TITLE 25

Property

Manufactured Home Communities

CHAPTER 70. Manufactured Homes and Manufactured Home Communities Act

Subchapter VI. Rent Increase Justification

§ 7050. Purpose [For application of this section, see 79 Del. Laws, c. 304, § 7].

Manufactured housing has become a vital source of affordable housing in Delaware, particularly as a homeownership opportunity for low-income households who otherwise would likely not be able to move into homeownership. In recent years, Delaware has experienced a difficult economic climate which has resulted in a crisis in affordable housing availability. Additionally, manufactured homeowners make substantial and sizeable investments in their manufactured homes. Once a manufactured home is situated on a manufactured housing community site, the difficulty and cost of moving the home gives the community owner disproportionate power in establishing rental rates. The continuing possibility of unreasonable space rental increases in manufactured home communities threatens to diminish the value of manufactured homeowners’ investments. Through this subchapter, the General Assembly seeks to protect the substantial investment made by manufactured homeowners, and enable the State to benefit from the availability of affordable housing for lower-income citizens, without the need for additional state funding. The General Assembly also recognizes the property and other rights of manufactured home community owners, and seeks to provide manufactured home community owners with a fair return on their investment. Therefore, the purpose of this subchapter is to accommodate the conflicting interests of protecting manufactured homeowners, residents, and tenants from unreasonable and burdensome space rental increases while simultaneously providing for the need of manufactured home community owners to receive a just, reasonable, and fair return on their property.

79 Del. Laws, c. 63, §  182 Del. Laws, c. 38, § 40

§ 7051. Rent increase; notice.

(a) A community owner may not increase a tenant’s lot rent more than once during any 12-month period, regardless of the term of the tenancy or the term of the rental agreement.

(b) A community owner may only increase rent if the rent increase complies with all of the following:

(1) Any lease provision providing for a specific amount of rent for a specific period of time.

(2) The applicable requirements of this chapter.

(c) (1) A community owner must provide written notice of a rent increase at least 90 days, but no more than 120 days, before the first day the increased amount of rent is due, to all of the following:

a. Each affected homeowner.

b. The homeowners’ association, if 1 exists.

c. Demhra.

(2) The notice under paragraph (c)(1) of this section must identify all affected homeowners by lot number, name, group, or phase. If the affected homeowners are not identified by name, the community owner shall make the names and addresses available, upon request, to any affected homeowner, homeowners’ association, or DEMHRA.

82 Del. Laws, c. 38, § 4183 Del. Laws, c. 341, § 2

§ 7051A. Rent increase; health or safety violations.

(a) For purposes of this section,

(1) “Escrow account” means an account with an FDIC-insured financial institution in an arrangement that requires that the financial institution hold the escrowed funds for the purpose of payment due to homeowners under this section.

(2) a. “Health or safety violation” or “violation” means a decision that contains a finding of fact or conclusion of law by any court, administrative agency, county, or municipality that a violation of a requirement under this chapter or federal, state, or county law exists and threatens the health or safety of the residents, visitors, or guests of the manufactured home community.

b. A violation is deemed to have started on the date that the violation is final. A violation is final if the decision finding the violation has been fully determined on appeal to the appropriate court, if all time for filing an appeal with respect to the decision has expired, or the decision is not subject to judicial review.

(3) “Total rent increase” means the difference in the amount of rent that a homeowner will owe in 1 year under the increased amount of rent in a notice under § 7051 of this title and the amount of rent the homeowner would owe in 1 year without the rent increase.

(b) A community owner may only increase rent under § 7052A or § 7052B of this title if 1 of the following apply:

(1) During the 12 months preceding the date of the notice of the rent increase, there has not been a health or safety violation in the manufactured home community that continued for 15 or more consecutive days.

(2) The community owner complies with subsection (c) of this section.

(c) A community owner may increase rent if the condition that constitutes the violation under subsection (a) of this section is not corrected if the community owner complies with all of the following:

(1) Provides DEMHRA with all of the following before sending the notice of the rent increase:

a. A surety bond or a letter of credit as follows:

1. If the community owner provides a surety bond, the surety bond must be from an admitted carrier that is licensed in Delaware and has a rating from AM Best of A or better.

2. If the community owner provides a letter of credit, the letter of credit must be from an FDIC-insured financial institution.

3. The surety bond or letter of credit must be all of the following:

A. Payable to the Delaware Manufactured Home Relocation Authority.

B. In an amount sufficient to fund 100% of the total rent increase for all affected homeowners.

C. Contains the purpose of securing that the community owner will correct the violation by a specified date. For purposes of this section, the date by which the violation is corrected cannot be later than 1 year after the date of the violation.

b. A list that includes all of the following:

1. The name of each affected homeowner and the total rent increase for each homeowner.

2. The mailing address of each affected homeowner.

3. The total rent increase for all affected homeowners.

c. Written documentation of how the violation will be corrected.

(2) Sends a copy of the documents required under paragraph (c)(1) of this section with the notice of the rent increase and to the Delaware Manufactured Home Owners Association and the Department of Justice.

(d) If a community owner increases rent under subsection (c) of this section and provides documentation to DEMHRA that the violation has been corrected by the date under paragraph (c)(1)a.3.C. of this section, DEMHRA shall cancel and surrender the surety bond or letter of credit to the community owner and the liability upon the surety bond or letter of credit is discharged.

(e) If a community owner increases rent under subsection (c) of this section and does not provide documentation to DEMHRA that the violation has been corrected by the date under paragraph (c)(1)a.3.C. of this section, the rent increase does not take effect and DEMHRA shall do all of the following:

(1) Make a claim on the surety bond or draw on the letter of credit.

(2) Deposit the funds from the surety bond or letter of credit in an escrow account.

(3) Within 30 days of the date under paragraph (c)(1)a.3.C. of this section, send each affected homeowner the amount of the total rent increase as provided under paragraph (c)(1)b.1. of this section.

(f) DEMHRA may promulgate regulations necessary to implement this section.

(g) The Superior Court has jurisdiction over disputes under this section.

83 Del. Laws, c. 341, § 4

§ 7052. Rent justification; when §§ 7052A and 7052B of this title do not apply [For application of this section, see 79 Del. Laws, c. 304, § 7].

(a) (1) This section applies to rent increases for all single-year and for all multiple-year leases entered into or renewed upon expiration of a prior lease after November 30, 2013, if notice of a rent increase was provided before July 1, 2022.

(2) This section also applies to a lease when notice of a rent increase is provided on or after July 1, 2027, if § 7052A of this title does not apply.

(b) A community owner may raise a homeowner’s rent for any and all 12-month periods governed by the rental agreement in an amount greater than the average annual increase of the CPI-U for the most recently available preceding 36-month period, provided the community owner can demonstrate the increase is justified for all of the following conditions:

(1) The community owner, during the preceding 12-month period, has not been found in violation of any provision of this chapter that threatens the health or safety of the residents, visitors, or guests that persists for more than 15 days, beginning from the day the community owner received notice of such violation.

(2) The proposed rent increase is directly related to operating, maintaining, or improving the manufactured home community, and justified by 1 or more factors listed under subsection (d) of this section.

(c) The Delaware State Housing Authority shall monitor the CPI-U and report to the Authority findings and recommendations relevant to the cost of rent in manufactured home communities in Delaware.

(d) One or more of the following factors may justify the increase of rent in an amount greater than the CPI-U:

(1) The completion and cost of any capital improvements or rehabilitation work in the manufactured home community, as distinguished from ordinary repair, replacement, and maintenance.

(2) Changes in property taxes or other taxes within the manufactured home community.

(3) Changes in utility charges within the manufactured home community.

(4) Changes in insurance costs and financing associated with the manufactured home community.

(5) Changes in reasonable operating and maintenance expenses relating to the manufactured home community including costs for water service; sewer service; septic service; water disposal; trash collection; and employees.

(6) The need for repairs caused by circumstances other than ordinary wear and tear in the manufactured home community.

(7) [Repealed.]

(8) The amount of rental assistance provided by the community owner to the homeowners under § 7022 of this title.

(e) A community owner shall not incorporate the cost of a civil penalty, criminal fine, or litigation-related costs for rent-related proceedings into rent charged under any circumstance. A community owner also shall not utilize as justification for any future rental increase the cost of capital improvements or rehabilitation work, once that cost has been fully recovered by rental increases that were incorporated into a prior rental increase in excess of CPI-U, where the prior rental increase was properly implemented under this subchapter.

79 Del. Laws, c. 63, §  179 Del. Laws, c. 304, §§  1, 682 Del. Laws, c. 38, § 4283 Del. Laws, c. 341, § 3

§ 7052A. Rent increase; justified base rent increase calculations.

(a) (1) This section applies to a lease when notice of a rent increase is provided on or after July 1, 2022, until July 1, 2027.

(2) Any of the following may continue beyond July 1, 2027:

a. A phased rent increase in effect under paragraph (d)(3) of this section.

b. An agreement under paragraph (b)(1)c. of this section.

(3) After July 1, 2027, this section continues to apply to rent increased under this section, including an additional rent increase under § 7052B of this title, until the end of the period for the rent increase.

(b) (1) If a community owner is in compliance with § 7051A of this title, a community owner may increase rent under 1 of the following:

a. Paragraph (c)(2) of this section, based on the CPI-U.

b. Subsection (d) of this section, based on the market rent.

c. Notwithstanding subsections (c) and (d) of this section, a community owner and a homeowner may, under a separate written agreement, mutually agree to a rent increase effective for longer than 1 calendar year.

(2) In addition to a rent increase under paragraph (b)(1) of this section, a community owner may increase rent under § 7052B of this title, if the community owner includes a written reservation of rights as follows:

a. In the notice for a rent increase under paragraph (c)(2) or subsection (d) of this section.

b. In the agreement to a rent increase under paragraph (b)(1)c. of this section.

(c) (1) a. For purposes of this section, “24-month CPI-U” means the average annual increase of the CPI-U for the most recently available preceding 24-month period.

b. The Delaware State Housing Authority shall monitor updates to the CPI-U and within 5 days after new CPI-U data is released, calculate the 24-month CPI-U and report the 24-month CPI-U to DEMHRA.

(2) A community owner may increase rent in an amount that does not exceed the following:

a. If the 24-month CPI-U is equal to or below 7%, by 3.5% of the rent plus 50% of the 24-month CPI-U up to an amount that does not exceed 7% of the 24-month CPI-U.

b. If the 24-month CPI-U exceeds 7%, by the 24-month CPI-U.

(3) a. Before providing notice of a rent increase under this subsection, a community must receive certification from DEMHRA that the rent increase is in compliance with paragraph (c)(2) of this section, as follows:

1. At least 20 days before providing notice of the rent increase, a community owner must submit written notice of this rent increase to DEMHRA and the Consumer Protection Division of the Department of Justice.

2. Within 10 days of receiving the notice under paragraph (c)(3)a.1. of this section, DEMHRA shall provide a written reply to the community owner that either provides certification that the proposed rent increase complies with paragraph (c)(2) of this section or states that the proposed rent increase cannot be certified.

b. A community owner must provide a copy of the certification under paragraph (c)(3)a.2. of this section with the notice of the rent increase.

c. If DEMHRA does not provide certification under paragraph (c)(3)a.2. of this section, a community owner must submit a new notice under paragraph (c)(3)a.1. of this section before increasing rent under this subsection.

(4) The Superior Court has jurisdiction over disputes under this subsection (c).

(d) (1) A community owner may increase rent to bring the amount of rent to a market rent.

(2) Section 7053 of this title applies to a rent increase under this subsection.

(3) A rent increase under this subsection must be phased in equally as follows:

a. Over 7 years, if the increase under paragraph (d)(1) of this section is an amount that equals 50% or less of the rent on the date of the notice of the rent increase.

b. Over 10 years, if the increase under paragraph (d)(1) of this section is an amount that equals more than 50% of the rent on the date of the notice of the rent increase.

83 Del. Laws, c. 341, § 4

§ 7052B. Rent increase; justified additional rent increase for allowed expenses.

(a) A community owner may increase rent under this section, in addition to a rent increase under § 7052A of this title, if the community owner is in compliance with all of the following:

(1) Sections 7051A and 7052A(b)(2) of this title.

(2) In the notice of the rent increase, the community owner explains that the community owner is providing written documentation of the actual cost of each of the allowed expenses by doing all of the following:

a. Providing a website where the documentation may be accessed and downloaded.

b. Making paper copies available for review in the manufactured home community’s management office.

c. Upon request of a homeowner, providing paper copies of the documentation at no cost.

(b) For purposes of this section:

(1) “Additional rent increase” means a rent increase under this section, that is in addition to the base rent increase.

(2) “Aggregate total of allowed expenses” means the total dollar amount of all of the allowed expenses for the manufactured home community for a 12-month period.

(3) “Allowed expenses” mean all of the following for the manufactured home community:

a. Taxes.

b. Insurance.

c. Utility charges or service.

d. Onsite employee costs, such as benefits and employment taxes, but not salaries or wages.

(4) “Anniversary date” means the date of the most recent base rent increase.

(5) “Base rent increase” means a rent increase under § 7052A of this title.

(6) “Increase of the aggregate total of allowed expenses” means the difference between the aggregate total of allowed expenses for the previous 12-month period and the aggregate total of allowed expenses for the prior 12-month period.

(7) “Onsite employee” means an employee whose primary job responsibilities are directly related to the operation and management of the manufactured home community.

(8) “Previous 12-month period” means the most recent 12 months before the notice of the rent increase under this section.

(9) “Prior 12-month period” means the most recent 12 months before the beginning of the previous 12-month period.

(10) “24-month CPI-U” means the 24-month CPI-U as calculated under § 7052A(c)(1) of this title.

(c) If a community owner is increasing rent under § 7052A(c)(2) of this title, the community owner may include an additional rent increase if the increase of the aggregate total of allowed expenses increased by a percentage that is larger than the 24-month CPI-U.

(d) On or after the second anniversary date of the base rent increase under § 7052A(b)(1)c. or (d), the community owner may add an additional rent increase if the increase of the aggregate total of allowed expenses increased by a percentage that is larger than the 24-month CPI-U.

(e) An additional rent increase is calculated by dividing the increase of the aggregate total of the allowed expenses by the number of recorded lots in the manufactured housing community and adding that sum to the base rent increase under § 7052Aof this title.

83 Del. Laws, c. 341, § 4

§ 7053. Rent increase dispute resolution [For application of this section, see 79 Del. Laws, c. 304, § 7, and 80 Del. Laws, c. 229, § 3].

(a) (1) This section applies to rent increases under §§ 7052, 7052A(d), and 7052B of this title.

(2) The Authority must maintain a form final meeting notice that includes all of the following:

a. The deadline to request arbitration under subsection (f) of this section.

b. A statement that an informal meeting under subsection (e) of this section does not affect, in any way, the date by which arbitration must be requested under subsection (f) of this section.

(3) The written notice under § 7051 of this title must contain all of the following:

a. The approved date, time, and place for the final meeting required under subsection (b) of this section.

b. The form language maintained by the Authority under paragraph (a)(2) of this section.

(b) If the proposed rent increase exceeds the CPI-U, the Authority shall approve a final meeting between the community owner and the affected homeowners, and the homeowners’ association, if one exists, to discuss the reasons for the proposed increase. The final meeting must be held within 30 days from the mailing of the notice of the rent increase.

(1) The community owner proposing the rent increase shall recommend to the Authority, in writing, a date, time, and place of the final meeting and provide a copy of this recommendation to the homeowner’s association, if one exists.

(2) The Authority shall approve the community owner’s recommendation if it determines that the date, time, and place are reasonable.

(3) The community owner shall include the approved date, time, and place for the final meeting in the notice required under subsection (a) of this section.

(c) At or before the final meeting the community owner shall, in good faith, disclose in writing all of the material factors resulting in the decision to increase the rent. When market rent is a factor used by the community owner, the community owner shall provide a range of rental rates from low to high, and when relevant the mean and median; this disclosure must include all of the following:

(1) Whether comparable rents were determined at arm’s length, each case in which the community owner or related party has an ownership interest in the comparable lot/community.

(2) The time relevance of the data.

(3) The community owner shall disclose financial and other pertinent documents and information supporting the reasons for the rent increase.

(d) The community owner and at least 1 affected homeowner or the homeowners’ association may agree to extend or continue the final meeting required under this section by doing all of the following:

(1) The community owner and the homeowner or homeowner’s association must sign a written document containing a specific date for the rescheduled final meeting.

(2) Within 2 business days of signing the agreement to continue or extend, the community owner shall notify the Authority of the agreement by forwarding the signed agreement to the Authority.

(e) At the community owner’s election, the community owner may schedule 1 or more informal meetings, before or after the final meeting, to discuss the proposed rent increase.

(f) After the final meeting, any affected homeowner who has not already accepted the proposed increase, or the homeowners’ association on the behalf of 1 or more affected homeowners who have not already accepted the proposed increase may, within 30 days from the conclusion of the final meeting, petition the Authority to appoint a qualified arbitrator to conduct nonbinding arbitration proceedings. If the thirtieth day is a Saturday, Sunday, legal holiday, or other day on which the office of the Authority is closed, the 30-day period shall run until the end of the next day on which the office of the Authority is open. Only if a petition is timely filed, the Authority shall select an arbitrator who is a member of the Delaware Bar with appropriate training in alternative dispute resolution. The Authority may select an arbitrator from the list of arbitrators maintained by the Superior Court of the State, or by soliciting applicants for a list maintained by the Authority, or through another method which the Authority, in its discretion, has determined will be sufficient to result in the selection of an appropriate arbitrator. The tenants and the landlord must each pay $250 to the Delaware Manufactured Home Relocation Trust Fund to be applied to the arbitrator’s fee. The Authority shall pay all direct arbitration costs in excess of the $500 collected from the homeowners and community owner. All other costs shall be the responsibility of the respective parties. The arbitration must be held within 60 days from the date of the petition.

(g) The Delaware Uniform Rules of Evidence shall be used as a guide by the arbitrator for admissibility of evidence submitted at the arbitration hearing.

(h) Unless waived by all parties, testimony will be under oath or affirmation, administered by the arbitrator.

(i) Testimony shall be transcribed and shall be considered a written record.

(j) The arbitrator will render a decision employing the standards under the requirements of the section under which the rent increase is proposed.

(k) The arbitrator will render a written decision within 15 days of the conclusion of the arbitration hearing.

(l) The homeowners will be subject to the rent increase as notified; however, if the rent increase is not approved through the process provided in this section, the community owners shall rebate the increase.

(m) Notwithstanding any other law or regulation to the contrary, all of the following may attend a final meeting as described in subsection (b) of this section:

(1) The homeowner’s designee.

(2) The homeowner’s attorney.

(3) The homeowners’ association’s attorney.

(4) A representative from The Delaware Manufactured Home Owners Association (DMHOA) or its successor.

(5) Elected Delaware officials, including officials holding a federal office.

(6) A representative from the Delaware Manufactured Home Relocation Authority Board.

79 Del. Laws, c. 63, §  179 Del. Laws, c. 304, §§  2-480 Del. Laws, c. 229, § 182 Del. Laws, c. 38, § 4383 Del. Laws, c. 175, § 183 Del. Laws, c. 341, § 5

§ 7054. Appeal [For application of this section, see 79 Del. Laws, c. 304, § 7 and 80 Del. Laws, c. 229, § 3].

The community owner, the homeowners’ association, or any affected homeowner may appeal the decision of the arbitrator under § 7053(k) of this title, within 30 days of the date of issuance of the arbitrator’s decision. The appeal shall be to the Superior Court in the county of the affected community. The appeal shall be on the record and the Court shall address written and/or oral arguments of the parties as to whether the record created in the arbitration is sufficient justification for the arbitrator’s decisions and whether those decisions are free from legal error.

79 Del. Laws, c. 63, §  179 Del. Laws, c. 304, §  580 Del. Laws, c. 229, § 282 Del. Laws, c. 38, § 4483 Del. Laws, c. 341, § 6

§ 7055. Penalties [For application of this section, see 79 Del. Laws, c. 304, § 7].

A community owner who raises a homeowner’s rent more than the annual average increase of the CPI-U for the preceding 36-month period without complying with this subchapter, must immediately reduce the rent to the amount in effect before the unauthorized increase and rebate the unauthorized rent collected to the homeowners with interest. The Department of Justice shall have authority over this section.

79 Del. Laws, c. 63, §  182 Del. Laws, c. 38, § 45

§ 7056. Exemption [For application of this section, see 79 Del. Laws, c. 304, § 7].

(a) Resident-owned communities shall be exempt from the provisions of this subchapter.

(b) Any deed subject to lease community shall be exempt from the provisions of this subchapter. A deed subject to lease community is a community wherein each homeowner has a deed subject to lease recorded with the recorder of deeds, has a long-term lease of at least 40 years’ duration where the lease includes specific rent increases, and wherein each home is of modular construction.

79 Del. Laws, c. 63, §  182 Del. Laws, c. 38, § 46