Treasure Island Owners, Mobile Home Tenants OK Deal : Housing: Most permanent residents will get 27.5% of the appraised value of their coaches as an incentive to move. The oceanfront area will be developed in 2 years.

Hoping to empty Treasure Island Mobile Home Park so it can be redeveloped, park owners struck a deal with most permanent residents this week guaranteeing them 27.5% of the value of their coaches and forcing them to move within a year.

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The agreement--signed by 48 of the park’s approximately 80 permanent residents--is the latest episode in a bitter battle between tenants and landowners, who want to begin building on the choice 29-acre oceanfront property in two years.

With the value of their homes shrinking because of the park’s pending closure, some residents embraced the owners’ offer, which included an immediate payment of one-third of the 27.5% appraised value.

The settlement comes on the heels of a lawsuit filed last month against park owners and the city.

The action was taken by some coach owners who are angry that the City Council recently altered a relocation benefits package approved by a previous council, potentially reducing its value.

Richard Hall, a Costa Mesa businessman who, along with Merrill Lynch Hubbard, heads the partnership that owns the park, said some who signed the agreement this week were also involved in the lawsuit and will now give up the legal fight. He called the settlement a major victory for the landowners.

“Once other tenants start seeing that their neighbors are getting checks, they’re going to start turning their contracts in also,” said Hall, who began handing out checks at the park on Tuesday.

K.P. Rice, who heads the park’s homeowners’ association and did not sign the agreement, said some of his neighbors are simply “bone weary” from the struggle and he understands why they chose not to continue fighting the landowners in court.

“We have people whose health is being affected by this strain, whose finances are in bad shape, their nerves are shot,” Rice said. “They’re just tired of trying to fight to hold their homes.”

Treasure Island, a gated community sprawled along a bluff top at the south end of the city and a fixture in Laguna Beach for 36 years, was purchased by the partnership for $43 million in 1989.

Its population has dwindled as the owners began buying up coaches.

Hall said about 160 coaches remain, half of them occupied by full-time residents. Other coach owners live there part time or vacation at the park.

The previous council fought vigorously for the community--one of three mobile home parks in town--rallying first to preserve the close-knit neighborhood and, when it became apparent the park would eventually close, preparing a relocation benefits package to help residents move.

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The package, approved in February, 1994, included an option that might have allowed residents to receive up to a total of $23 million in benefits, prompting the landowners to sue the city.

In October, a Superior Court judge limited the benefits to full-time residents, reducing the potential cost to the landowners to about $13.5 million, a decision the landowners appealed.

Hoping to extricate the city from the legal entanglement, in May a new council revised the earlier benefits package, adding an option that could further diminish the benefits some residents receive, prompting the coach owners’ lawsuit.

The landowners offered the current settlement, which Hall said has an overall value of $5.3 million, including a year’s free rent for both part-time and permanent residents.

Councilman Paul Freeman, who helped negotiate the deal, said the benefits package offered by the current council is the most generous of its kind in the state, and the landowners’ settlement offer is more generous yet.

Some residents will get $35,000, move to the mobile home park across the street and still have an ocean view, he said.

“There’s no question some people will lose money, but many people will make money,” Freeman said, adding that the settlement is helping to bring down the curtain on “a huge opera” that has been playing in Laguna Beach for years.

“We are about to turn a page,” he said. “And the next question is, what to do with it [the land] in the future.”