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Iacona v. Hometown Rehoboth Bay, LLC

Superior Court of Delaware

May 1, 2018

JOHN IACONA and ROBERT WEYMOUTH, Appellants,
v.
HOMETOWN REHOBOTH BAY, LLC, Appellee.

          Submitted: March 14, 2018

         Upon Appellee's Motion to Dismiss or Otherwise Limit the Scope of Appeal. Denied.

          Brian S. Eng, Esq., Community Legal Aid Society, Inc., Attorney for Appellants.

          Michael P. Morton, Esq. & Nicole M. Faries, Esq., Michael P. Morton, P.A., Attorneys for Appellees.

          MEMORANDUM OPINION

          Introduction

         Before the Court is Appellee, Hometown Rehoboth Bay, LLC's ("HRB"), Motion to Dismiss or Otherwise Limit the Scope of Appeal. For the following reasons, the Motion is DENIED.

         Factual and Procedural History

         The Appellants, John Iacona and Robert Weymouth ("Appellants"), challenged a rent increase imposed by HRB, the managing entity of the manufactured home resort community in which Appellants are tenants. Appellants brought this challenge under the Manufactured Homeowners and Manufactured Community Owners Act, commonly called the Rent Justification Act ("Rent Justification Act" or "Act").[1] Each man filed a petition for arbitration on his individual behalf, but later claimed to collectively represent a large proportion of the community population.[2] After an unfavorable decision by the Arbitrator assigned to resolve the dispute, Appellants appealed to the Superior Court.[3] On May 1, 2017, HRB filed this Motion to Dismiss or Limit the Scope of Appeal, which seeks to either limit the scope of the case to the two homeowners who originally filed petitions for arbitration or dismiss the case altogether. On June 28, 2017, Appellants filed their response, arguing that all of the homeowners they purport to represent are proper parties to the appeal. Oral argument was held on February 8, 2018.

         First, a review of the Rent Justification Act is helpful. The Delaware Court of Chancery case, December Corporation v. Wild Meadows Home Owners Association, summarizes the Rent Justification Act well:

In 2013, the Delaware General Assembly enacted the Rent Justification Act (the "Act"). The Act requires the owners of manufactured home communities ("Community Owners") to "justify" certain increases in annual rents that Community Owners charge to manufactured home owners who lease the land. Pursuant to the Act, if a Community Owner seeks to increase annual rents by an amount greater than the three-year average increase in the Consumer Price Index (the "CPI-U"), the Community Owner must justify the increase by meeting one of eight statutory justifications.
In order to perfect any increase in rent, the Act requires that Community Owners follow specific procedures to notify its residents. At least 90 days before the effective date of a proposed rent increase, the Community Owner must send a notice to three parties: the affected home owners, the HOA, and the Authority. If the proposed rent increase exceeds the three-year average increase in the CPI-U, the Community Owner must also schedule a meeting between the parties to "discuss the reasons for the increase." The meeting must be held within 30 days of sending the notice of the proposed rent increase. Finally, within 30 days of the meeting, any dissenting home owner or the HOA representing any dissenting home owner may petition the Authority to appoint an arbitrator to conduct nonbinding arbitration proceedings.[4]

         As previously stated, Appellants opposed the rent increase, so after undergoing the proper procedures, they petitioned for arbitration under 25 Del. C. §7043. As a preliminary matter, the Arbitrator addressed which home owners had standing to challenge the rent increase through arbitration. This is also the focus of the instant Motion. The Appellants were the only two home owners to sign the arbitration petitions. No petition was brought by the registered home owners association ("HOA"). However, Appellants argue that they represent a much larger portion of the community. They have provided a sign-up sheet showing the signature of the home owners they purport to represent. HRB argued that Iacona and Weymouth only had standing to challenge their individual rent increases.

         After reviewing the parties' submissions and the applicable law, the Arbitrator found that the Appellants were acting as representatives of the larger HRB community. Thus, the decision would apply to all parties listed on the sign-up sheet, not the Appellants only. The Arbitrator wrote, "...based on a plain reading of the language in the statute, and particularly in light of the current precedent from the courts, the steps taken and procedures followed by Mr. Iacona, and the home owners he has designated to represent, meet the legislative intent behind the governing statute to make him their representative."[5]

         The decision also went on to explain why it was unlikely that the HOA would have taken the issue forward, stating "What is clear is that the purported home owners association for the community and the community at large were not of a single mind. Indeed, the evidence seems indisputable that the vast majority of the home owners did ...


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