New State Laws Aim to Simplify HOA Governance

Assembly Bill 648 – HOA Meetings by Teleconference

In an effort to enable greater access to homeowners association (“HOA”) meetings, and enhance HOA members’ ability to participate and comment on matters of interest, the Davis-Stirling Common Interest Development Act, the primary body of law governing HOAs in California, was amended to allow HOA meetings to be held by teleconference.

Assembly Bill 648 was signed into law and became effective on January 1, 2024.  AB 648 adds Civil Code Section 4926 to the Davis-Stirling Act.  Prior to passage of AB 648, Civil Code Section 4090 required meetings of an HOA board of directors (“Board”) to be held in-person at a physical location, or by teleconference only in certain situations.

Newly added Civil Code Section 4926 allows a meeting of the HOA members or meeting of the Board to be conducted entirely by teleconference (including video conference), without any physical location being held open for the attendance of any HOA member or director on the Board (“Director”) if specified conditions are satisfied. These conditions include, among others, a requirement that the notice for the meeting provide clear instructions on how to participate by teleconference, and each HOA member and Director must have the same ability to participate that would exist if the meeting were held in person.  Also, the telephone number and email address of a person who can provide technical assistance with the teleconference process, both before and during the meeting, must be provided in the meeting notice.

These teleconference provisions do not apply to an HOA meeting at which ballots are counted and tabulated pursuant to Civil Code Section 5120.

Assembly Bill 1458 – Reduced Quorum for HOA Board Elections

In order to streamline the process for election of Directors to HOA Boards, the Davis-Stirling Act was amended to allow for reduced quorums in certain situations.

HOAs are required to periodically hold elections for the Board of Directors.  The governing documents of many HOAs include a quorum requirement for any election of Directors.  A quorum is the minimum number of HOA members that must be “present” – either in person or via mailed ballots – in order to make the election valid.  An HOA’s governing documents may require a majority (at least 51%) of HOA members to participate for the election to be valid.

A number of HOAs report having trouble meeting quorum requirements for Board elections due to lack of participation by the HOA members.  This inability to reach a quorum can prevent an HOA from electing Directors to its Board in a timely manner.  An HOA may have to hold multiple elections in an attempt to reach the required quorum of its members.

Assembly Bill 1458 was signed into law and became effective on January 1, 2024.  AB 1458 amends Civil Code Section 5115 of the Davis-Stirling Act and Section 7512 of the Government Code.

Civil Code Section 5115 as amended provides that if an HOA fails to reach a quorum required by its governing documents for an election of Directors, then unless a lower quorum is authorized by the HOA’s governing documents, the HOA may at a subsequent election reduce the required quorum to 20% of the HOA members voting in person, by proxy, or by secret ballot.  This means that only 20% of the HOA members will have to participate in an election of Directors for the election to be valid.  This reduced quorum requirement should allow Directors to be elected in a timely manner notwithstanding a lack of participation by many HOA members.  The HOA must provide specified notices to its members before reducing the quorum.  Similar amendments were made to Section 7512 of the Government Code.

Managing an HOA can be challenging given that HOA members and Directors often lead busy lives and may find it difficult to fully participate in the HOA.  These new State laws should facilitate greater participation in and efficient operation of HOAs for the benefit of all members.

 

Authored by Reuben, Junius & Rose, LLP Attorney Jay Drake.

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.

Superior Court Invalidates SB9 in Charter Cities

On April 22, 2024, the Superior Court issued a decision in City of Redondo Beach et. all, vs. Rob Bonta, et. all.  This case centered on the legality of SB 9, which the state legislature passed in 2021.  The court held that the legislation was “not reasonably related to ensuring access to affordable housing nor narrowly tailored to avoid unnecessary interference with local government,” thus was in violation of the “home rule” doctrine prohibiting interference with municipal affairs [of charter cities]. At the crux of the argument was whether the legislature’s stated intent of SB 9 – “ensuring access to affordable housing” – was effectuated in the legislation.  The court held that it was not.

As a reminder, SB 9 requires that a proposed housing development containing no more than 2 units in a Single-Family residential zoning district be approved ministerially, and that an associated lot split be approved ministerially as well.  This legislation was one of many that the state legislature has passed in the last several years to require local municipalities to approve new housing projects.

A key issue in the case was whether SB 9 violated charter cities’ authority to manage “municipal affairs.” The Court noted that under California jurisprudence a state law may overcome the home rule doctrine if it is reasonably related to the resolution of a matter of statewide concern. The Court then applied the four-part test from California Fed. Savings & Loan Assn. v. City of Los Angeles to resolve the issue of whether SB 9 superseded local land use authority.  At the end of this test, if “the court is persuaded that the subject of the statute is reasonably related to its resolution [and not unduly board in its sweep] then the conflicting charter city law is no longer a municipal affair and the state law applies.

The Court found, and the parties conceded, that land use and zoning regulations are traditionally local affairs and that SB 9 did indeed interfere with those powers.  On the third prong, whether SB 9 dealt with a matter of statewide concern, the parties sought to define what exactly the statewide concern at issue was. Petitioners sought to define the statewide concern as ensuring affordable housing, whereas respondents argued that the matter of statewide concern was addressing the state’s overall housing shortage.

Here, the Court looked at the plain language of the law – SB 9’s legislative intent and purpose was simply “ensuring access to affordable housing is a matter of statewide concern and not a municipal affair” – and adopted a narrow reading of the Legislature’s intention.  It held that SB 9 was just about ensuring access to affordable housing, not about the shortfall of housing generally. When respondents argued that specific identification of affordable housing did not necessarily preclude a shortfall in housing from being a matter of statewide concern, the Court was unpersuaded.

On the fourth prong of the inquiry (i.e. whether SB 9 is reasonably related to ensuring access to affordable housing and narrowly tailored to avoid unnecessary interference), the Court first turned to the definition of “affordable” within the context of SB 9.  The Court held that the legislatures’ use of “affordable” in SB 9 was in the context of below market-rate housing.  It did not agree with the respondents that it meant housing affordability at all levels.

The Court then held that the “broad requirement of ministerial approval of duplexes and urban lot splits does not contain any connection to affordable housing” (as defined as below market-rate units).  Therefore, since SB 9 does not contain any below market-rate requirements, there was no evidence that SB 9 would result in the creation of “affordable housing,” basically dashing the argument that SB 9 could satisfy the reasonably related/narrowly tailored prong.

It is important to note that the Court went out of its way to distinguish SB 9 from SB 35 and SB 423, which have specific requirements for below-market rate housing units, and therefore were not subject to this ruling.

Where does this leave SB 9?  There are 121 charter cities in California, many of them opposing not only SB 9 but other laws that force ministerial approval of housing projects.  However, many jurisdictions have approved SB 9 projects, including San Francisco.  Whether the Attorney General’s Office will appeal the ruling is not yet known, however, it is doubtful that this is the last we will hear about SB 9.

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.

State Law Could Overhaul “Builder’s Remedy”

Assemblymember Buffy Wicks has introduced Assembly Bill 1893 (“AB 1893”) to “modernize” the so-called “Builder’s Remedy” that allows projects with enough affordable units to bypass local zoning requirements when a city or county is out of compliance with Housing Element Law.   This month, California Attorney General Rob Bonta announced his sponsorship of the bill.

The Builder’s Remedy is part of the state’s Housing Accountability Act (“HAA”) that has been in effect for over 30 years. It prohibits local governments that haven’t met Housing Element deadlines from denying an application to build a housing project based on inconsistency with local zoning controls or a general plan designations so long as the project meets certain affordability requirements.

The Builder’s Remedy has laid idle for decades, but gained visibility and application over the past couple years as the Legislature has continued to strengthen state housing laws and numerous cities dropped the ball on meeting Housing Element deadlines.  It is no longer idle.  Housing advocacy groups have aggressively promoted the Builder’s Remedy, characterizing it as a “zoning holiday.”  Recent news coverage estimates that there are 93 Builder’s Remedy projects across the state that could deliver as many as 17,000 new housing units.[1]

Some cities have attempted to push back against the Builder’s Remedy as an unacceptable intrusion of state law into local land use permitting decisions.  These attempts have been met forcefully by the State Department of Housing and Community Development which has issued numerous advisory letters explaining that failure to process Builder’s Remedy projects could expose a city or county to liability under the HAA.  The Attorney General’s office has also intervened in litigation to enforce the Builder’s Remedy.  Just last month Los Angeles County saw the first court case victory for developers on a Builder’s Remedy project in La Caňada Flintridge, and a fleury of other cases are pending.  News coverage suggests that cities and counties have refused to process nearly half of the Builder’s Remedy applications filed based on arguments that it doesn’t actually apply, has been misinterpreted, or is itself unconstitutional.[2]

Developers have also pointed out the difficulty in meeting the affordability requirements of the Builder’s Remedy.  Projects must either provide 20% of the units at prices affordable to low-income households or 100% of the units at prices affordable to moderate income households.  Given current financial constraints, these affordability levels are often infeasible to meet.

AB 1893 would overhaul the Builder’s Remedy in a number of ways:

  • Revised Affordability Requirements. AB 1893 would replace the 20% low-income threshold with a 10% very-low-income threshold.  The 100% threshold for moderate-income projects would remain. Projects with 10 units or fewer would be exempt from affordability requirements.
  • Limiting Where Builder’s Remedy Can Apply. Currently, there is no restriction on what sites can apply the Builder’s Remedy. AB 1893 would only allow such projects on sites that permit housing, retail, office, or parking, or agricultural use if 75% of the site perimeter adjoins a site developed with urban uses.  Builder’s Remedy would not apply on a site or adjoined to any site where more than 1/3rd of the existing square footage is dedicated to industrial uses.
  • Capping Density. AB 1893 would generally cap the residential density of Builder’s Remedy projects to two- to three-times that otherwise permitted by local zoning, depending on whether the site is located in a high-resource area. Additional density (in an amount not yet specified) could be permitted for sites within ½ mile of a major transit stop.
  • Imposing Objective Development Standards. AB-1893 would require Builder’s Remedy projects to comply with objective zoning standards for the closest zone that allows multifamily residential use at specified density minimums, or if no such district exists, the zone that allows the greatest density in the locality.
  • Integrating the Builder’s Remedy with Other State Housing Laws. Among other items, this legislation prohibits local agencies from applying objective standards to Builder’s Remedy projects that would physically preclude their construction at the allowed densities or increase “actual costs.” It further clarifies that Builder’s Remedy projects can utilize State Density Bonus Law; that projects meeting residential density standards of AB 1893 will be deemed to satisfy objective density standards for streamlined ministerial development under AB 2011; and that projects meeting residential density and objective criteria of AB 1893 can qualify for qualify for streamlined, ministerial processing under SB 35.

As currently written, AB 1893 would not apply to Builder’s Remedy projects with applications deemed complete on or before April 1, 2024.

The Attorney General argues that AB 1893 is needed to “clarify and modernize” the Builder’s Remedy by “providing clear, objective standards for builder’s remedy projects, including density standards and project location requirements.”  It argues that these revisions will make the Builder’s Remedy into “a more effective enforcement tool because local governments will face greater certainty of swift consequences when they do not adopt a timely and substantially compliant housing element.”  Finally, the Attorney General argues that AB 1893 will yield better projects by incentivizing “development in urban infill and near transit centers, and promoting higher density housing that is more affordable than single-family homes.”

Opponents argue that AB 1893 will reduce the amount of affordable housing generated and reduce local control over land use permitting decisions.

We understand that some parties (including the Housing Action Coalition and YIMBY Action) are advocating for including the provisions of AB 1893 as an alternative to the existing Builder’s Remedy, but leaving the existing Builder’s Remedy in place for projects that are able to meet the increased affordability requirements and do not wish to be constrained by AB 1893’s limitations on location, density, and design.

AB 1893 passed from the Assembly Committee on Housing and Community Development and Local Government on April 17, 2024.  It will next be considered by the Assembly Committee on Local Government.  If it is signed into law this year, it would take effect in January 2025.

[1] California’s most controversial housing law, the ‘builder’s remedy,’ could get a makeover – Local News Matters

[2] Id.

Authored by Reuben, Junius & Rose, LLP Attorney’s Matthew Visick and 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.

Board of Supervisors Downzones Historic Districts Over Mayor’s Veto

Last week, the Board of Supervisors voted to override Mayor London Breed’s veto and passed legislation that will effectively downzone certain historic districts in the C-2 zoning district. According to the San Francisco Chronicle, this is the first time the Board has overturned Mayor London Breed’s veto. It also marks a reversal of the trend towards increasing density and eliminating numerical density limits in the City.

In the C-2 zoning district, formed-based zoning currently applies east of or fronting Franklin Street/13th Street and north of Townsend Street, meaning that instead of numerical caps on the number of units, the density is controlled by other development standards like height, bulk, setbacks, open space requirements, etc. The switch to form-based zoning in portions of the C-2 zoning district was just enacted in July 2023 as part of the Downtown Economic Revitalization legislation, which was unanimously approved.

Now, the Board of Supervisors passed legislation to revert back to numerical density limits in the C-2 district for properties within the Northeast Waterfront Historic District, the Jackson Square Historic District, and the Jackson Square Historic District Extension. This will limit density based on the density ratio permitted in the nearest residential zoning district, but no less than one unit per 800 square feet of lot area. The legislation exempts projects utilizing the Commercial to Residential Adaptive Reuse Program from the numerical density limits.

President Aaron Peskin, who sponsored the legislation, stated that it is a reaction to the “unintended consequence” of projects taking advantage of the form-based density in the C-2 zoning district in conjunction with the State Density Bonus Law to propose towers in these historic districts. Public comments specifically referred to State Density Bonus Projects at 1088 Sansome and 955 Sansome, which were proposing a total of 264 housing units.

The Mayor vetoed the legislation, calling it “anti-housing policy in the guise of historic protection.” Supervisors Melgar and Dorsey expressed concerns that as the City moves towards maximizing housing, this legislation would create a problematic precedent that individual supervisors can carve out exceptions to density decontrols. But ultimately, the Board voted 8-3 to override the Mayor’s veto, with Supervisors Melgar, Dorsey, and Engardio voting with the Mayor and against the legislation.

It remains to be seen whether these types of piecemeal exceptions to form-based density will continue to be enacted in response to specific projects. But either way, the Planning Department’s staff report aptly noted that a portion of the area affected by this legislation is currently included in the Planning Department’s rezoning effort in accordance with the Housing Element. If that rezoning scenario is pursued, the staff report states that the Department will likely recommend reinstating form-based density, and approximately 23 parcels that will be subject to numerical density controls under this legislation will revert to form-based zoning within the next year. This begs the question how many other areas will be subject to this type of legislative whiplash as the City grapples with balancing the need for additional housing and preserving neighborhood character.

Authored by Reuben, Junius & Rose, LLP Attorney 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.

Legal Victories for CEQA Streamlining

Earlier this month, the California Court of Appeal ruled that a qualifying development project in San Diego County could use the County’s General Plan Environmental Impact Report (“EIR”) to streamline the project’s environmental review, over the objections of neighbors and the County’s Board of Supervisors. A similar result was recently achieved in San Francisco.  RJR partner Tuija Catalano secured a victory at the Board of Supervisors for a housing project, with the Board determining that the project properly used San Francisco’s recently certified Housing Element EIR to streamline CEQA processing for the project. The Court of Appeal’s opinion further strengthens the use of CEQA streamlining and exemption provisions and validates San Francisco’s established process of “tiering” project specific CEQA review off its General Plan and Area Plan EIRs.

In San Diego, County planning staff determined that a recycling plant project that was consistent with the County’s most-recent General Plan could be evaluated for a CEQA evaluation pursuant to CEQA Guidelines Section 15183, which generally limits the CEQA evaluation for a project consistent with a General Plan (including a Housing Element) or an Area Plan to potential unique (“peculiar”) impacts. After several technical studies confirmed the recycling center project did not result in significant or peculiar impacts not already evaluated in the General Plan EIR, County staff prepared a 15183 evaluation with mitigation measures from the General Plan EIR’s Mitigation Monitoring and Reporting Program.

If that fact pattern sounds simple enough, the administrative CEQA review process was actually more complicated and unfavorable for the developer: the developer originally pursued an initial study to prepare either an EIR or Negative Declaration before pivoting to a 15183 evaluation only after all of the background technical studies were completed.  The Board of Supervisors sided with neighbors and upheld an administrative appeal over the recommendation of the staff to deny the appeal. The trial court also sided with the Board of Supervisors. The Court of Appeal reversed the trial court’s decision with a surprisingly straightforward opinion.

Importantly, the Court held that the project could pivot to a 15183 evaluation and confirmed the eligibility of this streamlining evaluation for projects using a General Plan or Area Plan. The Court next found that the Supervisors failed to base their conclusions on any substantial evidence in the record. It also explicitly rejected layperson testimony from neighbors at the Board of Supervisors appeals hearing (related, it also confirmed that the substantial evidence standard—which is less deferential—applied even when a court reviews a city or county’s determination an exemption is not applicable). The crux of the Court’s argument:

the Board of Supervisors failed to identify the specific nature of the … project’s ‘peculiar’ impacts that required environmental review, except to point to broad environmental categories. Nor did the Board of Supervisors address, with specificity, the effect of uniform policies and procedures on their purported impacts.

Hilltop Group, Inc., et al v. County of San Diego, et al. (2024) ___ Cal.App.5th ___.

The Court’s opinion confirms the use of 15183 can be appropriate, even for a large-scale project like a recycling plant, and should make cities and counties more comfortable using their General Plan or Area Plan EIRs on larger-scale projects. The opinion also emphasizes that politics only goes so far when an administrative record is lacking: a city or county cannot simply decree that a certain environmental topic addressed in a 15183 exemption— for example, preservation—is not adequately analyzed. The local agency needs to provide specifics with adequate factual and legal backing (as mentioned above, “lay opinion and personal observations” by neighbors was not substantial evidence). And that determination needs to address why mitigation measures or otherwise-applicable laws could not further reduce or eliminate the peculiar impacts.

Closer to home, San Francisco has a 15-year history of using CEQA Guidelines Section 15183 in the context of Plan Area EIRs (such as Eastern Neighborhoods Plan Area EIR and Central SoMa Plan Area EIR) to issue Community Plan Evaluations for projects within the applicable Plan Areas. With the certification of San Francisco’s Housing Element (2022 Update) EIR in November 2022, many projects outside Area Plans became eligible for similar streamlined CEQA review based on the General Plan (i.e. Housing Element) EIR that applies Citywide.

On February 6, 2024, the Board of Supervisors heard the first CEQA General Plan Evaluation appeal, and with a 10-1 vote the Board found that the use of Section 15183 streamlining provision based on the Housing Element EIR was proper.  The recent Board of Supervisors appeal decision, as well as the San Diego Court of Appeal opinion are important.  Cities and counties can look to these decisions to support streamlined process based on General Plan EIRs on projects that are consistent with the development density within the General Plan policies. The Board decision and the Court of Appeal opinion are especially good news for projects that are located outside Area Plans that until now were required to complete a negative declaration or an EIR if they were not eligible for any of the categorical CEQA exemptions.

 

uthored by Reuben, Junius & Rose, LLP Attorneys Tuija Catalano and 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.

Leases V. Licenses and Eviction Rights

court cases

The question has been previously raised – is a lease the same as a license – in that does the underlying occupant/user acquire tenancy rights by such occupation regardless of whether you define an agreement as a license or a lease.  A recent case – Castaic Studios, LLC vs. Wonderland Studios (97 Cal.App.5th 209) – discusses an important aspect of this issue.  In Castaic, Wonderland, as licensee, defaulted under a license agreement and the licensor, Castaic, elected to seek an unlawful detainer action to remove the licensee, only to be told by the lower court that it was not an available remedy under the license.  Here, Castaic granted Wonderland the “exclusive” but “non-possessory” right for the use of the property.  The license stated it was “not a lease or any other interest in real property but a contractual arrangement that creates a revocable license”.  The licensor waived the right to an unlawful detainer under the license agreement and the license provided it would be governed by “contract laws and not by the landlord tenant laws”.  It further stated, that upon a default, the licensee agrees that licensor may cease to provide access to the licensee’s area of use without notice or the need to initiate legal process.

The Courts of Appeal analyzed the contract to determine if the remedy of unlawful detainer applied here.  They stated that the fundamental goal of contract interpretation is to give effect to the mutual intention of the parties as it existed at the time they entered into the contract.  Further, in interpreting the contract, the court gives the words their ordinary and popular meaning, unless the parties have given the words a specialized or technical meaning.  Here, the Court stated that even if the license contains some elements of a lease, its express terms show the parties’ intent to waive any rights afforded by the landlord tenant laws, including a landlord’s remedy of unlawful detainer.

Castaic argued that the waiver should not be enforced.  The Court disagreed based on two principles: (1) the parties have the power to determine the terms of their contractual relationships and (2) other than a law established for a public reason, any person may waive the advantage of a law intended for its benefit.  Here, Castaic waived the right to bring an action for unlawful detainer and the Court saw no public reason that would prohibit a landowner from agreeing to waive the unlawful detainer remedy.  Finally, the Court stated that the existence of a landlord tenant relationship was essential to an unlawful detainer action.

Castaic highlights that if an agreement is clear that it is a license and not a lease, the courts will review on the plain terms of the language of that license and the parties’ intent.  In this case, the Court found that the parties were explicit that an unlawful detainer remedy was unavailable to the licensor and nothing outside the language of the license would allow it to be implied otherwise.

New State Condo Law Allows Reduced HOA Assessments for Designated Affordable Units

We are following up on a previous update where we discussed Assembly Bill 572.  After undergoing a few amendments in the State legislature, the Bill passed and became effective January 1, 2024.  AB 572 amended Section 5605 of the California Civil Code, which is part of the Davis-Stirling Common Interest Development Act.

The amended law, with certain exceptions, prohibits a homeowners association (HOA) that records its original declaration (CC&Rs) on or after January 1, 2025, from imposing an increase of a regular assessment on the owner of a deed-restricted affordable housing unit that is more than 5% plus the percentage change in the cost of living, not to exceed 10% greater than the preceding regular assessment for the HOA’s preceding fiscal year.

In a significant break from previous State law and regulations, a qualifying HOA may impose an assessment against an owner of a deed-restricted affordable housing unit that is lower than the assessment imposed against other unit owners according to the proportional ownership of total subdivision interests subject to assessments.  This change would appear to allow an HOA to require market-rate unit owners to subsidize affordable unit owners with respect to payment of certain HOA assessments.

The new law is not all encompassing.  As stated above, it only applies to new common interest developments that record their original CC&Rs on or after January 1, 2025.  It also does not apply to any of the following:

  • A development of 20 units or fewer.
  • A development where the percentage of the units that are deed-restricted affordable housing units exceeds the percentage required by an applicable zoning ordinance in effect at the time the development received final approval.
  • A development that is located within a city, county, or city and county that does not have an applicable zoning ordinance requiring a percentage of deed-restricted affordable housing units and meets either of the following conditions:
    • The percentage of the units that are deed-restricted affordable housing exceeds 10 percent of the total number of units in the development at the time the development received final approval.
    • For certain other developments that were approved for streamlined processing pursuant to Section 65912.124 of the Government Code, the percentage of the units that are deed-restricted affordable housing exceeds 15 percent of the total number of units in the development at the time the development received final approval.

The well-intentioned law is designed to protect owners of designated affordable housing units from large increases in HOA assessments.  Owners of affordable housing units are typically low or moderate income and large increases in HOA assessments can be a financial burden, and can jeopardize their ability to afford the HOA assessments along with the monthly mortgage and other costs of home ownership.

Critics of the new law argue that it could lead to disproportionate financial burdens on homeowners who cannot afford to subsidize others as well as create inequities and divisions within the community by identification of a class of affordable housing or low-income owners, which could lead to resentment among other owners.

Critics also point out that the law may undermine the ability of HOAs to raise the necessary funds to maintain the community by limiting assessment increases for all owners in the HOAs effort to avoid unequal assessments, resulting in artificially low budgets, and/or deferred maintenance and repair obligations.  Artificially low assessments could eventually require multiple special assessments to fund HOA budget shortfalls.

Authored by Reuben, Junius & Rose, LLP Attorney Jay Drake.

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.

Palo Alto Adopts Bold Upzoning

rezoning

Palo Alto recently reached a new housing milestone. On November 13, Palo Alto’s City Council adopted a legislative package implementing rezonings originally proposed in the City’s still uncertified sixth cycle Housing Element. In addition to increasing density and height limits on specific parcels across Palo Alto, this rezoning effort will unlock multi-family residential development on certain properties zoned for industrial or commercial uses.

The City Council’s action comes after a year marked by Palo Alto’s inability to adopt a compliant Housing Element. After missing its state mandated January 2023 deadline, Palo Alto adopted a Housing Element in March. But HCD, the state agency tasked with ensuring local compliance with Housing Element Law, rejected the City’s March Housing Element forcing City planners to go back to the drawing board. A second round of Housing Element legislation passed in May but to little avail. During its review process, HCD again refused to certify Palo Alto’s Housing Element. In a letter sent to the City’s Planning Department in early August, HCD requested Palo Alto make various modifications before it would certify the City’s Housing Element, citing concerns that the City’s site inventory was insufficient. Consequently, as of the time of this publication, Palo Alto’s Housing Element is out of compliance with state law and the City may be vulnerable to further Builder’s Remedy projects. With the adoption of this legislative package, the Palo Alto City Council seeks to appease HCD in the hope that the agency will finally certify the City’s Housing Element.

In addition to modest upzoning across the city, the enacted legislation focuses on rezoning parcels identified as housing opportunity sites in the City’s Housing Element. These identified opportunity sites are primarily clustered around a handful of the City’s major transit corridors, including properties along the west side of El Camino Real between Page Mill and Matadero Avenue (the “El Camino Real Focus Area”), commercial and industrial properties near San Antonio Road and Fabian Way (the “GM/ROLM Focus Area”), and certain sites owned by Stanford University along El Camino Real and Pasteur Drive. These changes come as affected property owners and lessees along El Camino Real have expressed increasing interest in redeveloping their properties to accommodate new housing.

Under the adopted rezoning package, opportunity sites identified in the City’s Housing Element will be rezoned to allow multi-family housing as a permitted use and will enjoy higher density and height limits compared to base zoning. The upshot is that industrially zoned properties located in the GM/ROLM Focus Area will allow multi-family housing as a permitted use, maximum height increases, and FAR maximum increases from 0.5 to 2.5 within the focus area and 1.5 on other opportunity sites. Because these densities would represent the “base” density, developers could leverage the rezoning and use the State Density Bonus Law to construct even taller and denser buildings. Properties located in the GM/ROLM Focus Area will also enjoy modified development standards, including a relaxed landscape coverage standard, reduced parking requirements, and taller height limits further easing constraints on development and leading to more housing in Palo Alto.

Sites identified as part of the City’s El Camino Real Focus Area will also enjoy higher densities, height limits, and lot coverage maximums. But, in response to local concerns, these projects will also face new headwinds. Residential development on these properties will be subject to architectural review to meet either objective design standards or context-based design criteria and would be required to provide 20% below-market rate housing at 80% AMI, an increase from the City’s typical requirement of 15%.

Finally, responding to demands from Stanford University, Palo Alto’s City Council also adopted higher density zoning regulations for university owned properties along El Camino Real and Sand Hill Road. Even though Palo Alto will count housing built on Stanford campus toward its RHNA, the university intends to develop these parcels with subsidized housing for graduate students, faculty, and other Stanford employees.

Beyond the focus areas identified as part of the Housing Element update, however, the rezoning also relaxes design and development standards for certain exclusively residential projects intended to accommodate lower income households across the City. Palo Alto’s recent rezoning legislation presents opportunities across Palo Alto to develop more residential housing in one of the most expensive communities in the Bay Area.

 

Authored by Reuben, Junius & Rose, LLP Attorney Alex Klein.

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.

Local Governments Given Broad Power to Authorize ADU Sales

sale

As recently as last month, existing state law prohibited the sale of accessory dwelling units (“ADU”) from being sold or conveyed separately from the primary residence, except under specific circumstances where the ADU was built or developed by a qualified nonprofit corporation and held pursuant to a recorded tenancy-in-common agreement meeting certain requirements. Thanks to new state legislation – and depending on the city – the right of property owners to sell ADUs separate from primary residences has been considerably broadened. Drafted by Assemblyman Phil Ting (D-San Francisco) and signed into law on October 11, Assembly Bill 1033 provides a path forward for participating cities to adopt legislation authorizing the purchase and sale of ADUs as condominiums, regardless of whether the contractor was a qualified nonprofit or the manner in which the property is owned. The following summarizes the requirements of AB 1033 and provides guidance for homeowners in utilizing this change in law.

With respect to the construction of ADUs, Government Code § 65852.2 allows local agencies, by ordinance, to provide for the creation of ADUs in areas zoned for single-family or multifamily dwelling residential use. Among other requirements, any such ordinance must (i) designate areas within the jurisdiction of the local agency where accessory dwelling units may be permitted, (ii) impose certain objective standards on ADUs (such as parking, height, setback, landscape, architectural review, and maximum size), (iii) provide that ADUs do not exceed the allowable density for the lot upon which the ADU is located, and (iv) require ADUs be for residential use consistent with the existing general plan and zoning designation for its lot.

AB 1033 now allows cities to adopt ordinances that authorize the sale of ADUs – constructed in compliance with Gov. Code § 65852.2 – as condominiums, provided such ordinances meet the following requirements:

(1) The condominiums are created pursuant to the Davis-Stirling Common Interest Development Act, the state’s statutory scheme governing residential condominiums.

(2) The condominiums are created in conformance with all applicable objective requirements of the Subdivision Map Act, which governs subdivision mapping, and all objective requirements of applicable local subdivision ordinances.

(3) Before recordation of the condominium plan, a safety inspection of the ADU must be conducted, evidenced either through (i) a certificate of occupancy from the local agency or (ii) a housing quality standards report from a building inspector certified by the United States Department of Housing and Urban Development.

(4) Each lienholder of the applicable property must consent to the recording of a subdivision map and condominium plan before either of those documents may be recorded. With respect to lienholder consent, a lienholder may (i) refuse to give consent, or (ii) give consent provided that any terms and conditions required by the lienholder are satisfied.

(5) Prior to recordation of the condominium plan (or any amendments thereto), written evidence of the lienholder’s consent must be provided to the county recorder along with the following signed statement from each lienholder:

“(Name of lienholder) hereby consents to the recording of this condominium plan in their sole and absolute discretion and the borrower has or will satisfy any additional terms and conditions the lienholder may have.”

(6) The lienholder’s consent must be included on the condominium plan or a separate form attached to the condominium plan (and include certain information required by statute), and must be recorded in the office of the applicable county recorder.

(7) The local agency must also include a statutory notice to consumers on any ADU submittal checklist or public information issued describing requirements and permitting for accessory dwelling units.[1]

(8) If an accessory dwelling unit is established as a condominium, the local government must require the homeowner to notify utility providers of the condominium creation and separate conveyance.

(9) For owners of a property or a separate interest within an existing planned development with an existing association, as defined in Section 4080 of the Civil Code, such owners may not record a condominium plan without the written authorization by the association.

Under AB 1033, an ADU may be sold or otherwise conveyed separate from the primary residence where the above conditions are satisfied. While this is certainly an encouraging development in the fight to overcome the state housing crisis, many questions remain.

AB 1033 will only be as effective as the cities that choose to adopt the necessary legislation providing for the separate conveyance of ADUs as condominiums. As of this writing, the City of Santa Monica has passed a resolution directing staff to draft a conforming ordinance for consideration. No city has yet enacted an AB 1033-compliant ordinance.

Beyond the issue of city participation, the appetite of lienholders to consent to the mapping and sale of ADUs as condominiums is unclear. If the condominiumization of ADUs were to reduce the value of the principal residences acting as a secured asset, lenders may decline consent or grant consent while imposing onerous conditions on property owners.

Further, the market for the sale of ADUs as condominiums is an unknown quantity. It may prove difficult for property owners to sell ADUs as a condominium separate from a primary residence, and vice versa. Purchasing either interest would also subject owners to the rules and regulations applicable to homeowners’ associations, which can prove tricky for small, two-member associations, particularly when disputes arise.

Homeowners looking to sell ADUs should contact their local city officials and request information regarding the prospects for local adoption of an ordinance now authorized pursuant to California Government Code § 65852.2.

If you have any questions or would like to discuss the mechanics and implications of AB 1033, please contact Michael Corbett from Reuben, Junius & Rose, LLP, at 415.567.9000 or mcorbett@reubenlaw.com.

[1] See Gov. Code § 65852.2(a)(1)(10)(E) for the required notice.

 

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.

Increased State Density Bonus Available Next Year

As we’ve previously covered, Governor Gavin Newsom signed a substantial amount of housing bills into law this year. Two of the most notable pieces of legislation will significantly increase the state density bonus permitted under state law and will make noteworthy changes to SB 35. Below is a more in-depth look at the amendments to the State Density Bonus Law as well as an overview of the potential impacts of the amendments to SB 35 in San Francisco.

AB 1287 – State Density Bonus Law

Beginning on January 1, 2024, AB 1287 will allow an additional 20% to 50% density bonus on top of the existing maximum bonus for projects that provide additional affordable housing units. Currently, the maximum density bonus allowed under the State Density Bonus Law is 50%, which can be accomplished by providing 15% very low income, 24% low income, or 44% moderate income units. The new amendments will allow projects that qualify for a 50% bonus under the current law to provide additional very low income or moderate income affordable housing units in exchange for an additional density bonus based on the sliding scale shown below. For example, a project that provides an additional 5% very low income units, for a total of 20% very low income units, would be subject to an additional 20% bonus, for a total bonus of 70%.

The only limit placed on projects that utilize this additional density bonus is that no more than 50% of the total units can be restricted as affordable.

The amendments also allow up to four concessions for projects that include a total of at least 16% of the units for very low-income households or at least 45% for moderate income households in for sale developments.

The bill also makes some tweaks to the requirements for 100% affordable housing projects that are proposed under the State Density Bonus law.

SB 35’s Future in San Francisco

SB 35 is a state law that offers streamlined ministerial approval for projects in cities that haven’t met their Regional Housing Need Allocation (RHNA) goals in exchange for providing affordable housing and agreeing to certain labor requirements. SB 423, which will take effect on January 1, 2024, includes a number of amendments to SB 35, as discussed in detail here.

San Francisco is currently falling short of meeting its RHNA goals for low income housing, but not above moderate income housing. So, in order to qualify for SB 35, a project in San Francisco must provide at least 50% of its units (not including units granted via a density bonus) to low-income households.

However, due to the increase in the state’s housing production goals allocated to San Francisco for the current RHNA cycle (2023-2031), it is anticipated that the City will not meet its goals for above-moderate housing in the next reporting period. If the California Department of Housing and Community Development makes that determination next summer, then a rental project will qualify for SB 35 streamlining by providing 10% of its units as affordable to very low income households or 20% of its units to low income households. An ownership project can qualify by providing 10% of its units as affordable to low income households.

SB 35 allows for ministerial approval, meaning it eliminates environmental review under CEQA and discretionary entitlements from the Planning Commission. It also imposes a maximum 6-month time frame for approval of planning entitlements. If San Francisco becomes a “10% jurisdiction,” it could unlock the ability to pursue projects that are otherwise cost-prohibitive due to long processing and approval timelines.

Together, SB 35 and the new additional density bonus could significantly spur housing development in San Francisco next year.

 

Authored by Reuben, Junius & Rose, LLP Attorney 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.