Force Majeure and Covid: Implications on Tenancies and Rental Payments

| Lindsay Petrone
force majeure

What happens when a tenant does not pay rent citing the financial impacts of the COVID pandemic?  Can such tenant rely on the force majeure provision in the lease to excuse the payment of said rent?  These questions arose in lease contexts throughout the pandemic and a recent Court of Appeal case weighed in on one such situation.  In West Pueblo Partners, LLC v. Stone Brewing Co., LLC (C.A. 1st, April 3, 2023.  Westlaw Cite: 2023 WL 3151827), the court found that West Pueblo Partners, LLC (“Landlord”) could bring an unlawful detainer action to evict Stone Brewing Co., LLC (“Tenant”) and Tenant was not excused from paying rent due to a force majeure event, specifically the COVID pandemic.

In West Pueblo, Tenant operated a brewery and restaurant that was shut down in different capacities due to COVID restrictions during 2020 and 2021.  Tenant alleged they did not have to (and in fact did not) pay rent citing the force majeure provision in the lease which stated in relevant part “if a party is delayed from performing any of its obligations under the lease due to act of god or governmental act, then the time for performance of such party shall be extended for an equivalent amount of time.”  Tenant argued the governmental regulations and business interruptions triggered the force majeure provision and they were excused from paying rent during such time period.

The Court of Appeal reviewed the force majeure provision in the lease (which, to note, did not include a typical qualification that the payment of rent is always required regardless of any force majeure event) and found that if the force majeure event had effectively stopped Tenant from paying rent, that is one thing (for example, a snowstorm blocked the ability to send a wire), but here they had the financial means and chose not to pay the rent due to COVID restrictions and negative impacts on their business.  The Court of Appeal also dug into prior cases analyzing force majeure provisions generally and reiterated that “the qualifying event must have still caused a party’s timely performance under the contract to become impossible or unreasonably expensive.”  The Court of Appeal found that force majeure events which merely make performance unprofitable or more difficult or expensive do not suffice to excuse a contractual obligation.

The West Pueblo court did repeatedly note that Tenant admitted it had the financial means to pay the rent but elected not to do so.  This was a relevant consideration for the Court of Appeal when it reviewed other (out of state) cases on the subject which held certain tenants were excused from paying rent due to COVID and force majeure considerations.  In those cases, the tenants could not pay rent due to COVID because they did not have the financial ability to do so.  Here, Tenant was a company with multiple operations and admitted it could have paid the rental amounts due, but obviously had dramatically less income due to the restrictions.

The West Pueblo case highlights that although a party’s performance may be delayed if they are unable to act due to the force majeure event, it does not necessarily excuse them from performing said action if it was just more expensive or much harder to do so.  It must be impossible or egregiously expensive to comply in order to warrant excusing a contractual obligation.  Even COVID restrictions, which decimated restaurants’ ability to make money, do not necessarily insulate such tenants from their obligations under their leases.  This is especially true if the tenant objectively has the means to make the rental payment otherwise.

 

Authored by Reuben, Junius & Rose, LLP Attorney Lindsay Petrone.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Details on San Francisco’s Proposed Housing Production Ordinance

| Mark Loper
ordinance

Recently, Mayor London Breed and Supervisor Joel Engardio introduced an ordinance removing some of the Planning Code’s regulatory barriers to housing. A major implementing measure of San Francisco’s recent Housing Element, it is rich in detail and nuance and proposes a range of common-sense changes to increase housing production. Below, we summarize some of the major aspects of the proposal captured in the first draft of the ordinance, broken up into two sections: process streamlining, and relief from certain building design and density restrictions.

Process Streamlining

  • Eliminating conditional use requirement for certain developments. Automatic conditional use (“CU”) approvals for developments on certain “large lots” in neighborhood commercial districts would be eliminated. Similarly, CU requirements for buildings taller than 40-50 feet in RH, RM, RC, and Broadway NC districts would be eliminated, as would buildings taller than 50 feet along the Van Ness Special Use District. This would unlock the development potential of many sites where the height limit is comfortably above the 40-50 foot CU threshold.
  • HOME–SF. HOME-SF would be modified to allow projects on sites where a single-family home exists and is proposed to be demolished, and to remove a requirement that the Planning Department’s Environmental Review Officer determine the project will not have any adverse wind, shadow, or preservation impacts.
  • Dwelling unit demolitions. Outside of the “priority equity” areas of San Francisco—which are neighborhoods with a higher density of vulnerable populations; see the map at the bottom of this alert—some residential demolition projects will not require a CU. The project cannot remove more than two residential units; the units to be demolished cannot be tenant occupied or have a history of evictions within the last 5 years; the building cannot be an historic resource; the project needs to add at least one more unit than is proposed for demolition; and the unit needs to comply with the Housing Accountability Act’s protections for replacement units and recent tenants.

Design and Density Regulation Changes

  • Increased residential density in RH districts. The ordinance would eliminate the need for a conditional use (“CU”) to exceed the one- to three-unit base density in RH districts. And, it would principally permit one unit per 3,000 square feet of lot area in the three RH-1 districts; one unit per 1,500 square feet of lot area in RH-2; and 1 unit per 1,000 square feet of lot area in RH-3, exclusive of any ADUs. Also, residential projects in RH zones that meet certain eligibility criteria currently can have up to six units on corner lots, and up to four units on non-corner lots. The ordinance would add group housing to this potential density bonus on RH-1 zoned lots and eliminate an owner occupancy requirement, opening up the number of sites that could qualify for this density increase.
  • Making senior housing easier and more widespread. Currently, senior housing—which generally allows increased residential density—is only permitted within ¼ mile of an NC-2 zoning district or higher. The ordinance would eliminate this restriction, opening a wider area of the city for this much-needed type of housing. It would also eliminate an automatic CU requirement for senior housing in RH and RM districts that are not close to neighborhood commercial districts.
  • Minimum lot width and area. The City’s minimum lot width would be reduced from 25 feet in most districts to 20, and lot area reduced from 2,500 square feet to 1,200. This would allow more residential density on some larger lots.
  • Reducing rear yard requirement. San Francisco’s rear yard requirements are notoriously complicated and a regulation that often requires exceptions or limits the development potential of a property. The ordinance would make the rear yard requirement 25% of lot depth or 15 feet in most zoning districts. In certain “R” districts, the requirement would be 30% or 15 feet. It also includes a common-sense option for corner lot developments to provide an interior corner open area, saving the need for a variance or other entitlement.

We should note that the legislative digest flags a few aspects of the residential streamlining proposal that do not appear to be included in the first draft of the ordinance. These may be added to subsequent versions of the legislation, and it could be amended as it is brought to the Planning Commission and eventually the Board of Supervisors. We will continue to track this important ordinance as it moves forward. We will also track other legislation that seeks to further implement the Housing Element.

 

Authored by Reuben, Junius & Rose, LLP Attorney Mark Loper.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

 

Up in Flames? Impact of Court Decision to Overturn Berkeley’s Natural Gas Ban

| Tara Sullivan
Berkeley

Last week, the Ninth Circuit struck down the City of Berkeley’s “Natural Gas Ban” in new construction regulations.

The case, California Restaurant Association v. City of Berkeley, focused on whether the federal Energy Policy & Conservation Act, or EPCA, preempted Berkeley’s regulations. The Ninth Circuit broadly interpreted the EPCA’s preemption clause to prohibit state and local standards that interfere with “the end user’s ability to use installed covered products at their intended final destinations” (emphasis in original).

Instead of directly banning natural gas products in new buildings, Berkeley took a more circuitous route and prohibited natural gas piping, rendering gas-used appliances useless. The court held that the EPCA expressly preempts State and local regulations concerning the energy use of many natural gas appliances. Energy use is defined by the EPCA as “the quantity of energy directly consumed by a consumer product at point of use” – i.e., at the place where the products are used. By prohibiting a type of energy hookup like natural gas, it is indirectly saying there can be “zero” of that type of fuel use, which the court held was in fact a quantity (Berkeley argued that zero was not a quantity so its ordinance was not an energy use regulation). Because zero is a quantity in the court’s view, not allowing it at all is regulating the “quantity,” or the energy use of a product. Further, the court held, the ban interferes with the end user’s ability to use the product(s), which, in essence, is regulating the use of the appliances themselves. The Ninth Circuit held that this was a violation of the plain text of the EPCA.

What effect will this case have, if any, on San Francisco’s regulations covering natural gas appliances? Before discussing, here is some background:

  • The EPCA was passed in 1975 and tasks the Department of Energy to issue regulations that certain household appliances demonstrate the products’ “energy efficiency ratings” (42 U.S.C. § 6294). In simpler terms, the EPCA sets energy efficiency standards for a range of consumer products, including refrigerators/freezers, air conditioning systems, water heaters/furnaces, dishwashers, kitchen ranges, and other products (42 U.S.C. § 6292) – all called “covered products”.
  • EPCA contains a preemption clause that establishes that, once a federal energy conservation standard becomes effective for a covered product, “no State regulation concerning the energy efficiency, energy use, or water use of such covered product shall be effective with respect to that product” (42 U.S.C. § 6297).
  • Passed in 2019, Berkeley’s natural gas ban was the first in the county that completely prohibited the use of natural gas infrastructure in new construction, in this case, the piping and connections of natural gas from the point of metering (the property line) to the point of use (the appliances themselves). Berkeley’s regulations are located in the city’s Health and Service Code. Chapter 12.80, Prohibition of Natural Gas Infrastructure in New Buildings.
  • The California Restaurant Association sued the city, claiming that their members were harmed by Berkeley’s law and that it was preempted by the EPCA. The District Court held that the EPCA must be “interpreted in a limited manner” and local ordinances that do not “facially address any of the [energy conservation] standards” are not in violation of the EPCA’s preemption clause. It upheld Berkeley’s law. The CRA appealed this decision to the Ninth Circuit.
  • The DOE filed an amicus brief supporting Berkeley’s ordinance, claiming that the EPCA only preempts “energy conservation standards” that operate directly on the covered products themselves. Since Berkeley’s ordinance did not prohibit any covered products, the DOE argued that it was not preempted by the EPCA.
  • The Ninth Circuit overturned the District Court’s decision that Berkeley’s law was preempted by the EPCA for the reasons cited above.

The EPCA contains several exceptions to preemption (42 U.S.C. § 6297). For example, if a regulation of a covered product does not exceed a state or national standard, or if there has been a waiver granted [to the government], then they are not preempted. There is also an important exemption for state and local building codes, allowing energy efficiency regulations if the code meets seven conditions (listed below).  Berkeley used its general police power to regulate natural gas, putting the regulations in their Health Code.  The city did not use its building code authority to regulate natural gas.

San Francisco used their building code authority to regulate natural gas appliances (Ordinance 237-20, BOS File No. 2007-01). Instead of directly banning natural gas appliances, it requires “all-electric” buildings. There are exceptions for technical or physical infeasibility and for areas of a building that are specifically designed and occupied for commercial food service use. An “all-electric building” is defined as one that uses a permanent supply of electricity as the source of energy and does not “install natural gas or propane piping systems, fixtures or infrastructure for those purposes in or in connection with the building, structure, or within property lines of the premises, extending from the point of delivery at the gas meter.”

It appears that San Francisco’s law runs afoul of the Ninth Circuit’s decision. Using the broad interpretation of the court, it could be held to be preempted. The court held that a regulation on energy use, defined as “the quantity of energy directly consumed by a consumer product at point of use”, encompasses an ordinance that eliminates the “use” of an energy source.

San Francisco’s regulations require electric-ready (i.e. electric only) buildings. The electric-ready building definition explicitly states there can be no natural gas hookups or pipes. Meaning, no natural gas use – that’s zero – which the Ninth Circuit has held is a quantity. San Francisco’s definition of an electric-ready building does the same thing as Berkeley’s ordinance – it effectively prevents the use of a natural gas appliance through its mandate of all electric buildings. In other words, it regulates the energy use of natural gas, which the Ninth Circuit held runs afoul of the EPCA’s preemption clause.

San Francisco could regulate natural gas products if they amended their building code to align with the EPCA’s express preemption exception. Building codes can contain regulations that relate to energy efficiency or energy use of EPCA-covered products if it meets seven conditions:

  1. If they allow a builder to select items whose combined energy efficiency meet the [city’s] energy objective(s);
  2. Does not specifically require any EPCA-covered appliance to exceed federal standards;
  3. Allows appliances that exceeds the federal or state standards if they offer a one-for-one equivalent energy use or equivalent cost basis;
  4. If a code uses a baseline building design standard which all projects are evaluated against and contains standards on covered products that do not exceed state or federal standards;
  5. Offers at least one or more “optional combination of items” that does not exceed federal standards for any covered appliance;
  6. Frames an energy consumption or conservation objective in terms of total consumption of energy, allowing projects to meet that number in a variety of methods; and
  7. Uses the EPCA-specified test procedures for determining the energy consumption of covered products.

San Francisco’s regulations do not meet the parameters of the EPCA’s exception clause. It would not be difficult to establish a system that meets these requirements – the city currently regulates greenhouse gas emissions through its Transportation Demand Management Program, which is a point system where projects can meet their goals through a variety of methods. A similar program can be established for natural gas products.

Regardless of whether San Francisco amends their regulations, this is not the last word on the topic. Berkeley has not decided whether to appeal the Ninth Circuit court’s decision, and a higher court could come to a different, more narrow interpretation of the EPCA preemption issue. As noted by others, the Ninth Circuit’s decision only affects those states within its jurisdiction, and only directly applies to Berkeley’s ordinance and those structured in the same way.

Jurisdictions all over the country have enacted regulations against natural gas appliances and infrastructure. Not all follow Berkeley’s approach. There are ways to model ordinances so they do not run afoul of the EPCA’s preemption clause or the Ninth Circuit’s ruling. Building code regulations are permitted if they meet the EPCA’s guidelines. Some regulatory bodies enact air emissions standards for new buildings that do not discuss the energy performance of a building or EPCA-covered appliance. The Ninth Circuit also stated that local governments retain authority over their natural gas distribution to individual parcels, providing another method of regulating natural gas products.

The Ninth Circuit’s decision in California Restaurant Association v. City of Berkeley is not a death nell on natural gas product regulations. There will most definitely be more litigation regarding these regulations, with the final decision likely coming from the Supreme Court. Until then, there will continue to be regulations on nitrogen oxide emission-producing products, with the hope that they help reduce emissions that contribute to climate change.

 

Authored by Reuben, Junius & Rose, LLP Attorney Tara Sullivan.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Can New Rules Jumpstart Downtown?

| Melinda Sarjapur
ordinances

Last week, two new ordinances were introduced, both seeking to encourage residential conversion projects downtown, which have been recently touted by the media and policy advocates as one potential solution to address San Francisco’s office vacancy; combat the housing crisis; and draw retail foot traffic back to the City’s core.

The “Commercial to Residential Adaptive Reuse and Downtown Economic Revitalization” ordinance, sponsored by Supervisor Aaron Peskin and Mayor London Breed, proposes an expansive list of Planning, Building and Fire Code amendments that share a common goal of encouraging downtown residential conversions and revitalizing the downtown core.

The “Development Impact Fees for Commercial to Residential Adaptive Reuse Projects” ordinance, sponsored by Supervisors Asha Safai and Matt Dorsey, is limited in scope but also seeks to incentivize residential conversions by exempting them from development impact fees.

The Breed/Peskin ordinance proposes the following Code modifications, which, if adopted, would not only encourage downtown residential conversions but would also broaden the types of uses allowed downtown, streamline process, and reduce costs for new businesses:

  • Creates a new definition for “Adaptive Reuse” project, which would apply to downtown projects that change existing GFA from non-residential to residential. Qualifying “Adaptive Reuse” projects must be located in a C (commercial) zoning district that is east of or fronting on Van Ness/South Van Ness Avenue and north of Harrison Street; can’t utilize California State Density Bonus Law; can’t propose an addition to the building envelope that exceeds 20% of the existing building’s GFA; can’t propose an addition of more than one vertical story; and must submit an application on or before December 31, 2028.
  • Relaxes zoning controls for qualifying “Adaptive Reuse” projects. Such projects would be exempt from zoning requirements that often trigger discretionary exceptions through a Downtown Project Authorization entitlement and/or drive-up development costs, such as lot coverage (which the ordinance substitutes for rear yard setback in C districts); usable open space; streetscape and pedestrian improvements; bike parking; dwelling unit mix.  “Adaptive Reuse” projects would also be subject to reduced dwelling unit exposure, and Intermediate Length Occupancies would be principally permitted regardless of the number of units in the project.  In addition, eligible “Adaptive Reuse” projects would not be subject to public hearing requirements for Downtown Project Authorization entitlements, unless seeking Planning Code exceptions beyond those listed above.
  • Raises the thresholds for public hearings of permits in Downtown Residential Districts and C-3 Districts so that public hearings are only triggered by proposed construction of new buildings or vertical additions greater than 120 feet in height (its currently triggered for any project of 75 feet in height or that adds 50,000 gsf of floor area).
  • Changes dimensional limits on exemptions to height restrictions for mechanical equipment, elevator, stair, and mechanical penthouses on existing buildings;
  • Proposes a range of zoning code tweaks intended to draw business back to the downtown core. These include creating a new definition for “Flexible Workspace” and allowing it as active ground floor commercial uses along certain street frontages in the C-3 District; authorizing large-scale retail uses (> 50,000 gsf) in the C-3 District; allowing window displays to be at least four-feet deep in the C-3 District; allowing accessory storage in the C-3 Districts; allowing temporary signs for 60 days in the C-3-R district; allowing temporary “pop-up” non-residential uses in vacant spaces for up to a year in certain C, NC, NCT, or Mixed-Use districts; principally permitting Lab, Life Science, Agricultural and Beverage Processing, and Animal Hospitals in C-2 Districts; principally permitting office and design professional uses on the second floor and above for C-3-R districts; and requiring consideration of office vacancy rates in consideration for granting code exceptions in the Transit Center Commercial Special Use District.
  • Streamlines sign permit requirement in the C-3 District and Citywide by exempting existing business sings in the C-3 District from certain requirements and allowing non-conforming neon signs to be physically detached from a building for repairs or maintenance, under certain conditions.
  • Streamlines Historic Preservation Review for administrative certificates of appropriateness and minor permits to alter for awnings.
  • Allows for In Lieu Fee payment to satisfy POPOS requirements in certain C-3 Districts.
  • Amends the Building Code by directing the Building Official and Fire Code Official to develop an alternative building standards manual, providing building standards specific to “Adaptive Reuse” projects.

The Safai/Dorsey ordinance is focused solely on economic incentive.  It would exempt certain downtown residential conversion projects from all development impact fees except for Inclusionary Housing Program requirements.

To qualify for these fee waivers, an “Adaptive Reuse” project would need to be located in a C zoning district that is east of or fronting on Van Ness/South Van Ness Avenue north of Harrison Street; can’t utilize California State Density Bonus Law; can’t expand an existing building envelope by more than 20% of the existing buildings GFA; and can’t add more than one vertical story.  Fee waiver would not apply to the area of any non-residential use proposed within a broader conversion project.

The above ordinances clearly aim to incentivize downtown residential conversions, but it’s unclear whether they go far enough to trigger a significant up-tick in “Adaptive Reuse” projects.

On April 3, 2023, the Board’s Land Use and Transportation Committee held a public hearing to review a Policy Analysis Report drafted by the Board’s Budget and Legislative Analyst’s Office on feasibility of repurposing existing commercial real estate for residential use in San Francisco.  While the Analysts report identified that zoning and policy changes in line with those under review could help to incentivize residential conversions, it also noted that “converting commercial properties to residential use is not a panacea for solving California’s housing shortage” because such conversions face a number of challenges “including architectural and building design limitations, municipal development approval processes that add time, cost, and uncertainty to conversions…”  Likewise, a recent policy paper issued by the San Francisco Policy and Urban Research organization (“SPUR”) found that given current economic conditions and development costs, most conversions of underperforming office buildings would not pencil.

The Breed/Peskin and Safai/Dorsey ordinances were both introduced on April 4, 2023 and assigned to the Board’s Land Use and Transportation Committee under the Board’s 30-Day Rule, which means they cannot be heard by Committee until at least early May 2023.

 

Authored by Reuben, Junius & Rose, LLP Attorney Melinda Sarjapur.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

2023 Legislation at a Glance – Part 2

| Justin A. Zucker and Sabrina Eshaghi
policies

As reported last week, this legislative session is packed full of pending bills with far reaching changes to land use controls and local control of such. In Part 1, we discussed some of the most significant bills introduced impacting the California Environmental Quality Act (CEQA), the State Density Bonus Law, and removal of an only in San Francisco allowance to appeal a building permit after a qualifying residential project receives entitlement. Here, in Part 2, we discuss significant bills introduced related to housing, parking, accessory dwelling units (ADUs), and other land use-related policies.

Accessory Dwelling Units

Since their introduction into housing nomenclature by former Bay Area lawmaker Senator Bob Wieckowski (D-Fremont) in 2016 with SB 1069 along with companion AB 2299 (Bloom), ADUs have become somewhat of a darling child in the housing production world. Over the years, several bills have passed intended to increase the production of ADUs. A few include a package – AB 68 (Ting), AB 587 (Friedman), AB 670 (Friedman), AB 671 (Friedman), AB 881 (Bloom), and SB 13 (Wieckowski) – enacted in 2019 and another pair of bills from 2022 – AB 2221 (Quirk-Silva) and SB 897 (Wieckowski). This year, we see proposals for further relaxation of controls on ADUs, including:

  • AB 1033 (Ting) would allow a local jurisdiction to permit condominiumization and sale of ADUs separate from the primary residence.
  • AB 1332 (Carillo) would require jurisdictions, by April 2025, to publish six sets of permit ready floor plans (studio, 1-bedroom, and 2-bedroom, in both standard and reverse formats) for detached ADUs.
  • AB 1661 (Bonta) would remove the requirement that an ADU be individually metered for electrical and gas service and allow for an ADU to use existing or upgraded meters on the property.
  • AB 976 (Ting) would make permanent an existing prohibition to imposing an owner-occupancy requirement on an ADU that sunsets January 1, 2025.
  • SB 477 (Committee on Housing) would create a new Government Code chapter to house state ADU regulations.

Constitutional Amendments

There are two noteworthy Constitutional Amendments being proposed this legislative session.

ACA 1 (Aguilar-Curry) Affordable Housing Bond Approval Threshold. Would lower the necessary voter threshold for approving affordable housing bonds from a two-thirds supermajority to 55%. This appears to be a set up for a forthcoming affordable housing bond (AB 1657, Wicks), slated to go before the voters in fall of 2024.

ACA 10 (Haney) Housing a Fundamental Right. Would amend the Constitution to declare that the state recognizes the fundamental human right to adequate housing for everyone in California. The amendment would impose a shared obligation on the state and local jurisdictions to respect, protect, and fulfill this right, by all appropriate means, including legislative action.

Relaxing of Parking Controls

In recent years, there has been an effort to reduce minimum parking controls. Last year, AB 2097 (Friedman) removed a local jurisdiction’s ability to impose any minimum parking requirements on residential or commercial development located within one-half mile of public transit (as defined). This year there is a trio of bills that will further relax parking controls local jurisdictions may impose:

  • AB 1317 (Carrillo) would require landlords to “unbundle” parking costs from rent from leases or rental agreements for residential property commencing or renewed on or after January 1, 2024.
  • AB 1308 (Quirk-Silva) would prohibit a local jurisdiction’s ability to increase the applicable minimum parking requirements of a single-family residence as a condition of approval to remodel, renovate, or add to a single-family residence.
  • AB 894 (Friedman) would allow properties with underutilized parking (as defined) to share spaces with other users, which would count toward meeting any automobile parking requirement.

Housing Policies

AB 1485 (Haney) Attorney General Right To Intervene in Actions Involving Violations of State Housing Laws. This bill would grant the Attorney General an unconditional right to intervene in any lawsuit filed over a potential violation of an enumerated list of state housing laws, including, among others, the Housing Accountability Act, Housing Crisis Act of 2019, and the Density Bonus Law.

AB 1532 (Haney) Streamlined Office to Residential Conversions. This bill would allow by-right, ministerial office to residential conversion projects statewide and limit fees and design requirements that local governments can impose on conversions. It would also allow an applicant to pay applicable impact fees over a ten-year period. It includes a skilled and trained workforce requirement. This bill has been converted to a two-year bill and we will likely not see any movement on it until next year.

AB 1633 (Ting) Housing Accountability Act Protection Extended to CEQA Review. This bill would expand the Housing Accountability Act’s definition of “disapprove the housing development project” to include any instance when a local agency fails to issue an exemption, fails to adopt a negative declaration or addendum for the project, or certify an environmental impact report or another comparable environmental document.

AB 281 (Grayson) Streamlining Post-Entitlement Permits. This bill would extend the post-entitlement permit timelines created by AB 2234 (2022, Rivas) to special districts. AB 2234 imposes the following timelines for review of post-entitlement applications for housing projects: (1) for projects with 25 units or fewer, a local agency shall complete first review and comment within 30 days of an application completion; and (2) for projects with 26 or more units, a local agency shall complete first review and comment within 60 days of an application completion.

AB 821 (Grayson) General Plan Consistency. This bill would provide that, in the event a local jurisdiction fails to amend a zoning ordinance to be consistent with the general plan within 90 days of receiving written notice of the inconsistency, a proposed development project cannot be deemed inconsistent with that zoning ordinance and cannot be required to be rezoned, if there is substantial evidence that (1) the proposed project is consistent with objective general plan standards and (2) the zoning for the project site is inconsistent with the general plan.

AB 919 (Karla) Stable Homes Act – Tenant Opportunity to Purchase. This bill would require a residential property owner, including owners of single-family homes, to (1) provide notice of their intent to sell the residential real property to each tenant and qualified entities and (2) allow each qualified entity ten days to give notice of interest and either 60 or 40 days to submit an offer to purchase to the owner. For a single-family residential property, the qualified entity must provide existing tenants eighteen months to purchase the entire residential property or to purchase improvements if the underlying land is to be retained by a community land trust.

SB 294 (Weiner) Minimum Floor Area Ratio Limits. This bill would expand the minimum floor area ratio (FAR) standards under state law that currently only apply to projects providing up to 10 units, to apply to all housing projects. The bill would prohibit municipalities from imposing an FAR limit less than 2.5 on housing projects providing 11-20 units. For housing projects over 20 units, it would prohibit an FAR limit less than 1.25 for every ten units.

SB 423 (Weiner) SB 35 Extension and Expansion. This bill would permanently extend SB 35 (2017, Weiner), which is currently set to expire January 1, 2026, and expand its applicably as discussed below:

  • Eligibility. This bill would allow SB 35 projects (1) in the coastal zone and (2) on wetlands or protected habitat if authorized by any other state or federal law. It would also apply in cities that have failed to adopt complaint housing elements as determined by HCD.
  • Labor Standards. This bill would remove the skilled and trained workforce requirement. Instead, the requirement to pay prevailing wages will remain, and on projects over 50 units, contractors would be required to offer apprentices employment and cover health care expenditures.
  • Clarifications. This bill clarifies that the planning director or other equivalent local government staff is required to make determinations about compliance with the objective planning standards, all departments required to weigh in on a project before granting entitlement must do such within SB 35’s time parameters (60 or 90 days depending on project size), prohibits the local government from requiring consultant studies to evaluate consistency with objective planning standards, removes references to public oversight from the design review process, and prohibits requiring compliance with any standards necessary to receive a postentitlement permit for purposes of the SB 35 approval.

SB 450 (Atkins) SB 9 Amendments. This bill would amend SB 9 (2021, Atkins), the fourplex/urban lot split legislation that took effect last year, by:

  • Removing the limitation on demolition of more than 25% of the existing exterior structural walls to be eligible for ministerial approval;
  • Prohibiting a local agency from imposing objective standards that do not apply uniformly to development within the underlying zoning or do not relate to the design or improvements of a parcel;
  • Removing the ability of a local jurisdiction to deny a SB 9 project if the building official makes a written finding that the proposed housing development project would have a specific, adverse impact on the physical environment;
  • Requiring the local agency to approve or deny a SB 9 application within 60 days from receiving a completed application; and
  • Requiring the local agency to provide a full set of comments to the applicant with a list of items that are defective or deficient and a description of how the application can be remedied by the applicant if it denies an application.

AB 1218 (Lowenthal) SB 330 Amendments. This bill would tweak SB 330 (2019, Skinner) by extending the protected unit demolition and replacement controls, which currently only apply to housing development projects, to projects that are not considered housing developments. This bill would also place the restrictions on demolition of protected units and replacement requirements into a separate provision that will apply permanently, which otherwise would become inoperative on January 1, 2030.

Land Use-Related Policies

SB 466 (Wahab) Rent Control Reform – 15-Year Look Back. This bill would amend Costa Hawkins to allow municipalities to apply rent control to properties that were issued a certificate of occupancy more than 15 years before the date the owner seeks to establish the rental rate. It would also remove the exemptions for properties that are alienable and separate from title to any other dwelling units, meaning rent control could be applied to single family homes and condos.

SB 745 (Cortese) Water Demand Reduction. This bill would require the California Building Standards Commission to propose mandatory building standards to reduce the potable water demand of new buildings by 25% from current mandatory design requirements and to minimize the use of potable water for nonpotable uses. The bill would require the Commission to adopt mandatory building standards for new buildings to be designed to capture graywater and use alternative water sources for nonpotable building and landscaping water uses.

SB 83 (Weiner) Electrical Grid Connection. This bill would require electrical utilities to connect, aka energize, a development project to the electrical grid within 8 weeks of the project being ready for interconnection (previously known as receiving a “green tag”). An alternative time period may be set and applies if an issue specific to the project or project site arises that would prevent the utility from safely completing the interconnection. This bill would further require a utility to compensate a development project applicant for failing to meet either the 8-week or the alternatively-set time period.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Justin A. Zucker and Sabrina Eshaghi.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

2023 Legislation at a Glance – Part 1

| Justin A. Zucker and Sabrina Eshaghi
CEQA

As we’ve previously reported, 2022 was a blockbuster year for housing legislation and it appears this legislative session is gearing up to be just as consequential. But, with approximately a quarter of the legislative body in their freshman year, it’ll be difficult to determine how the session will play out. In this two-part update, we will be providing a brief overview of some of the most significant bills introduced thus far impacting the California Environmental Quality Act (CEQA), State Density Bonus Law, housing, parking requirements, accessory dwelling units (ADUs), and other land use-related policies.

CEQA Reform

A substantial number of CEQA-related bills have been introduced this legislative session. Most significantly, meaningful CEQA reform appears to be a priority with multiple bills aiming to creatively address CEQA misuse.

AB 978 (Patterson) Bond Requirements for CEQA Challenges to Housing Projects. This bill would require any person bringing a CEQA lawsuit against a housing project to post a bond of $500,000 to cover the costs and damages to the housing project incurred by the project sponsor or lead agency. The court would be permitted to waive or adjust the bond requirement if there is good cause to believe the requirement does not further the interest of justice.

AB 340 (Fong) Written Comments Must be Submitted Ahead of Hearing. This bill would require project opponents to make any written comments challenging the project’s compliance with CEQA at least ten days before the public hearing on the project. Any written comments submitted after that time could not be used in a CEQA lawsuit against the project. Note that this would not restrict opponents’ ability to present oral comments at the hearing.

SB 239 (Dahle) Limits on CEQA Litigation. First, this bill would only allow the Attorney General to bring CEQA lawsuits challenging certified Environmental Impact Reports (EIRs), Negative Declarations, or Mitigated Negative Declarations, meaning members of the public and community organizations would no longer have standing in cases involving these types of CEQA documents. Notably, it excludes other types of CEQA documents like exemptions. Challenges brought for non-environmental purposes would be subject to dismissal and award of attorney’s fees. Second, courts would be prohibited from stopping construction or operation of a project due to CEQA litigation, unless the project (1) presents an imminent threat to public health and safety or (2) contains unforeseen important Native American artifacts or unforeseen important historical, archaeological, or ecological value that would be materially, permanently, and adversely affected. Even in that case, the court can only stop specific activities related to those impacts. Third, for housing projects, the bill would limit subsequent CEQA actions challenging an agency’s remedial revisions to CEQA documents in response to a court’s ruling by prohibiting the court from considering new issues that were not raised in the original proceeding. Lastly, until January 1, 2030, lawsuits challenging certified EIRs for commercial, industrial, housing, or public works projects that meet certain standards and address longstanding critical needs in the project area must be resolved within 365 days, unless the court makes certain findings.

These bills may indicate that the long-awaited first step toward CEQA reform is on the horizon. In addition, a couple of other CEQA-related bills have been introduced that would be helpful in limiting review:

  • Two bills appear to be a response to the First District Court of Appeal ruling last month involving the UC Berkeley project that proposes to turn the People’s Park into student and homeless housing. In that case, the court held that the EIR failed to analyze potential noise impacts from loud student parties, among other inadequacies.
    • AB 1307 (Wicks and Luz Rivas) would amend CEQA to clarify that for residential projects, noise generated by the unamplified voices of residents is not an impact on the environment.
    • AB 1700 (Hoover) would clarify that for housing projects, in addition to noise impacts, population growth is also not an impact on the environment.
  • Currently, aesthetic impacts are not considered significant effects on the environment for housing projects involving the refurbishment, conversion, repurposing, or replacement of an existing building. This existing law is set to expire January 1, 2024. AB 356 (Mathis) would make this provision permanent.

State Density Bonus Updates

Similar to last year, a number of bills proposing updates and tweaks to the current State Density Bonus Law have been introduced.

AB 1287 (Alvarez) Additional Density Bonus. This bill would modify the State Density Bonus Law to supersede the California Coastal Act of 1976. This bill would also allow up to an additional 50% density bonus for projects that (1) maximize the very low income, low income, or moderate-income units permitted under the current State Density Bonus Law and (2) provide up to 15% additional moderate-income units. Projects that utilize this additional moderate-income bonus would also receive up to six incentives or concessions.

AB 1630 (Garcia) Ministerial Student Housing. Dubbed the Student Housing Crisis Act of 2023, AB 1630 would require student and faculty and staff housing (with limitations) on property within 1,000 feet of a university campus to be ministerially approved if a minimum of 20% of the units are affordable to lower income households. In exchange, a local agency could not impose or enforce a minimum parking requirement, floor-to-area ratio requirement, rear or side setback requirements greater than four feet, or height limit below forty feet. This bill would require a range of wage and training standards, including paying prevailing wage, providing workers with health benefits, and giving graduates of state-approved apprenticeship programs first access to these jobs (similar to AB 2011, which is taking effect July 1, 2023).

AB 323 (Holden) Restricting Use of For-Sale Units as Rentals. This bill would prohibit a developer from offering a for-sale unit constructed pursuant to a local inclusionary zoning ordinance to a purchaser that intends to rent the unit to families of extremely low, very low, low-, and moderate-income families, unless the developer can prove that none of the applicants for owner-occupancy can qualify for the unit. Any violation would be subject to a civil penalty of not more than $15,000.

AB 637 (Low) Undermining Local Inclusionary Ordinance Not Allowed. This bill would create an exception from the requirement to grant an incentive, concession, waiver, or reduction if it would alter the requirements of a local inclusionary affordable housing ordinance. The initial draft of this bill would have created an exception from the requirement that a jurisdiction grant an incentive, concession, waiver, or reduction if the project would have an adverse impact on a policy that affirmatively furthers fair housing.

Only in San Francisco

As previously reported last month, AB 1114 (Haney) would bar jurisdictions (San Francisco is the only one affected) from allowing building-permit appeals after a qualifying residential project has received an entitlement.

Stay tuned next week for an overview of proposed legislation related to housing, parking, ADUs, and other land use-related policy bills.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Justin A. Zucker and Sabrina Eshaghi.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Partitions by Appraisal Now Easier in California

| Michael Corbett
appraisal

A partition action is the procedure for segregating and terminating common interests in the same parcel of real property, resulting in either: (1) a physical division of the property; (2) a sale of the property and a division of the proceeds; or (3) a partition by appraisal whereby one cotenant acquires the interests of the other cotenants based on a court ordered and supervised appraisal.[1] California courts have established that consent by cotenants is not required to partition a property by sale because the right to partition is absolute. For owners of real property where title is held in a cotenancy capacity, the prospect of another cotenant seeking a partition and forced sale of the property can be nightmarish. The Partition of Real Property Act (“Act”), which applies to partition actions filed on or after January 1, 2023[2], should allow such non-petitioning cotenants to rest a little easier.

The Act, codified at §§ 874.311-874.323 of the California Code of Civil Procedure, is designed to prevent dispossession of property by way of a forced sale by replacing the Uniform Partition of Heirs Property Act (“UPHPA”). The UPHPA applied to “heirs property” for which there was no written agreement governing partition among the owners. The UPHPA had preserved the right of a cotenant to sell their interest in inherited real estate, while ensuring that the other cotenants had the necessary due process to prevent a forced sale: notice, appraisal, and right of first refusal.[3]

The Act maintains this same goal while expanding its application to “real property held in tenancy in common where there is no agreement in a record binding all the cotenants which governs the partition of the property.”[4] Put plainly, the Act removes the condition under the UPHPA that required the property to have been inherited property, thus expanding the scope of partition actions far beyond those included in the UPHPA and allowing for added opportunities for non-partitioning parties to purchase the partitioning parties’ interest through partition by appraisal.

Except where (1) the cotenants have agreed in writing to the value of the subject property or (2) the court determines that the evidentiary value of an appraisal is outweighed by the cost of the appraisal, the court determines the fair market value of the property by ordering an appraisal.[5] Where the court orders an appraisal, the court must appoint a disinterested real estate appraiser licensed in the State of California to determine the fair market value of the property, assuming sole ownership of the fee simple estate.[6] Not more than ten (10) days after such appraisal is filed, the court then sends notice to each cotenant with a known address, stating all of the following:

(1) The appraised fair market value of the property;

(2) That the appraisal is available at the court clerk’s office; and

(3) That a party may file with the court an objection to the appraisal not later than 30 days after the notice is sent, stating the grounds for the objection.

Cal. Code Civ. Proc. § 874.316(e).

Thereafter, the court conducts a hearing to determine the fair market value of the property at least thirty (30) days after a copy of the notice of appraisal is sent to each cotenant with a known address, whether or not an objection to the appraisal is filed.[7] In addition to the court-ordered appraisal, the court may consider any other evidence of value offered by a party. Finally, after the hearing but before considering the merits of the partition action, the court must determine the fair market value of the property and send notice to the cotenants of such value.[8]

Whether used to resolve a dispute between co-owners, avoid potential issues with a new, unknown cotenant, or simply as a method of further investment, the Act now provides non-heir cotenants with a clear path to buy out their fellow cotenants’ property interest. As a practical matter, it is recommended that cotenants agree in writing to the method of valuation to be used in the event of a future partition action, rather than relying on the court and its chosen appraiser.

[1] Cal. Code Civ. Proc. §§ 873.210-873.980.

[2] Cal. Code Civ. Proc. § 874.311(c).

[3] Conf. of Comm’rs on Uniform State Laws, The Uniform Partition of Heirs Property Act – A Summary, 2010.

[4] Cal. Code Civ. Proc. § 874.311(b).

[5] Cal. Code Civ. Proc. § 874.316(a)-(c).

[6] Cal. Code Civ. Proc. § 874.316(d).

[7] Cal. Code Civ. Proc. § 874.316(f).

[8] Cal. Code Civ. Proc. § 874.316(g).

 

Authored by Reuben, Junius & Rose, LLP Attorney Michael Corbett.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

SF Contemplates Major Reductions in Inclusionary Housing and Impact Fees

| Kaitlin Sheber
fee

In the recently released Preliminary Controller Recommendations, the Inclusionary Housing Technical Advisory Committee (“TAC”) recommended reductions in San Francisco’s inclusionary housing requirements to make low- and mid-rise condo development feasible. Through its studies, TAC found no housing project prototype studied would be financially feasible under San Francisco’s 2022 inclusionary on-site requirements or at the current fee percentage requirements.

In 2022, the inclusionary requirements for projects with 25 or more units were as follows:

  • 5% for apartment units provided on-site.
  • 5% for condominium units provided on-site.
  • 30% in-lieu fee for apartment units.
  • 33% in-lieu fee for condominium units.

TAC recommended lowering the on-site requirement within the range of 12-16% and lowering the in-lieu fee within the range of 22-29% to make some housing project prototypes possible. The study suggested the reduction would make some low- and mid-rise condominium project prototypes under 8 stories feasible. However, the analysis acknowledged that under the recommended reduced inclusionary housing requirements, condominium project prototypes over 8 stories and all apartment project prototypes would remain infeasible. Overall, a greater proportion of low-rise condominium projects would likely be feasible than mid-rise condominium projects under TAC’s recommended reductions. If requirements were set in the lower portion of recommended ranges, additional mid-rise condominium projects may be feasible.

TAC also outlined additional policy levers available to the Mayor and Board which could affect financial feasibility of housing development, including:

  • Impact and other permanent regulatory fees.
  • Timing of payment.
  • Other city-imposed exactions.

TAC recommended the reduced requirements remain in place through April 2026 and that current TAC membership not expire to ensure a fully-seated TAC during the next Triennial Review.

Further, as of February 16, 2023, San Francisco’s Planning Department (the “Department”) updated its Bulletin on implementing the State Density Bonus Program (“SDBP”). The update clarifies and revises certain Department policies regarding the interaction of the SDBP and local inclusionary requirements. Two of the biggest takeaways include:

  • SDBP projects (rental or ownership) can now use an incentive to substitute low-income units for required moderate or middle income units in the base project, lowering the base project overall affordability requirements. However, ownership projects must still include the required percentage of low-income (80% AMI) ownership units in both small and large projects and may not reduce the affordability level of those units below 80% AMI in order to qualify for greater bonus under state law.
  • For SDBP projects with a base project under 25 units, the addition of density bonus units to the project will not trigger the City’s higher inclusionary requirements for projects with 25 or more units.

We will continue to track San Francisco’s efforts to reduce constraints on housing development as the City implements its recently adopted updated housing element.

 

Authored by Reuben, Junius & Rose, LLP Attorney Kaitlin Sheber.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

West Side Story: Proposed Legislation May Remove Barriers for Small Projects

| Chloe Angelis
legislation

Supervisor Myrna Melgar has introduced legislation that aims to incentivize much-needed family-sized housing on the west side of the city. While clearly in line with the City’s housing production goals, it includes some requirements that could make it inapplicable to most of the west side properties it aims to cover.

The draft legislation would create the Family Housing Opportunity Special Use District, which shares a boundary with the Well-Resourced Neighborhoods Map included in the draft 2023-2031 Housing Element. The map covers the entire west side of the city, plus the Marina, Cow Hollow, and parts of North Beach. As drafted, the ordinance would expire eight years after it becomes effective.

The proposed ordinance encourages the construction of two-to-four-unit projects that provide at least two 2-bedroom units within the new special use district. Qualifying projects would be exempt from an otherwise-required conditional use authorization (“CU”), including CUs that typically apply to the demolition of an existing residential unit. Eligible projects would also be exempt from Section 311 notice and the discretionary review process. Obtaining approval of a CU or having a project sent to the Planning Commission by a neighbor via discretionary review creates uncertainty and can add many months to a project’s approval timeline. Taking both CU requirements and Section 311/discretionary review off the table are meaningful incentives.

The legislation does not automatically exempt these projects from CEQA—but small new construction projects should be eligible for Class 3 (new construction of small structures) categorical exemptions.

Specifically, the new rules would apply to projects that construct two-unit buildings (including a two unit building with a third standalone unit outside the proposed building envelope) and three-unit buildings (including a three unit building with a fourth standalone unit outside the proposed building envelope). At least two of the units in a qualifying project must have at least two bedrooms.

Projects must consist of ground-up new construction, and while they would be exempt from the otherwise-applicable density limit (up to four units per lot and not including any permitted accessory dwelling units), projects would not be exempt from the otherwise-applicable height limit for the property in question.

As drafted, the legislation includes several other restrictions that will limit its potential impact:

Qualifying projects cannot demolish a historic resource and must comply with the Residential Design Guidelines and the Planning Code, except for lot-based dwelling unit density limits. While requiring Code compliance in exchange for bypassing Planning Commission review is reasonable, the Residential Design Guidelines are not entirely objective, which will make it difficult for sponsors to assess whether Planning Staff will deem a particular project in compliance with the guidelines. It’s also difficult to imagine how a third or fourth unit constructed outside the main building envelope could comply with the Planning Code’s rear yard and obstruction controls.

Additionally, projects cannot propose the demolition of any of the following:

  • Units that are or were subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of lower or very low income within the past five years;
  • Units that are or were subject to the Residential Rent Stabilization and Arbitration Ordinance (Chapter 37 of the Administrative Code) within the past five years;
  • Units that are or were occupied by lower or very low income households within the past five years; or
  • Units that were withdrawn from the rental market pursuant to the Ellis Act within the past 10 years.

The requirement related to the Rent Stabilization and Arbitration Ordinance (i.e., the “Rent Ordinance”) is very limiting as drafted. Most residential units in San Francisco are subject to the Rent Ordinance, which has a rent control component and an eviction protection component.

Units built after June 13, 1979, most single-family homes and condos, and units that have undergone substantial rehabilitation are subject to the Rent Ordinance, but only to the eviction controls (not the rent increase limitations that apply to other units). If the legislation intends to exclude these units and older units subject to rent control limits, there will be nothing left for redevelopment pursuant to the proposed Family Housing Opportunity Special Use District. Protecting affordable units from demolition is a logical policy choice, but hopefully the legislation will be amended to limit this restriction only to units subject to the Rent Ordinance’s rent control protections.

Supervisor Melgar’s proposal has the potential to be an impactful piece of legislation to spur development on the west side of the city and we’ll be keeping an eye on its progress through the legislative process.

 

Authored by Reuben, Junius & Rose, LLP Attorney Chloe Angelis.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Matt Haney Seeks To Eliminate Only-in-San Francisco Appeals

| Thomas P. Tunny
appeals

Housing developers in San Francisco no doubt recognize this entitlement moment of disbelief:  after a grueling, years-long process of working with staff, neighbors, and policy-makers, with numerous concessions made to address the potential impacts of their proposed project, the project finally receives its entitlement from the Planning Commission (a recent study found that a multifamily housing project takes 627 days on average to obtain a building permit) when lo and behold, the Board of Appeals sends notice that the project’s site permit has been appealed; and/or the demolition permit is appealed; and/or the grading permit; and/or the tree planting permit…

Fueling the disbelief even further is that the appeal isn’t based on anything new.  The project has already gone through exhaustive review and revisions.  The permit appeal process simply gives project opponents one more “bite of the apple”, an opportunity to cause delay and gain leverage for further negotiations and concessions.  The standard of review for the Board of Appeals is merely whether the permit was issued in error.  And four out of five votes are needed to overturn the permit.  All of this highlights the City’s recognition that these appeals are superfluous; and yet, they remain allowed.

Assembly Member Matt Haney seeks to change that.  This month he introduced AB 1114, a new bill that recognizes the absurdity (and steep costs to housing) of these appeals, and would eliminate them.  The bill would bar cities from allowing building-permit appeals after an applicant has navigated the long and winding road to entitlement.  Although the legislation would apply to all cities and counties in California, San Francisco is the only jurisdiction in the state that allows such appeals of entitled projects.  Hence, only San Francisco would be affected by the new law.  Only permits for projects that are at least 2/3 residential would be protected by the legislation.

One potential hurdle for the legislation is the City’s Charter.  Arguably, this proposed change requires an amendment of the City’s Charter, which can be done only by San Francisco voters.  But Haney is seeking to bypass that requirement, relying on the state’s vested interest for all California jurisdictions to build more housing.

The bill was introduced February 15 and is scheduled tentatively for a committee hearing on March 18.  State Senator Scott Wiener supports the bill, and the Housing Action Coalition was instrumental in its drafting.

 

Authored by Reuben, Junius & Rose, LLP Attorney Thomas P. Tunny.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.