the Town's agent. Before filing a tenant's petition, written notice of the alleged service reduction and a reasonable opportunity to restore service must be given to the mobile home park owner. (b) If a group of tenants seeks review, the petition shall designate an individual to serve as the tenant representative for the purposes of receipt of all notice, correspondence, decisions and findings of fact required in this article. Service of notice upon the designated tenant representative will constitute adequate and sufficient notice to the tenants who signed the petition. Failure to designate a tenant representative will render the petition incomplete and the petition will not be accepted for filing. (c) A tenant's petition may include a request for audit and NOI analysis for the preceding three years, however, no such audit and analysis may be required more frequently than every three years. The cost of such audit and analysis shall be paid by the mobile home owner and reimbursed by the Town from the regulatory fees collected. The full audit shall be confidential and presented to the Arbitrator only. A summary shall be prepared 11 and presented to the mobile home park owner and tenant representative. Disclosure of any information not included in the summary shall be disclosed only as deemed necessary in the exclusive discretion of the Arbitrator. Section 14.85.130. Petitions -- Form. The form of the owner's and tenant's petition shall be prescribed by the Town's Agent and must be accompanied by supporting material as prescribed by the Town's agent. An owner's petition shall contain the printed name and address (i.e. space number) of each tenant whose rent is being increased. Appended to the petition shall be a copy of the notice given by the park owner which indicated the date it was served. Appended to the tenant's petition shall be a copy of the tenant's notice to the mobile home park owner of that service reduction. The petition shall be made under penalty of perjury and supporting documents shall be certified or verified as requested by the Town's agent. Section 14.85.135. Petitions -- Time for Filing. An owner's petition must be filed at least thirty calendar days before the first effective date of the increase stated in the notice to tenant. A tenant's petition must be filed within thirty calendar days after expiration of the reasonable time given to the mobile home park owner to restore services. Section 14.85.140. Space rent increase -- Effective when. If an owner's petition is filed, the supplemental rent increase shall not take effect unless and until approved by the arbitrator. Section 14.85.145. Hearing -- Procedures. (a) Parties. Parties to an owner's petition include the owner and all tenants affected by the proposed rental increase. Parties to a tenant's Petition include the owner and signatories of the petition. (b) Time. Within forty -five working days from the date a petition is received by the Town's agent, an arbitrator shall conduct a hearing open to representatives of all parties. (c) Notice. The Town's agent shall mail written notice to all parties at least twenty calendar days before the hearing. (d) Submittal of Evidence. Materials to be considered at the hearing must be logged with the Town's agent who shall make them available to all parties to the hearing at least fifteen working days in advance of the hearing. (e) Extensions. Extensions of time for the hearing process may be mutually agreed upon by both parties with the concurrence of the arbitrator. Section 14.85.150. Hearing -- Arbitrator's fee. The Town shall pay the arbitrator's fee from the regulatory fees. Section 14.85.155. Hearing -- Conduct. The hearing shall be conducted by the arbitrator. Any party or their counsel may appear and offer such documents, testimony, written declaration or other evidence as may be pertinent to the proceeding. Section 14.85.160. Hearing -- Determination. (a) Owner's petition: Based upon the evidence presented at the hearing, the arbitrator shall determine the extent to which the proposed supplemental rent increase is reasonable, in accordance with the factors set forth in Section 14.85.200. The burden of proof regarding such reasonableness shall be on the owner unless otherwise indicated. (b) Tenant's petition: Based upon the evidence presented at the hearing, the arbitrator shall determine if a service reduction has occurred and the monetary value thereof. (1) The burden of proof to establish a service reduction and its monetary value shall be on the person alleging such a reduction. (2) If an audit and analysis prepared pursuant to the provisions of Section 14.85.125 indicates that a park's NOI.exceeds 5% more than a fair and reasonable return as defined by Section 14.85.205, it shall be considered prima facie evidence of a service reduction and the burden of proof shall switch to the park owner to establish that a service reduction has not occurred. Section 14.85.165. Hearing- Determination - Notification. Within fifteen working days following the conclusion of the hearing, the arbitrator shall deliver to the Town's agent a written statement of determination and findings of fact upon which such determination is based. The Town's agent shall cause copies of the determination and the findings to be mailed by regular first class mail to all parties. Section 14.85.170. Increase determined not reasonable -- Remedies. Any rent increases collected by a mobile home park owner pursuant to a CPI or supplemental increase which is the subject of a tenant's petition and later determined to E be unjustified because of a service reduction, shall, within ninety calendar days be either returned to the tenants or credited to future rental charges at the option of the mobile home park owner. Section 14.85.175. Determination -- Applicability. The determination made under the provisions of this article shall be effective with respect to all mobile home park spaces, unless the tenant of such space has a written lease which meets the criteria of Civil Code Section 798.17, with the park owner which otherwise sets forth the rights and obligations of the parties with respect to rent. Section 14.85.180. Determination and Appeal. The determination of the arbitrator shall be final. Any party disputing the determination and findings may seek review pursuant to Sections 1094.5 and 1094.6 of the California Code of Civil Procedure. Division 3. Criteria for Evaluating Reasonableness of Supplemental Rent Increases Section 14.85.200. Determination of reasonableness. In determining the reasonableness of a supplemental rent increase, the arbitrator shall consider this article's purpose to permit owners a just and reasonable return while protecting tenants from arbitrary, capricious or unreasonable rent increases. The arbitrator shall consider the following factors: (a) Fair rent return (Net Operating Income Approach set out below). (b) Changes in the consumer price index. (c) The rent lawfully charged for comparable mobile home spaces in the Town of Los Gatos. (d) The history of rent increases in the previous five years. (e) The completion of any capital improvements, maintenance, or rehabilitation, the cost thereof, including cost of materials, labor, construction interest, permit fees, and other items as the arbitrator deems appropriate. These costs will be limited to an amount equal to the annual depreciation expense as allowed in Section 14.85.240. Once the capital improvement has been fully depreciated, such expenses shall be excluded from the calculation of net operating income. (f) Changes in property taxes or other taxes related to the mobile home park. 10 (g) Changes in the utility charges for the mobile home park paid by the applicant and the extent, if any, of reimbursement from the tenants. (h) Changes in reasonable operating and maintenance expense. (i) The need for repairs caused by circumstances other than ordinary wear and tear. 0) The amount and quality of services provided by the applicant to the affected tenant including the value of service reductions. Section 14.85.205. Fair return rent increases. It is expected that the CPI rent increase will provide the owner with a fair and reasonable return. However, in the event that the CPI rent increase does not provide the owner with a fair and reasonable return, the owner may request a supplemental rent increase. Section 14.85.210. Presumption of fair base year net operating income. For the purposes of determining the rent increase necessary to provide the owner with a fair and reasonable return, it shall be presumed that the Net Operating Income, as described below, provided the owner with a fair and reasonable return in the base year. Section 14.85.215. Base year. (a) Except as provided in subsection (b) of this section, base year means the calendar year 1985. (b) For spaces which were exempt from the provisions of this article pursuant to a rental agreement as described in Section 14.85.025 and which are subject to the provisions of this article because of the expiration or other termination of such rental agreement, base year means the last twelve (12) months of the term of the rental agreement. Section 14.85.220. Determination of base year Net Operating Income. The base year Net Operating Income shall be determined by calculating the NOI per space in the base year for each Los Gatos mobile home park and averaging them. 11 Section 14.85.225. Rebuttal of fair Net Operating Income presumption. Evidence to rebut the presumption of fair and reasonable return based upon the Base Year NOI may be presented during hearing on a petition and the arbitrator may adjust the Base Year NOI upon making at least one of the following findings: (a) The owner's operating expenses in the base year were unusually high or low in comparison to other years. In such instances, adjustments may be made in calculating operating expenses so the base year operating expenses reflect average expenses for the property over a reasonable period of time. The arbitrator shall consider the following factors in making this finding: (1) Extraordinary amounts were expended for necessary maintenance and repairs. (2) Maintenance and repair were below accepted standards and caused significant deterioration in the quality of services provided. (3) Other expenses were unreasonably high or low notwithstanding the application of prudent business practices.. (b) The owner's operating expenses in the base year inadvertently omitted expenses actually paid. (c) The gross income during the base year was disproportionate. In such instances, adjustments may be made in calculating gross income consistent with the purposes of this article. The arbitrator shall consider the following factors in making this finding: (1) The gross income during the base year was lower than it might have been because some tenants were charged reduced rent. (2) The gross income during the base year was significantly lower than normal because of the destruction of the premises and /or temporary eviction for construction or repairs. Section 14.85.230. Determination of Net Operating Income. (a) The Net Operating Income for the base year shall be determined by: (1) Determining the annualized gross income by totalling the rents collected during the base year per 14.85.235. (2) Determining the operating expenses during the base year per 14.85.240. 12 (3) Subtracting the operating expenses from the annualized gross income. (b) The NOI for years other than the base year shall be determined by: (1) Determining the annualized gross income by totalling the rents for the twelve -month period ending within 90 days prior to the notice of a rent increase or service reduction ( "the relevant year "). (2) Determining the operating expenses during the relevant year. (3) Determine annualized park NOI by subtracting operating expenses from annualized gross income. Section 14.85.235. Calculation of gross income. (a) For the purposes of determining the Net Operating Income, Gross Income shall be the sum of the following: (1) Gross rents calculated as gross rental income at one hundred percent (100 %) occupancy of all spaces, adjusted for uncollected rents as provided in subsection (b) of this section; (2) Income from any laundry facilities and parking fees; (3) Costs of utilities paid directly to the owner by the mobile home tenants; and (4) All other income or consideration received or receivable in connection with the use or occupancy of the mobile home space including the regulatory fee required by Section 14.85.030. (b) Gross rents shall be adjusted for uncollected rents due to vacancy of mobile home spaces and bad debts to the extent such are beyond the control of the owner. No such adjustment shall be greater than three percent (3 %) of gross rents unless justification for a higher rate is demonstrated by the owner. (c) Gross income shall not include rent from mobile homes owned by the park owner which exceeds the average space rent. It shall be deemed that the rent for spaces occupied by mobile homes owned by the park owner or vacant spaces is equal to the average space rent of all other occupied spaces in the park. This rent shall be included in the gross rents as calculated in sub -part (a)(1) above. 13 Section 14.85.240. Calculation of operating expenses. (a) For the purposes of determining Net Operating Income, operating expenses shall include the following: (1) Costs of operation and maintenance. (2) Utility costs to the extent they are not included in costs of operating and maintenance. (3) Owner performed labor compensated at reasonable hourly rates. a. No owner performed labor shall be included as an operating expense unless the owner submits documentation showing the date, time, and nature of the work performed. b. There shall be a maximum allowed under this provision of five percent (5 %) of gross income unless the owner shows greater services were performed for the benefit of the tenants. (4) License and registration fees required by law to the extent not otherwise paid by the residents and the regulatory fee required by Section 14.85.030. (5) Expenses of capital improvements (either improvements to existing capital items or acquisition of additional fixed assets) where all of the following conditions are met: a. The capital improvement is made at a direct cost of not less than Two Thousand Five Hundred Dollars ($2,500). b. The costs, less any insurance proceeds or other applicable recovery, are averaged on a per space basis for each space actually benefited by the improvement. Infrastructure improvements shall be deemed a benefit to all park tenants unless a mobile home or group of mobile homes receive a higher level of service as a result of the improvement. C. The expense is limited to one fifth of the cost of the capital improvement or the annual depreciation as calculated by generally accepted accounting principles of the capital improvement whichever is less. d. The costs do not include any additional costs incurred for property damage or deterioration resulting from unreasonable delay in the undertaking or completion of any repair or improvement. 14 e. If a capital improvement replaces an existing asset which has not been fully depreciated, revenue is realized on the retired asset for the amount which has not yet been depreciated. (b) Operating expenses shall not include the following: (1) Mortgage principal or interest payments or other debt service costs and park lease costs. (2) Any penalties, fees or interest assessed or awarded for violation of any provision of this article or of any other provision of law. (3) Legal fees except as specified in subsection (c) of this section. (4) Political contributions. (5) Any expenses for which the owner has been reimbursed by any utility rebate or discount, security deposit, insurance settlement, judgment for damages, settlement or any other method or device. (6) Costs arising from operation and maintenance, improvement, and acquisition of mobile homes owned by the park owner. (7) Expenses of a capital improvement after the improvement is fully depreciated. (8) Rehabilitation costs resulting from a work order issued by a public agency unless to correct conditions caused by a natural disaster. (c) Legal expenses allowed in the calculation of operating expenses shall include: attorneys' fees and costs incurred in connection with successful good faith attempts to recover rents owing, successful good faith unlawful detainer actions not in derogation of applicable law, and legal expenses necessarily incurred in the normal operation of the park to the extent such expenses are not recovered from adverse or other parties. Attorneys' fees incurred in relation to the administrative or judicial proceedings in connection with this article are not allowable as operating expenses. Section 14.85.245. Fair and Reasonable Return. An owner has a fair and reasonable return when the owner's relevant year NOI is equal to the amount required for the owner to maintain the base year NOI adjusted annually by the consumer price index, plus increases allowed by vacancy as set forth in Section 14.85.025(d). 15 Section 14.85.250. Determination of Allowable Supplemental Rent Increase. (a) The arbitrator shall set the amount of any supplemental rent increase in an amount not to exceed that required to provide the owner with a fair and reasonable return. (b) In determining the supplemental rent increase required to provide the owner with a fair and reasonable return, the arbitrator shall determine: (1) The fair and reasonable return in accordance with Section 14.85.245. (2) The gross income required to produce the fair and reasonable return. (3) The rent increase needed to produce the required gross income. (c) Rent increases based upon costs of capital improvements shall apply only to those spaces benefited by the capital improvements in accordance with Section 14.85.240 (a)(5)b. (d) Rent increases based upon increased operating expenses shall apply only to those spaces for which such increased operating expenses were incurred. Division 4. Criteria for Determining Service Reduction Section 14.85.300. Basic service level. The mobile home park owner is required to furnish to the tenant a basic level of housing services, herein called the "basic service level ". The basic service level is established by : (a) Civil Code Section 1941.1 and 1941.2 and other applicable codes and statues; (b) The mobile home park owner's implied warranty of habitability; (c) Express or implied agreement between mobile home park owner and tenant; (d) The condition of improvements, fixtures and equipment considering: (1) The nature and quality of original construction, fixtures, and equipment; (2) The age; (3) The condition at the beginning of the tenancy; 16 (e) The mobile home park owner's policies of operation and maintenance, repair and replacement communicated to the tenant at the beginning of the applicable term of tenancy. Section 14.85.305. Service reductions. A service reduction occurs when the mobile home park owner has breached the obligation to furnish the Basic Service Level impairing the tenant's use of the premises. Section 14.85.310. Allegations of service reductions. Each allegation of a service reduction in a tenant's petition shall be separately stated and include: (a) The prior level of service; (b) The specific changes in the prior level of service; (c) The date the service reduction was first noticed by the tenant; (d) The cause of reduction of service level, if known; (e) The mobile home park owner's. response to the tenant's notice; (f) The mobile home park owner's effort to improve or correct the service reduction; (g) The status as of the date the petition is filed. Section 14.85.315. Determining value of unreasonable service reductions. The arbitrator shall determine the monetary value to be assigned to a service reduction by applying the following standards: (a) The arbitrator shall determine the percentage reduction in usability of the mobile home space and common areas caused by the service reduction considering: (1) The area affected; (2) The amount of time the tenant is exposed to the condition; (3) The degree of discomfort the condition imposes; 17 (4) The extent to which such a condition causes tenants to find the premises uninhabitable. (b) The date reduction in service began. (c) The arbitrator shall apply the percentage reduction to the monthly rent, divide by 30, and multiply by the number of days commencing from the accrual date to the date of restoration of the service to the Basic Service Level. Section 14.85.320 Conclusive evidence of service reduction The results of an audit, prepared pursuant to Sec 14.85.125, which demonstrate that a mobile home park owner's three year average NOI exceeds a fair and reasonable return, as defined by Sec. 14.85.245, by more than eight percent, shall be conclusive evidence of a service reduction. In such an event, rents shall be reduced to result in a NOI not to exceed 8% more than a fair and reasonable return. Division 5. Resolution of Non - Rental Dispute Section 14.85.400. Resolution of non - rental disputes. This division is provided to enable tenants and park owners to resolve disputes when there is no concurrent issue concerning increase in or the amount of rent. If at any time while the non - rental dispute remains unresolved there is a rent dispute, then the non- rental dispute issues shall be resolved separately in accordance with this section and shall not be consolidated with the rent dispute proceeding. Section 14.85.405. Unsupervised efforts of the parties. (a) Notice of objection: One or more tenants, or the mobile home park owner, may at any time file a written objection with the other, as to maintenance, capital improvement, housing services, or any other concern related to the physical condition or living condition of the mobile home park. (b) Informal meeting: Within ten days after service of the written objection from a tenant, the mobile home park owner shall set a time and place for a meeting to be held on the mobile home park premises, giving the tenant at least five days' notice of the time and place. In the case of a written objection filed by the park owner, a time and place for discussion shall be set forth in the notice. The purpose of this meeting shall be to allow the parties `the opportunity to resolve any differences they may have concerning non - rental disputes. The meeting may be continued to another time and place agreeable to the parties. The parties may agree to consolidate more than one notice of objection in the same discussion. Section 14.85.410. Conciliation. If the informal meeting does not resolve the dispute to the satisfaction of both parties, the dissatisfied party or parties may, within ten days of the date of the meeting, file with the Town's agent a petition for conciliation. Conciliation in this sense is limited intervention in the dispute, using letters and telephone and personal conversation to attempt to explain to each party the position of the other and to urge rational agreement. If the Town's agent determines after a reasonable time that conciliation is not likely to resolve the dispute, it shall notify the parties in writing. Section 14.85.415. Mandatory mediation. (a) Petition for formal mandatory mediation: Within ten days of notice of failure of conciliation from the Town's agent, either party may file with the Town's agent a petition for mediation of non -rent dispute. (b) Assignment of mediator and hearing date: Upon receipt of a petition for mediation, the Town's agent shall assign a mediator. The Town's agent shall set a date for mediation .hearing no sooner than ten nor later than thirty days after the mediator is assigned. The parties shall be notified in writing by the Town's agent of the date, time, and place of the mediation hearing which shall be set to maximize the convenience of the parties. (c) Mediation hearing: (1) Conduct. The parties may offer oral and documentary evidence at the mediation hearing. The parties may by written authorization designate a representative to appear at the hearing. The mediator may order one continuance of not more than ten days. The petitioner shall have the first opportunity to present evidence of each disputed issue. (2) Termination. At any time during the mediation hearing process the mediator may terminate the proceeding upon a determination of lack of good faith or a determination of impasse. The parties shall be notified of this decision in person, or in writing if the determination is made outside the presence of the parties. (3) Resolution by agreement of the parties. In the event that the parties resolve the disputed issues, the mediator shall prepare a memorandum of agreement for the signature of the parties. This agreement shall constitute a legally enforceable contract. (4) Resolution by the mediator. If the parties do not resolve the disputed issues at the mediation hearing, as it may be continued, the mediator may request the submittal, within 5 days, of each party's "best offer ". Failure of any party to submit a "best offer" shall terminate the mediation proceeding. If best offers are submitted, the mediator 19 shall within 10 days notify the parties in writing of the determination of the fair and just resolution of the dispute. The determination of the mediator is final and binding unless either party files a written rejection of the mediator's determination within 10 days. A party's rejection shall terminate the mediation. (5) Record of the mediation. The mediator shall file a record of the mediation with the Town's agent which shall be admissible evidence in any subsequent rent dispute proceeding. SECTION II Town Code Section 14.80.020 is hereby amended to read as follows: Sec. 14.80.020. Definitions. The following words, terms and phrases, when used in this article, shall have the meanings ascribed to them in this section, except where the context clearly indicates a different meaning: Housing services. Those services provided and associated with the use or occupancy of a rental unit, including but not limited to, repairs, replacement, maintenance, painting, light, heat, water, elevator service, laundry facilities and privileges, janitorial service, refuse removal, furnishings, telephone, parking, and any other benefits, privileges or facilities. Land. Real property in the technical sense. The meaning of the word includes, but is not limited to, buildings, and parking spaces. Lease. An agreement, written, oral, implied in fact, or implied in law, in which a landowner, for compensation, conveys the right to possess land to someone else for a period of time or from period to period. Mediator. A person designated by the manager who is trained to conciliate rental disputes under this article. Arbitrator means a person designated by the manager or the manager's delegate who is trained to arbitrate disputes under this article and the regulations adopted pursuant thereto. Rent. The consideration, including any bonus, benefit or gratuity, demanded or received by a landlord for or in connection with the use or occupancy of a rental unit, or the assignment of a lease for such a unit, including housing services or subletting. Rental unit. Any building or part of a building which is used for residence, or any mobile home owned by a mobile home park owner, and which is rented to a tenant as a dwelling place, except: 20 (1) Rental units, located in a building or group of buildings on the same premises, containing two (2) or fewer dwelling units; (2) A room in an owner - occupied dwelling where under the lease provisions the tenant does not have the substantially exclusive use of a kitchen; (3) A single house, condominium unit or planned development (Business and Professions Code section 11003.0) unit; (4) A hotel room or similar accommodation ordinarily let for occupancy by the same tenant for periods of less than thirty (30) days; (5) A hospital room, skilled nursing facility or similar accommodation where the main factor in the rental relationship is the personal care given to the tenant; (6) A dwelling owned, operated or managed by a government agency or which is exempted by State or Federal law from rent regulation. (7) Mobile homes located in mobile home parks and not owned by the park owner. Rent increase. Any additional rent due or paid by a tenant for a rental unit, including any reduction in housing services without a corresponding reduction in the moneys demanded or paid for rent. Tenant. A lessee who occupies land under a lease. Sublessees are tenants. Voluntary vacancy. Occurs when a rental unit is vacated by a tenant for reasons other than eviction. SECTION III This ordinance takes effect 30 days after it is adopted. Within 15 days after this ordinance is adopted the Town Clerk shall cause it to be published once in a newspaper of general circulation published and circulated in the Town. 21 This ordinance was introduced at a regular meeting of the Town Council of the Town of Los Gatos on October 5, 1992 and adopted by the following vote as an ordinance of the Town of Los Gatos at a regular meeting of the Town Council of the Town of Los Gatos on October 19, 1992. COUNCIL MEMBERS: AYES: Randy Attaway, Steven Blanton Mayor Eric D. Carlson NAYS: Brent N. Ventura ABSENT: None ABSTAIN: Joanne Benjamin SIGNED: MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST: CLERK OF THE TOWN OF ZS GATOS LOS GATOS, CALIFORNIA 22