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Rent Negotiations

Inflation

One factor often cited is inflation or “cost of living”. A measure of fair lot rents is to take historical rents in the park and compare them to todays (or tomorrows proposed) rents. If costs; such as property tax (ad Valorem), city & county fees (non ad Valorem) or waste removal have been broken out as separate bills  since the start date they must be considered. Here’s an real example:

In 1992 a resident moved in to the park and got a lifetime rent certificate for $279/month. Taxes and trash were extra. What would the lot rent be today adjusted for cost of living?

The United States Department of Labor – Bureau of Labor Statistics has a CPI Calculator. The CPI inflation calculator uses the Consumer Price Index for All Urban Consumers (CPI-U) U.S. city average series for all items, not seasonally adjusted. This data represents changes in the prices of all goods and services purchased for consumption by urban households. Its calculation (Jan – Jan) would put the lot rent in 2019, adjusted for cost of living, at $508.53

As you can see these values, from two different sources, are almost identical. Using these tools and historical data gathered from past park rent data you can put todays rent in perspective with regard to the argument it has not kept up with inflation.

Mixed Parks

Are the “Market” rent folks in your park being asked to pay the full cost of improvements and expense increases while others in the park are not counted in the calculation? When an investment group or corporation buys a park they are obligated to honor the “deals” made by previous owners. This could include Lifetime fixed rent arrangements, “CPI” rental increase agreements, or other rents at less than “Market”. New folks coming in are typically moved to “Market”. That’s a great deal for those fortunate enough to have been in the right place at the right time but are the rest being asked to pay unfairly?

Rent negotiations relate only to an “affected” group. In mixed parks this can mean the only negotiable rents are those on “Market”. Factors brought to the table by owners can include cost increases and capital improvements. As an example, let’s say a park owner has a 5 % cost increase and has made $100,000.00 in improvement in the last year. For this example we’ll use a park with 500 lots whose rents break down thusly:

  • 100 lots on Lifetime fixed agreements
  • 200 lots on “CPI” adjusted increases
  • 200 lots on “Market”

The only rent negotiation to be addressed by the HOA is that of those on “Market” rent. So the question is: “How are these increases divided?” Since the park owner can only increase rents substantially for the “Market” renters – it stands to reason they would pass on the entire costs in this negotiation. In reality – only 2/5 of the costs should be attributed to this group. It is up to the HOA negotiating committee to insure this is how the calculation is done to insure “Market” folks are only required to pay their fair share.