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Page 2 Memo to Mayor and Councilmembers May 1, 2009 Stabilization Agreement. Presumably the City and the park owner would attempt to negotiate a new rent stabilization agreement in 2017 that would apply until the park owner began selling the Tots (which could not be earlier than 2019). In order to avoid the potential that these negotiations might not be successful, staff recommends that a condition of approval be added that would provide that the term of the existing Rent Stabilization Agreement be extended through 2025 with the understanding that if the state law provisions, in particular as to lower income households, were more beneficial, those provisions would apply. That is, it may be that the rent increases undcr the state law provisions would produce a lower rent increase than the Rent Stabilization Agrcement. By applying the formula that yields the lower rent, residents will be better protected. 2. Supporting legislation to strengthen local control over mobilehome conversions. One of the reasons that staff is recommending that the Council approve this application, even though Tess than a majority of the residents in the Park evidenced support for the conversion, is that current state law is ambiguous whether the Council may consider resident support in determining whether to approve the application. The park owner, pointing to case law and portions of the legislative history concerning Government Code, Section 66427.5, argues that resident support is not relevant for purposes of approval of the conversion and becomes relevant only if the conversion were approved but then lots not sold, i.e., the conversion was a "sham "just to avoid local rent control provisions. Although there is competing legislative history concerning Section 66427.5 and other sections of the Government Code that suggests public entities may consider resident support and /or may impose conditions on conversion, there is no published case law that clearly supports that position. Accordingly, state law needs to revised to provide morc clearly that public entities can exercise local control over these types of conversions. For example, earlier this year, legislation (AB 566) was introduced that included a provision that stated expressly that a local agency was not prohibited from enacting reasonable measures to prevent sham conversions of mobilehome parks and to preserve affordable housing. Unfortunately, that bill has been amended in committee to delete that provision. Notwithstanding the current status of AB 566, staff recommends that Council support amending AB 566 further to include the provisions that would give local agencies more control over these conversions and authorize support of other legislation that would accomplish the same goal. 3. Support other public entities' litigation efforts to exercise more local control over mobilehome conversions. Unless and until there is a published court of appeal decision that provides the legal support for local agencies to impose reasonable conditions on residential conversions, local agencies are likely to be challenged in court by park owners and may be at risk for damages if the application is denied. For example, the County of Sonoma adopted an ordinance that allows the Board of Supervisors to deny a conversion application when less than 20% of the residents are in support of the conversion. The park owner filed a "facial" challenge to the ordinance and made a $25 million claim against the County. The County prevailed at the trial court level but the park owner has appealed. The case has been fully