Case Involving SF Ordinance May Have Broader Implications

In a case of both local and statewide interest, on March 21, 2012, the California Supreme Court denied review of a Court of Appeal decision involving a San Francisco ordinance. Aiuto v. City and County of San Francisco (201 Cal.App.4th 1347 [Cal.App. 1 Dist., December 15, 2011]) involves a challenge to the City’s Condominium Conversion BMR Program (“BMR Program”) by owners of certain BMR units restricted under the Program. As discussed below, the Aiuto decision indicates the broad applicability of a 90-day statute of limitations contained in the California Subdivision Map Act (“SMA”) for claims concerning subdivisions.

Long before the City’s current inclusionary housing ordinance, the City established the BMR Program in 1979 under the authority of the SMA by adopting Sections 1341 and 1385 of the San Francisco Subdivision Code. The BMR Program was created in an effort to limit perceived tenant displacement in connection with condominium conversions and to provide opportunities for first-time home buyers, and required owners converting their buildings from apartments to condominiums to designate a certain number of the units as below market rate (“BMR”) units. These BMR units were then typically sold to low or moderate income buyers.

After a dispute arose between the City and owners of certain BMR units regarding the terms of the BMR Program, the City adopted Ordinance No. 320-08 (“Ordinance”) in December 2008, which amended the BMR Program and added new regulations. Five months after the effective date of the Ordinance, a number of BMR unit owners filed a lawsuit challenging the Ordinance on various grounds, and seeking release of their units from the Program.

While the plaintiffs’ claims were being litigated, the Superior Court issued a preliminary injunction delaying the City’s enforcement of the Ordinance against the plaintiffs until the case was decided by the court. On the City’s appeal of the lower court’s issuance of the preliminary injunction, the Court of Appeal reversed the lower court’s decision and invalidated the preliminary injunction. In deciding that the injunction was improperly granted, the court based its decision on the 90-day statute of limitations contained in SMA Section 66499.37, which requires that any action challenging a legislative body’s decision concerning a subdivision must be filed with the court within 90 days of the effective date of the decision. As the plaintiffs filed their lawsuit five months after the effective date of the Ordinance, the court reasoned that plaintiffs’ claims were time barred.

Although the BMR Program dated back to 1979, because the Program was adopted under the authority of the SMA, and because the City adopted the Ordinance as an amendment to the Program, the court determined that SMA Section 66499.37 served to bar the plaintiffs’ claims challenging the Ordinance. While the court’s decision was technically limited to the preliminary injunction, and the case was sent back to the Superior Court for further proceedings, the Court of Appeal’s rationale may signal the ultimate resolution of the plaintiffs’ claims. If the lower court follows this rationale, the plaintiffs’ claims would be denied for failure to file the lawsuit before the 90-day deadline, irrespective of the merits of the plaintiffs’ underlying challenges to the Ordinance.

In applying the 90-day deadline in SMA Section 66499.37, rather than the various 2-5 year deadlines for claims urged by the plaintiffs under other state and federal laws, the court cited the California Supreme Court’s decision in Hensler v. City of Glendale ([1994] 8 Cal.4th 1) in stating that “any challenge to local legislative or administrative acts or decisions taken pursuant to ordinances enacted under the authority of the Subdivision Map Act [are subject to the 90-day statute of limitations in SMA Section 66499.37].” The court also noted the broad applicability of SMA Section 66499.37 to a variety of controversies, which may not seem to involve a subdivision subject to the SMA. (See e.g., McPherson v. City of Manhattan Beach (2000) 78 Cal.App.4th 1252, 1264-1265 [SMA Section 66499.37 applied to city’s grant of a conditional use permit allowing a developer of a condominium project to exceed city’s building height restriction]; Friends of Riverside’s Hills v. City of Riverside (2008) 168 Cal.App.4th 743, 754-756 [SMA Section 66499.37 applied to cause of action under California Environmental Quality Act that concerned a subdivision].

Given the court’s decision in Aiuto, and the broad applicability of SMA Section 66499.37 to a variety of controversies concerning land use and development even remotely related to the SMA, property owners and developers considering a challenge to a local legislative or administrative act or decision should carefully consider whether SMA Section 66499.37 will impose a 90-day statute of limitation on the filing of such a claim. Anyone considering such a challenge should seek legal advice to ensure compliance with any applicable deadlines.

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, 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.

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