HILLSBORO PROPERTIES v.CITY OF ROHNERT PARK
Filed 4/6/06
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
| HILLSBORO PROPERTIES et al., Plaintiffs and Appellants, v. CITY OF ROHNERT PARK et al., Defendants and Respondents. | A110441 (Sonoma County Super. Ct. No. SCV-235529) |
A property owner is prevented from charging increased rent by a rent control ordinance that is subsequently determined to be unconstitutional. Is the owner entitled to recover the lost rental income, either from its tenants or from the city that imposed the limit, if the ordinance did not deny the owner a fair return on its investment? We hold that it is not.
In 1987, the City of Rohnert Park (the city) passed a rent control ordinance that limited the amount by which a landlord of a mobile home park could raise rents. Plaintiffs Hillsboro Properties and Goldstone Enterprises, Inc., doing business as Rancho Grande Mobilehome Park (collectively, Hillsboro) seeks to recover, either from its tenants or from the city, rents in excess of the rent control ceiling for the period during which the ordinance, subsequently held to be unconstitutional, was in force. Hillsboro relies principally on Kavanau v. Santa Monica Rent Control Bd. (1997) 16 Cal.4th 761 (Kavanau) in arguing that it is entitled to recover additional rents from its tenants, and on Galland v. City of Clovis (2001) 24 Cal.4th 1003 (Galland) in seeking to recover directly from the city. In Kavanau, the court held that when a rent control law becomes confiscatory--i.e., denies the property owner a fair rate of return--a constitutional taking can be obviated by allowing the landlord to adjust future rents to compensate for prior enforcement of the overreaching law. From 1988 through 1995, Hillsboro gave notice to its tenants of higher rents that it sought to impose, but could not because of the ordinance. In 1995, the city amended the ordinance to allow a landlord to raise rents above the rent control ceiling in order to recoup the cost of capital improvements, which the original measure did not permit. In 1996, a federal court determined that the ordinance as originally written was unconstitutional because it did not provide a fair return on capital improvements. In December 2002, the federal court held that the amended ordinance satisfied constitutional requirements. Beginning in August 2003, Hillsboro unsuccessfully attempted to apply to the rent board for a â€
