Victoria Finkle is the director of consumer protection for the Delaware Department of Justice. This was also sent to manufactured home community owners across the state Oct. 14.
We are writing to inform you of a concern that has come to our attention in recent months and to put all manufactured home community owners on notice of your obligations under the law.
The Delaware Department of Justice’s manufactured housing ombudsperson has referred to the Consumer Protection Unit multiple consumer complaints from residents regarding recent rental increases in manufactured housing communities. To balance the needs of both manufactured home residents and community owners, Delaware law provides several approved methods for determining annual lot rent increases in manufactured home communities. Absent certain prohibitions, community owners may base an increase in lot rent on one of the following:
The complaints assert that manufactured housing community owners are increasing rents using both a CPI-U increase and a phased-in market rent value increase in the same year. This is a misreading of the statute that runs counter to the purpose of the law.
Rent increase justification
Delaware’s landmark Manufactured Homes and Manufactured Home Communities Act includes a subchapter dedicated to rent increase justification, outlining specific parameters and formulas for how, when and by how much a manufactured home community owner may increase a manufactured home resident’s lot rent, providing critical protection against unreasonable and burdensome rental increases.
As provided by 25 Del. C. § 7051(a), “a community owner may not increase a tenant’s lot rent more than once in any 12-month period.” Section 7052A(b)(1) provides a list of three options that a compliant community owner may use as his or her basis for rent increases per 12-month period for each resident. A community owner “may increase rent under 1 of the following” methods, to include:
The choice to phase in market rent necessarily precludes the use of a CPI-U rent increase in a given year.
When it created Section 7052A in 2022, the legislature included explicit direction for community owners to bring the amount of rent to market rate, gradually, in equal increments over a course of seven or 10 years. A community owner who chooses to base an annual rent increase on market rent, instead of CPI-U, is permitted to impose a series of rent hikes for the specified seven- or 10-year period, which must be communicated to the manufactured home resident in the first year that such an annual increase is put into effect.
Under the only logical reading of the statute, a rent increase based on market rent cannot be implemented simultaneously with a rent increase based on CPI-U. This is supported by language throughout the statute that contemplates a structure whereby the community owner must choose a single approach:
Reading these provisions together, it is clear that aggregating both market rent and CPI-U rent increases in the same 12-month period would be a violation of Chapter 70.
The law must be read consistent with the legislative purpose to prevent residents from unreasonable and burdensome rent increases.
A community owner’s attempt to increase a resident’s lot rent based on more than one method in the same 12-month period would be unreasonable and burdensome on residents and thus counter to the law’s purpose.
The General Assembly was keenly aware of competing interests in the manufactured housing market when it approved Chapter 70, Subchapter VI, regarding rent increase justification, and it has made subsequent amendments to the law. Indeed, the stated purpose of the law is to “accommodate” such “conflicting interests” — on the one hand, “protecting manufactured homeowners, residents, and tenants from unreasonable and burdensome space rental increases,” while, at the same time, “providing for the need of manufactured home community owners to receive a just, reasonable, and fair return on their property.” However, manufactured home community owners double-dipping on rent increases is neither just, reasonable nor fair. Thus, a reading of the statute that would permit a community owner to impose a rent increase based on CPI-U, while already increasing the resident’s rent based on market rent in the same year, would be contrary to the stated goals of the legislature.
Conclusion
In summary, raising lot rent based on both market rent and CPI-U in a single year is a violation of the MHMHCA and potentially a violation of the Consumer Fraud Act, 6 Del. C. § 2511 et seq.
Any community owner who has implemented more than one rent increase in the same year should take appropriate corrective action to bring him- or herself into compliance with the law. Failure to do so may result in a CPU enforcement action.
Thank you for your attention to this letter. If you have questions, please reach out to deputy attorney general Giovanna Crozier-Fitzgerald at giovanna.crozierfitzgerald@delaware.gov.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
