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 landlord 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.

82 Del. Laws, c. 38, § 41

§ 7052. Rent justification [For application of this section, see 79 Del. Laws, c. 304, § 7].

(a) 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 Consumer Price Index For All Urban Consumers in the Philadelphia-Wilmington-Atlantic City area (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 (c) of this section.

(b) 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.

(c) 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) Market rent. — For purposes of this section, market rent’' means that rent which would result from market forces absent an unequal bargaining position between the community owner and the homeowners. In determining market rent relevant considerations include rents charged to recent new homeowners entering the subject manufactured home community and/or by comparable manufactured home communities. To be comparable, a manufactured home community must be within the competitive area and must offer similar facilities, services, amenities, and management.

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

(d) 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, § 42

§ 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) A community owner shall give written notice to each affected homeowner and to the homeowners’ association, if one exists, and to the Delaware Manufactured Home Relocation Authority (“Authority”), at least 90 days prior to any increase in rent. The notice shall 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 to any affected homeowner, homeowners’ association, and the Authority, upon request.

(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 this subsection (a) 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 § 7052 of this title.

(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, § 1

§ 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 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, § 44

§ 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