Little Mountain Estates Tenants Association v. Little Mountain Estates MHC, L.L.C.

We are asked to decide under the Manufactured/Mobile

Home Landlord-Tenant Act (MHLTA), chapter 59.20 RCW, whether a landlord

and tenant can lawfully agree to a 25-year lease that will convert to a one-year

lease if the tenant assigns it. Because the MHLTA expressly preserves the right

of a landlord and tenant to negotiate and agree to the term of a rental agreement,

this agreed-to provision does not violate the MHLTA.

No. 82574-2

Facts

Petitioner Little Mountain Estates MHC LLC operates a manufactured

home community intended for the elderly. To entice new residents the owner

offered individuals a 25-year lease with rent increases tied to the Consumer Price

Index. According to the rental agreement this 25-year term was only available to

the original tenant; if the tenant assigned the lease to another party, the assigned

lease would be for one or two years.1 When formulating the offer, the owner

determined that a 25-year lease with a fixed rent increase would not be profitable

when a resident stayed for the entire length of the lease, but that loss would be

offset by those who assigned their leases before the 25-year term expired. This

trade-off balanced financial security for the tenants by having fixed rent for 25

years and profit for the park owners because the financial security attracted more

tenants and the full 25-year term would not be exercised in its entirety in most

cases.

Every tenant had the opportunity to read the rental agreement prior to

signing; every tenant signed it; and no tenant objected to the assignment

provision at that time. Later, some tenants assigned their leases and Little

Mountain Estates Tenants Association brought suit claiming the assignment

1 Some of the leases provided an assignee a one-year term; other leases provided a two-year term. The distinction is immaterial to the ultimate legal issue here.

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provision violated the MHLTA and the Consumer Protection Act (CPA), chapter

19.86 RCW.

The trial court held the lease did not violate the MHLTA or the CPA and

the tenants were bound by the terms of the leases they voluntarily signed. The

Court of Appeals reversed the trial court's determination that the MHTLA was

not violated. Little Mountain Estates Tenants Ass'n v. Little Mountain Estates

MHC LLC, 146 Wn. App. 546, 561, 192 P.3d 378 (2008) (Little Mountain).

Standard of Review

The court reviews statutory interpretation de novo. State v. Williams, 158

Wn.2d 904, 908, 148 P.3d 993 (2006) (citing Am. Cont'l Ins. Co. v. Steen, 151

Wn.2d 512, 518, 91 P.3d 864 (2004)). Where the plain language of the statute is

unambiguous, the statute's plain meaning should be enforced. State v.

Armendariz, 160 Wn.2d 106, 110, 156 P.3d 201 (2007) (citing State v. J.P., 149

Wn.2d 444, 450, 69 P.3d 318 (2003)).

ANALYSIS

The issue is whether under the MHLTA a landlord and tenant can agree to

a 25-year rental term with fixed rent increases that becomes a one- or two-year

term if the tenant assigns the rental agreement. The MHLTA expressly permits a

landlord and tenant to negotiate the term of their rental agreement. RCW

59.20.090(1) provides: "Unless otherwise agreed rental agreements shall be for

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a term of one year." (Emphasis added.) Here, the landlord and tenants agreed to

a varying term based upon whether the rental agreement was assigned. Nothing

in the MHLTA precludes the term of the rental agreement from being determined

by a formula or linked to the tenant's decision to assign the lease. Cf. Vance v.

Villa Park Mobilehome Estates, 36 Cal. App. 4th 698, 708, 42 Cal. Rptr. 2d 723

(1995) (The California Court of Appeals held, because the Mobilehome

Residency Law allowed the landlord and tenant to determine the rental rate, the

parties were permitted to determine the rent by any formula to which they agreed,

including a formula increasing rent upon assignment.).

The tenants argue the assignment provision requires tenants to waive their

right to assign their 25-year leases and thus is unenforceable. The MHLTA

protects a tenant's right to assign his or her rental agreement and renders

unenforceable any contract provision that waives that right. See RCW

59.20.060(2)(d), .073(1). However, the tenants' position mischaracterizes the

rental agreement. The MHLTA permits parties to agree to the term of the rental

agreement, RCW 59.20.090(1), and the parties here did agree to a term of 25

years for the original tenant and one or two years if assigned. Tenants are

precluded from assigning a 25-year term because their rental agreements never

provided an assignable 25-year term.2 However, they are not prevented from

assigning, nor did they waive their right to assign, the rental agreement.3

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Respondents also argue that upholding the assignment provision

contradicts the legislative intent statements of the MHLTA. However,

statements of legislative intent are irrelevant to a court's analysis when the

statutory language is unambiguous. See Armendariz, 160 Wn.2d at 110 (citing

2 This does not open the gates for a landlord to surreptitiously circumvent a tenant's right under the MHLTA to assign his or her rental agreement by adding an assignment provision that essentially extinguishes the lease. Here we address an assignment provision that affects the term of the rental agreement; the MHLTA specifically provides that the parties can agree upon the term of the lease. Furthermore, the assignment provision provides for, at minimum, a one-year term. A one-year term is the default term set forth in the MHLTA. See RCW 59.20.090(1); see also, RCW 59.20.050(1). We have no occasion here to determine whether a shorter term might run afoul of the MHLTA or raise issues of unconscionability.

3 The Court of Appeals reasoned that any limitation imposed on the scope of an assignment violated the MHLTA because the court defined an assignment as the transfer of the identical contractual rights from the assignor to the assignee. See Little Mountain, 146 Wn. App. at 560. But this overstates the common law and the cases relied upon by the Court of Appeals. Puget Sound National Bank v. Department of Revenue, 123 Wn.2d 284, 287, 868 P.2d 127 (1994), addressed whether a sales tax refund for worthless debt passed upon assignment to a bank. Estate of Jordan v. Hartford Accident and Indemnity Co., 120 Wn.2d 490, 495, 844 P.2d 403 (1993), addressed whether the assignee of a bond had standing to sue. Neither of those cases addressed contract provisions that altered the terms of the contracts upon assignment.

Conversely, the common law preserves citizens' freedom to contract. See, e.g., Clements v. Olsen, 46 Wn.2d 445, 448, 282 P.2d 266 (1955) ("Courts do not have the power, under the guise of interpretation, to rewrite contracts which the parties have deliberately made for themselves."); Torgerson v. One Lincoln Tower, LLC, 166 Wn.2d 510, 517, 210 P.3d 318 (2009) ("It is black letter law of contracts that the parties to a contract shall be bound by its terms." (quoting Adler v. Fred Lind Manor, 153 Wn.2d 331, 344, 103 P.3d 773 (2004))). Here, common law supports, and RCW 59.20.090(1) expressly preserves, the parties' freedom to negotiate the term of the rental agreement.

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J.P., 149 Wn.2d at 450). Unambiguous statutory language is enforced as written.

Id. RCW 59.20.090(1) unambiguously preserves the right of a landlord and

tenant to negotiate and agree to the term of the rental agreement.

Even if this court were to look to statements of legislative intent as the

Court of Appeals erroneously did, see Little Mountain, 146 Wn. App. at 560,

those statements do not support voiding the assignment provision here. RCW

59.22.010(2) sets forth the multiple legislative purposes of the MHLTA. The

first is to maintain low-cost housing to benefit the elderly. Here, an initial 25-

year term with fixed increases in rent provides secured housing and financial

stability to the elderly who live there, and the assignment provision makes that 25-

year term economically feasible for the manufactured home park. The legislature

also sought "to obtain a high level of private financing for mobile home park

conversions" and "to help establish acceptance for resident-owned mobile home

parks in the private market." Id. Permitting a park owner to offer contractual

terms that provide attractive yet profitable features to prospective residents

encourages additional private financing and market growth.

Respondents ask this court to deem unenforceable any provision that alters

the contract upon assignment. However, this contract does not alter an

assignment; it provides in the original contract what would happen in that

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eventuality. Nothing in the MHLTA imposes a wholesome prohibition on such

assignment provisions. The MHLTA does not prevent landlords from offering

special terms to the tenants who first move into a new mobile or manufactured home park.4 Such a practice is not uncommon when a landlord is attempting to

populate a new rental community.

Ultimately, the core of respondents' argument is that the rental agreement

here was misleading, that labeling the contract as a "25 Year Lease Agreement"

but including a provision that converted the term to one or two years upon

assignment was deceptive or unfair. That claim is one under the CPA, not the

MHLTA. Respondent's CPA claim is not before this court on review; the Court

of Appeals remanded the CPA claim for further factual findings to determine

whether the tenants could prove a CPA violation. See Little Mountain, 146 Wn.

App. at 563.

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See: http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=825742MAJ

We hold the assignment provision does not violate the MHLTA and the MHLTA does not render it unenforceable. The Court of Appeals decision is

reversed to the extent it is inconsistent with this holding. Respondents'

remaining claim under the CPA is remanded to the trial court as is the claim for

an award of reasonable attorney fees under RCW 59.20.110.