Objective Standards for Housing Projects – The Next Battleground?

| Andrew J. Junius
housing

In November of last year, to little fanfare, the San Francisco Planning Department presented to the Planning Commission its new Citywide Objective Design Standards. San Francisco, like cities across the state, are grappling with the brave new world of objective standards as required by recent housing legislation out of Sacramento. As the dust settles around the new and improved Housing Element process, the next battleground will be over individual projects, and each jurisdiction’s take on how to implement “objective standards.”

The need for objective standards is straightforward: as the state took dramatic action to jumpstart housing production by removing local zoning barriers, the focus was on eliminating local discretion for qualifying housing projects. In other words, planning commissions and city councils could no longer determine that a proposed housing project, while compliant with all local zoning, density and height controls, simply did not fit into the neighborhood character, was too big, blocked views, and generally displeased existing residents. That discretion – used by cities across the state – is why California doesn’t have enough housing. For decades, local residents have been leaning on their city officials to stop these projects. And in many cities they have succeeded.

No longer able to defer to local discretion, planning departments were charged with making sure that housing projects would only be evaluated with respect to objective standards. What is an objective standard? The California Housing Accountability Act (amended in 2017) defines objective standards as those that “involve no personal or subjective judgment by a public official and are uniformly verifiable by reference to an external and uniform benchmark or criteria available and knowable by both the developer, applicant or proponent and the public official before submittal.”

This created an immediate challenge to planning departments across the state. While all city planning and zoning codes do have objective standards (i.e., numbers like height limits, floor area ratios, and the like), they also included a significant number of discretionary standards and processes. One would think that removing these discretionary provisions from planning codes and simply leaving the objective numbers would be a straightforward process. In other words, if a housing project in a certain zoning district required a conditional use authorization previously (a conditional use approval requires a Planning Commission to make very subjective findings regarding whether the project will be necessary and desirable and otherwise good for the neighborhood…) it should be a simple matter to remove that requirement and get on with it.

In many instances, that has simply not been the case. Discretionary and objective standards and procedures for many cities have been woven tightly together and cannot be easily untangled. At times there is even a debate over what is objective and what is subjective. And of course, such changes in local planning codes require legislative action by city councils.

Some California jurisdictions have attempted to comply with relatively minor changes to their code, claiming that these are in fact, “objective”. However, careful review of these minor changes reveals that there are still portions of their code purporting to protect views, “harmonize” the development with surrounding character, etc., etc. The subjective criteria that remain are not objective and would not pass muster if challenged.

Other jurisdictions, including San Francisco and Marin County, have taken a very different approach. In these cases, the Planners have gone to extraordinary lengths to provide an objective standard for virtually every aspect of a development, from site design, height limits, building modulation, etc., down to the more nuanced details for lobby and building entrance design and location, window location and design, façade treatment, building articulation, blind walls, and more. Marin County’s form-based code clocks in at a formidable 323 pages of objective standards.

It’s hard to predict how this will all work out in the months and years ahead. Now that the Housing Element battles are for the most part over (or at least not at full boil), the project-by-project housing battles have begun. We commend the state legislature’s efforts to prioritize housing production the only way it can: by removing the ability of cities to say no to qualifying housing projects. We hope that cities across the state will see the need for housing as critical and will work to implement these state laws as quickly and efficiently as possible.

 

Authored by Reuben, Junius & Rose, LLP Partner, Andrew J. Junius.

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.

City Extends Entertainment Zone to Outer Neighborhoods

| Tara Sullivan
neighborhood

On December 10th Mayor Breed and Supervisor Mandelman introduced BOS File No. 241197, an ordinance that would create the Cole Valley Entertainment Zone. Buoyed by the success of the Entertainment Zones that occurred downtown, this is an acknowledgment that there are other parts of San Francisco that have yet to recover from the pandemic-related downturn.

As a refresher, entertainment zones enable restaurants and bars in designated areas to sell alcoholic beverages to go for outdoor consumption during events and activations. The establishment of entertainment zones stems from the Mayor’s Roadmap to San Francisco’s Future, which has supported a series of entertainment initiatives designed to bolster Downtown’s economic recovery. Sanctioned under SB 76, authored by Senator Scott Wiener, entertainment zones are designed to support the sustainability of local bars and restaurants and boost neighborhood economic activity by permitting restaurants and bars to sell alcoholic beverages to go for outdoor consumption during special, permitted events.

So far, there have been three events (in two Entertainment Zone areas) that have taken advantage of this legislation: Oktoberfest on Front (Street) on September 20th and Nightmare on Front Street on October 31st, along with the recent Winter Wonderland Tree Lighting Ceremony on November 30th at Thrive City (Chase Center). All of these have been deemed a success, bringing in thousands of people and increasing sales by anywhere from 700-1,500%.

The proposed legislation makes a tweak to the definition of an “Entertainment Zone Event” by removing the requirement of an ABC license or permit to allow the sale and consumption of alcohol to be served outdoors. Moving forward, only local authorization is needed to hold an “Entertainment Zone Event,” with only licensed establishments that hold an ABC permit allowed to sell alcohol. This will greatly reduce the amount of paperwork needed to put on an Entertainment Zone Event.

Cole Valley is a small neighborhood district that spans three blocks from Frederick Street to Parnassus Avenue. Intimate in nature, it does feature several bars and restaurants, and the neighborhood has undertaken several street-specific events, like the Cole Valley Night Fair on December 5th. It is not a neighborhood that draws many nighttime patrons, largely due to its location and family-oriented population. However, it is located along a Muni line and sits between the Haight and Inner Sunset neighborhoods, so it is a good case study for this type of economic initiative. It is anticipated that the proposed entertainment zone will be effective as early as March 2025, allowing for nighttime and weekend events along Cole Street in the spring.

The entertainment zone program has so far proved to be a success in larger, more commercially-oriented areas. Cole Valley is an interesting choice for the first of this expanded concept, but if successful, can demonstrate how other neighborhoods in the city such as the Inner Sunset, which has held several night markets in 2024, can utilize the concept to help attract patrons during times that are otherwise pretty quiet. Cole Valley’s businesses all support the proposed Entertainment Zone and, if successful, will be great to see how this concept is utilized in other neighborhoods throughout San Francsico.

 

Authored by Reuben, Junius & Rose, LLP Partner, 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.

Court Broadens Applicability of CEQA Infill Exemption

| Thomas P. Tunny
CEQA

Readers no doubt are aware of the CEQA Infill Exemption, one of the most common CEQA exemptions used for projects in San Francisco and the Bay Area. In an important opinion published on November 18, the Sixth District Court of Appeal interpreted key terms in the Infill Exemption (CEQA Guidelines Class 32 categorical exemption) to broaden its application, in particular “in-fill development” projects that meet specified criteria, including being “substantially surrounded by urban uses.” In doing so, the Court upheld a lower-population city’s use (King City) of the exemption for a Grocery Outlet project near Highway 101. (Working Families of Monterey County, et al. v. King City Planning Commission (Best Development Group, LLC, Real Party in Interest) (2024) ___ Cal.App.5th ___.)

The project at issue was a Grocery Outlet store in a single-story building with surface parking on a 1.6-acre lot located within 1,000 feet of Highway 101. The parcel’s General Plan land use designation was Highway Service Commercial (HSC) and its zoning designation was Highway Service District (H-S). It was surrounded on two sides by commercial buildings, on the third side by sheriff’s department buildings, and on the fourth side by a cemetery.

An environmental assessment submitted by the project developer in support of the project’s permit applications (for a CUP, architectural review, monument sign permit, and landscaping permit) concluded the project would not result in any significant environmental impacts relating to traffic, noise, air quality, water quality, or otherwise, and that it qualified for the CEQA Guidelines Class 32 exemption for in-fill development. The City’s Planning Commission agreed on all counts, and its decision approving the project entitlements and exemption was upheld by the City Council, which did the same on administrative appeal.

The Petitioners, a union, sought to have the court narrow the infill exemption by arguing the project was not located in an “urbanized area,” as defined in CEQA Section 21071(a) (population 100,000 or more) or CEQA Guidelines Section 15387 (population 50,000 or more). Petitioners also alleged the project did not meet the definition of an “infill site,” as defined in CEQA Section 21061.3, since the project site was not previously developed for “qualified urban uses.”

The court refused to take the bait and turned to traditional rules of statutory construction to discern the meaning of these key terms. Finding the language of the exemption arguably ambiguous, the court looked to the findings of the Natural Resources Agency and the Office of Planning and Research (“OPR”) in establishing the exemption. Their statements of regulatory intent showed no indication that the regulators intended to limit the Class 32 categorical exemption for infill development to projects that meet the criteria set forth in the statutory definitions of “infill site,” “urbanized area,” and “qualified urban uses”.

Citing OPR directly, the court concluded, with a flourish, “The term ‘infill development’ refers to building within unused and underutilized lands within existing development patterns, typically but not exclusively in urban areas. Infill development is critical to accommodating growth and redesigning our cities to be environmentally- and socially-sustainable.” This broad definition will allow the Infill Exemption to be used in areas that may not meet specific definitions of “urban”, but as a matter of common sense are clearly “urbanized”. This decision is important because it reinforces and even broadens the applicability of the Infill Exemption in both typical urban areas and smaller cities.

 

Authored by Reuben, Junius & Rose, LLP Partner, 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.

Preliminary Election Results: Correction on Measures L & M

| Kaitlin Sheber

Measure L: Additional Business Tax on Transportation Network Companies and Autonomous Vehicle Businesses to Fund Public Transportation – Failed*

With preliminary election results showing 56.88% voter approval, it would seem voters passed Measure L, but the Measure has failed due to a provision in Measure M discussed below. Measure L would have placed a permanent additional tax on transportation network companies and autonomous vehicle businesses to support Muni transportation services and fare discount programs, titled the “Ride-Hail Platform Gross Receipts Tax.” The Measure would impose the tax specifically on businesses that provide passenger service for compensation and receive more than $500,000 in gross receipts. The tax rates range between 1% and 4.5% of gross receipts. The Controller estimates annual revenue from the measure at approximately $25 million.

Measure M: Changes to Business Taxes – Passed

Measure M proposed to modify several existing taxes in the City, including the Gross Receipts Tax, Homelessness Gross Receipts Tax, Overpaid Executive Gross Receipts Tax, Business Registration Fee, and the Administrative Office Tax on Payroll Expenses. In general, the Measure is expected to cut taxes for many small businesses and shift more tax burden onto medium, large, and wealthier businesses through a variety of changes. Preliminary election results show that Measure M was approved by 69.73% of voters so far. As discussed above, Measure M contained a provision to render Measure L null and void in the event it obtained more votes. With preliminary results showing Measure L with 201,074 votes in favor and Measure M with 228,038 votes in favor, Measure L is expected to fail.

*Corrected from original publication on November 13, 2024.

 

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.

San Francisco Empty Homes Tax Struck Down at Trial Court

| Alex Klein

Last week, the San Francisco Superior Court struck down the City’s “Empty Homes Tax” which was set to be collected for the first time starting in April 2025 for the 2024 tax year. As stated in a message on the San Francisco Treasurer and Tax Collector’s website, the agency is evaluating the court’s decision and its effect on the upcoming collections and will “expect to have more information in the coming weeks.”

Adopted by San Francisco voters with the passage of Measure M, during the November 2022 general election the Empty Homes Tax aimed to add residential housing stock back into the local rental market by imposing a tax on owners of certain multifamily buildings for keeping rental units vacant for 182 or more days each tax year. The Empty Homes Tax would have applied broadly to most multifamily property owners in the City whose properties had vacant units with limited exemptions for 501(c)(3) tax exempt nonprofits, governmental entities, and the owners of residential buildings with two or fewer units.

The tax would have been calculated based on the vacant units’ square footage. For the 2024 tax year, a minimum tax of $2,500 would have been assessed for vacant units with less than 1,000 square feet and up to $5,000 would have been assessed for vacant units with greater than 2,000 square feet. Tax rates imposed under the Empty Homes Tax were set to increase annually over the next few years.

The present litigation was brought in February of 2023, shortly after the passage of Measure M, by a handful of property owners in the City affected by the Empty Homes Tax, in addition to the various interested real estate organizations including the San Francisco Apartment Association and the San Francisco Association of Realtors.

In their complaint challenging the Empty Homes Tax, Plaintiffs argued that the Empty Homes Tax violated the Takings Clause of the US Constitution. Specifically, Plaintiffs argued that the tax amounted to the City compelling property owners to rent their property, an action the United States Supreme Court and California’s First Appellate District have held is a Taking. Yee v. City of Escondido (1992) 503 U.S. 519; Cwynar v. City & Cty. Of S.F. (2001) 90 Cal.App.4th 637, 658. The tax, plaintiffs argued, sought to “achieve indirectly the very result that the Constitution and state law prohibit…” by “coerc[ing] owners to rent their units by severely penalizing those who exercise their rights to keep units vacant…” (Complaint pg.5.)

Plaintiffs also argued that Prop M was preempted by the Ellis Act which prohibits public entities from compelling owners of residential real property to offer their accommodations for rent or lease. Cal. Gov. Code § 7060(a). As Plaintiffs highlighted in their motion for summary judgment, the “compulsion” prohibited by the Ellis Act extends to the imposition of financial or other penalties for declining to rent residential units. See Bullock v. San Francisco (1990) 221 Cal.App.3d 1072.

In addition to arguing that Plaintiffs did not have standing to challenge the tax before paying it under protest, the City argued in its motion for summary judgement that Plaintiffs had mischaracterized Prop M as requiring property owners to rent their units or pay the Empty Homes Tax. Rather, the City argued, property owners merely needed to ensure that their rental units were “occupied, inhabited, or used,” or that they fell within one of Prop M’s vacancy exclusion periods. Defendant’s Motion for Summary Judgement, Pg. 16.

The Court has yet to publish its decision granting summary judgment for Plaintiffs. It is certainly possible that the City will appeal the decision, which will create uncertainty over the future of the Empty Homes Tax.

 

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.

Fee Waiver Possible for Downtown Conversions

| Thomas P. Tunny
downtown

Mayor Breed and Supervisor Dorsey recently introduced legislation to waive development impact fees and inclusionary housing requirements for downtown office-to-housing conversion projects. For the Mayor it is the latest in a series of new policies she has dubbed the “30 x 30” initiative, designed to bring at least 30,000 residents and students downtown by 2030.

The city’s impact fees and inclusionary housing requirements are the largest source of city-imposed costs on conversion projects. According to some estimates they add between $70,000 to $90,000 per unit in project development cost. The legislation would waive these fees for all commercial-to-residential conversion projects downtown, specifically projects located in any C-3 zoning district or a C-2 zoning district east of or fronting Franklin Street/13th Street and north of Townsend Street. The legislation would apply to new projects and projects that have received Planning approvals or permit sign-off by Planning prior to January 1, 2025, but not yet received issuance of the first construction document. This legislation builds off the waiver of real estate transfer taxes for conversion projects that was enacted in March 2024.

The Mayor first introduced her 30 x 30 initiative in March 2024. The initiative has three components: (1) commercial to residential conversions; (2) 5,000 units of new housing; and (3) a focus on colleges and universities seeking to bring 10,000 students, teachers, and staff downtown.

The office-to-residential component of the initiative aims to convert 5 million square feet of office space to approximately 5,000 units of housing, bringing 10,000 of the 30,000 new residents downtown. Actions towards this goal include:

  • The Commercial-to-Residential Adaptive Reuse Program streamlines permitting by waiving a number of Planning Code requirements for conversion projects. Now scheduled to expire in 2028, the proposed impact fee legislation would extend this streamlining indefinitely.
  • Approved by voters in March 2024, Proposition C waives the real estate transfer tax on up to 5 million square feet of commercial-to-housing conversion projects downtown.
  • The Department of Building Inspection’s Commercial-to-Residential Adaptive Reuse Information Sheet, published in September 2024, clarifies Building and Fire Code requirements and alternative methods of compliance for adaptive reuse projects.
  • In 2025, as authorized by AB 2488, the Office of Economic and Workforce Development will establish a special Financing District for commercial-to-residential conversion projects that would reinvest incremental property tax revenue to offset a significant share of development costs for these projects.

 

Authored by Reuben, Junius & Rose, LLP Partner, 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.

New Federal Business Filing Requirement Starting in 2024

| Alex Klein
BOI Reports

Starting in 2024, many business entities will be required to comply with the Corporate Transparency Act (the “FCTA” or the “Act”).  Enacted in 2021 to enhance corporate transparency and combat tax fraud, the FCTA requires all “reporting companies” to submit Beneficial Ownership Information (“BOI”) reports to the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) by December 31, 2024.  (31 U.S.C. § 5336(a)(11)(A).)

I.  What are reporting companies?

For the purposes of the FCTA, a “reporting company” is defined as any corporation, limited liability company (“LLC”), or other similar entity that is (a) created either domestically by filing with the jurisdiction’s secretary of state or under the laws of a foreign county, and (b) registered to do business in any state.

There are, however, numerous carve-outs from the above definition, including certain highly regulated financial intuitions, nonprofit entities, political organizations, and certain business entities already subject to regulation by the Securities and Exchange Commission such as banks.  In addition, the Act also excludes “large operating companies,” defined as entities with an operating presence at a physical office in the United States and employing more than 20 employees on a full-time basis in the US that demonstrated gross receipts exceeding five million ($5,000,000) dollars in their previous federal income tax returns.

II.  What needs to be reported?

BOI reports must identify each reporting company’s beneficial owner or owners.  The FCTA defines “beneficial owners” as any person or entity that either exercises substantial control over the business entity or who owns or controls a twenty-five (25%) percent interest in the company.  (31 U.S.C. § 5336 (a)(3)(A).)  This definition does, however, exclude minors, creditors, and other discrete classes from the reporting requirement.

BOI reports must include each beneficial owners’ full legal name, date of birth, current residential or business address, and either a unique identifying number from an acceptable identification document or a FinCEN identifier.  (31 U.S.C. § 5336 (b)(2)(A).)  Either a valid United States passport, a valid driver’s license, a nonexpired identification document issued by a state, local government, or Indian Tribe, or, if the individual does not have one of these forms of identification, a foreign passport would be acceptable forms of identification.

In addition, BOI reports must also disclose some information about the business entity itself, including its full legal name, trade name, the current address of the company’s principal place of business, its jurisdiction of formation, and its taxpayer identification number.  Upon request and after submitting the BOI report to FinCEN, beneficial owners will be issued a FinCEN identifier.

BOI reports may be filed by anyone a reporting company authorizes to file the report on its behalf, including employees, owners, or third-party service providers such as attorneys or accountants.  The person responsible for filing the BOI report will need to certify that the information provided is accurate and complete.

III.  Deadlines and the BOI Reporting Process

Reporting companies must file a report containing their beneficial ownership information through FinCEN’s website.  Companies must file their BOI reports by the following deadlines to comply with the FCTA:

  • Domestic reporting companies formed prior to January 1, 2024, are required to file an initial BOI report by January 1, 2025. (31 U.S.C. § 5336 (b)(5).)
  • Companies formed this year (i.e. after January 1, 2024) will be required to file a BOI report within ninety (90) days of receiving actual or public notice of the company’s creation or registration, whichever is earlier.

Once a report has been filed, FinCEN will provide a confirmation receipt.  Reporting companies will need to update their reports in the event any beneficial ownership changes occur, such as a sale of the business or an owner’s death.

IV.  Penalties for Noncompliance

Intentional misrepresentation of BOI information or intentional failure to provide complete or updated BOI information on a BOI report could result in criminal or civil penalties.  (31 U.S.C. § 5336 (h)(3)(A).)  Continued reporting violations may result in five hundred dollar ($500) daily penalties until those violations have been remedied.  An FCTA violation may result in fines up to ten thousand dollars ($10,000) and up to two (2) years imprisonment.

The FCTA does, however, also contain a safe harbor provision exempting some reporting companies who submit BOI reports containing inaccurate information and voluntarily submit corrected reports to FinCEN.  (31 U.S.C. § 5336 (h)(3)(C).)

 

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.

3 Day Notice to Pay or Quit – Compliance and Requirements

| Lindsay Petrone
rent

What is a “person” in the context of a 3 day notice to pay or quit?  Is it a natural person, like an individual, or could it also include an entity?  A recent case, City of Alameda v. Sheehan (2024 WL 4195486, Filed September 13, 2024), just explored this question.  In City of Alameda (“City”), the City served a 3-day notice on Shelby Sheehan (“Sheehan”) who had not paid rent for 17 months pursuant to a lease with the City.  Upon a successfully delivered notice to pay or quit and non-payment by the tenant within the 3-day period, the landlord can thereafter seek eviction of the tenant through an expedited unlawful detainer action.  The 3-day notice to pay or quit directed Sheehan to pay the outstanding rent by cash or check to City of Alameda c/o River Rock Estate Group at an address in Alameda, California.  Sheehan argued that the notice failed to provide the name of a natural person to whom rent may be paid, instead naming a corporation.  Therefore, the notice was invalid because the statute required a “person” to be listed.  The Court in Sheehan confirmed that a “person” in the context of a 3-day notice does include a corporation or entity.  However, the 3-day notice was ultimately defective because the corporation’s name was incomplete and incorrectly stated.

Section 1161 of the Code of Civil Procedure (“Section 1161”) governs the 3-day notice process, in which the notice is required to provide the tenant with the “name, telephone number and address of the person to whom rent shall be paid” within the 3-day period.  Section 1161 does not further define a “Person”.  In Sheehan, the Court looked to the definition of a “person” in another Code of Civil Procedure statute, Section 17, which states “a person includes a corporation as well as a natural person”.  The Court also noted that Section 1161 defines a “Tenant to include any person who hires real property” and that common sense and case-law both recognize that tenants, for the purposes of eviction via unlawful detainers, include both natural persons and entities.  In other words, if a corporate tenant can be served a 3-day notice, then a corporation or other entity can receive the rent.  The Court also recognized a lease can require rent to be paid by electronic means or otherwise to a corporate landlord, rather than to a named individual by mail.  Therefore, it would not make logical sense to allow payment to a landlord who is an entity, but then not allow an entity to collect the rent under a 3-day notice.  The Court also looked to the legislative history and noted that the legislature could have stated “natural person” in Section 1161 but did not.  For the stated reasons above, the Court held that the recipient or “person” named to receive the rent in a 3-day notice could be an individual or an entity.

Ultimately, in this case, the entity River Rock Estate Group was incorrectly spelled and the address stated on the 3-day notice for that entity did not match any River Rock entity found on the Secretary of State website.  As such, the 3-day notice did not strictly comply with the requirements of Section 1161 and would need to be corrected and again served on Sheehan to be enforceable.  The City of Alameda case reiterates that the requirements of Section 1161 must be strictly followed in order to be enforceable and also confirms a “person” to whom rent can be paid may be an entity or an individual, as long as clearly stated as to whom and where the money should be paid.  Landlords should make sure their notices are accurately drafted and follow the guidelines in Section 1161 to ensure any subsequent unlawful detainer action is valid if the rent remains unpaid after the 3 days.

 

Authored by Reuben, Junius & Rose, LLP Partner, 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.

2024 State Housing Legislation Preview

| Alex Klein and Melinda Sarjapur
legislation

During its 2024 legislative session, the California State Legislature again passed a variety of laws aimed at increasing housing production.  As this new housing legislation heads to Governor Newsom’s desk to be either vetoed or signed into law, here is a preview of nine housing bills which could soon become law:

Streamlining Laws

  • AB 2243 (Wicks): AB 2011 amendments. This bill would update the Affordable Housing and High Road Jobs Act of 2022 (AB 2011), which allowed for streamlined residential development on parcels abutting commercial corridors where office, retail, or parking are principally permitted uses.  If enacted, this bill would update the Affordable Housing and High Road Jobs Act of 2022 (AB 2011, Cal Gov Code Sec. 65912.100, et. Seq.).  Among other changes, this bill would expand program eligibility to sites up to 100 acres that contain a regional mall; expand the definition of “urban uses” [which must abut 75% of a qualifying site’s perimeter] to include parking lots and public parks surrounded by other urban uses; and revise the definition of “dedicated to industrial use” so that it applies only to sites which currently contain industrial use, were most recently permitted as industrial and occupied with such use within the past three years, or were designated for industrial use in the jurisdiction’s most recent general plan adopted before 2022 (except where residential uses are also principally permitted).  Further, AB 2243 would allow projects within five hundred (500) feet of a freeway, provided they meet certain ventilation and HVAC requirements.
  • AB 1893 (Wicks): Builders Remedy update. This bill would amend what’s known as the Builder’s Remedy: a provision of the Housing Accountability Act (HAA).  As amended, the Builder’s Remedy would generally prohibit local governments that have failed to adopt a compliant Housing Element from disapproving residential projects that provide either one hundred percent (100%) of units affordable to lower-income or moderate-income households; thirteen percent (13%) are affordable to lower-income households; ten percent (10%) are affordable to very-low income households; or seven percent (7%) are affordable to extremely-low income households.  This affordability requirement would not apply to projects with ten (10) or fewer units located on a site smaller than one (1) acre with a minimum density of ten (10) units per acre.  AB 1893 would also set some new site eligibility restrictions; establish maximum and minimum density limits; and allow qualifying developments to use an existing streamlining program such as AB-2011 or SB-423, as well as State Density Bonus Law.  Importantly, projects that are currently seeking Builder’s Remedy relief and filed applications with a local jurisdiction before January 1, 2025 may proceed under the original Builder’s Remedy law.
  • SB 1123 (Caballero): More flexibility for residential subdivisions up to 10 units. This bill would amend the Starter Home Revitalization Act of 2021 (Cal. Gov. Code Sec. 65852.28 & 66499.41), which allows ministerial approval for subdivisions with ten (10) or fewer units on parcels of five (5) acres or less, zoned for multifamily residential use, and surrounded by qualified urban uses.  Among other changes, this bill would extend the Act to vacant sites up to 1.5 acres that are zoned for single-family housing.  It would also provide that ADUs and JADUs (if permitted) would not count toward the 10-unit maximum.  If signed into law, these changes would become effective as of July 1, 2025.

Development Fees

  • SB 937 (Weiner): Delaying payment of certain development fees. This bill would amend the Mitigation Fee Act (Cal. Gov. Code 66007, et. seq.).  Among other changes, it would delay assessment of development impact fees on certain housing developments until issuance of a first certificate of occupancy or first temporary certificate of occupancy.  Further, it would limit the amount of utility service fees that can be collected at the time an application is received for a residential project to costs incurred by the utility related to the connection.
  • AB 1820 (Schiavo): Fee estimates for residential development. This bill would allow residential developers to request that a local agency provide a preliminary fee and exaction estimate at the time an SB 330 preliminary application is submitted. If requested, the local agency would be required to provide the estimate within thirty (30) business days.  Within thirty (30) business days of final project approval, the local agency would also be required to provide an itemized list and good faith estimate of all applicable fees and extractions.
  • SB 1210 (Skinner): Greater transparency for utility fees and timeframes. This bill would require certain publicly-owned utilities to post the following information on their websites by January 1, 2026: (1) a schedule of fee estimates for typical service connection fees; and (2) estimated timeframes for completing typical service connections for a variety of residential developments including ADUs, single-family homes, multifamily, and mixed-use developments.

Entitlement and Permit Extensions

  • AB 2729 (Patterson): Entitlement extension for certain projects. This bill would extend entitlements for housing developments that were issued prior to and in effect on or before January 1, 2024, and that are set to expire before December 31, 2025, by eighteen (18) months.  AB 2729 would apply to a broad range of entitlements including legislative approvals; administrative approvals; ministerial approvals; and building permits, but would not apply to development agreements, SB-330 preliminary housing applications, or tentative maps that have already been approved for at least twenty-four (24) months under the Government Code.  The area of qualifying housing development projects must be at least two-thirds residential.
  •  AB 2117 (Patterson): Tolling expiration dates. This bill would toll the expiration of certain local entitlements during the time when an action challenging them is pending.  AB 2117 tolling would apply to approvals including variances, conditional use permits, and any other development permits, but not to building permits issued under state or local code, demolition permits, minor or standard excavation and grading permits, or other nondiscretionary permits required post-entitlement prior to construction.

ADUs

  • SB 1211 (Skinner): Expanding state ADU law. This bill would increase the number of detached ADUs eligible for a ministerial approval on a lot that has an existing multifamily dwelling from two (2) detached ADUs to no more than eight (8) detached ADUs, provided that the number of ADUs does not exceed the number of existing dwelling units on the lot.  It would also prohibit local agencies from imposing objective development or design standards that are not authorized by state law on ADUs subject to ministerial approval, or from requiring the replacement of parking spaces if uncovered parking is eliminated to construct an ADU.

The Governor has until September 30, 2024, to either sign or veto legislation passed during the California State Legislature’s 2024 legislative session.

 

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

HCD Reverses Course: No Zoning Amendments for Builder’s Remedy Projects

| Chloe Angelis
HCD

Back in May, we wrote about a March 28, 2024, Department of Housing and Community Development (“HCD”) Letter of Technical Assistance to the City of Compton, which determined that the Builder’s Remedy does not prohibit a city or county from requiring Builder’s Remedy projects to obtain zoning or general plan amendment approvals.[1]  Since then, HCD has issued a Letter of Technical Assistance and a subsequent Notice of Violation[2] to the City of Beverly Hills, walking back that March determination and confirming that a Builder’s Remedy project cannot be denied based on inconsistency with a jurisdiction’s zoning ordinance or general plan land use designation.

The Builder’s Remedy, which is part of the Housing Accountability Act (“HAA”), allows developments that meet certain affordability thresholds to bypass local zoning when a city or county is out of compliance with housing element requirements.

In the March letter to the City of Compton, HCD wrote that “the Builder’s Remedy does not expressly prevent the City from requiring discretionary permits and/or legislative actions (e.g., GPAs, Zoning Changes, CUPs, specific plan amendments, etc.) that would be required for similar projects where the Builder’s Remedy does not apply.”  While the March letter focuses on a general plan amendment and zoning change intended “to remedy the inconsistencies between the project and applicable regulatory documents that will result when the project is approved,” the determination cuts to the core of the Builder’s Remedy, which is meant to provide a path for qualifying projects to completely bypass local zoning.

Thankfully, the latest pair of HCD letters to the City of Beverly Hills reverses course.  At issue in these letters is a 165-unit project with 20% low-income units.  The applicant had appealed an incompleteness letter, in which the City instructed the applicant to pursue a general plan amendment and zoning change.  Pending the City Council’s decision on the appeal, the applicant sought direction from HCD on whether a general plan amendment and zoning change could legally be required under the HAA.

The June 26, 2024, Letter of Technical Assistance acknowledges the earlier City of Compton Letter and walks back the March conclusion, explaining that a requirement to pursue a general plan and/or zoning amendment is, in fact, a violation of the HAA:

“While it remains true that the statutory language in the HAA does not expressly prevent the City from requesting or requiring legislative actions (e.g., a GPA/ZC) that would be required for similar projects where the Builder’s Remedy does not apply, requiring such action where the Builder’s Remedy does apply leads to an absurd outcome . . .

The HAA is clear that a project protected by the Builder’s Remedy may not be disapproved for inconsistency with a jurisdiction’s general plan and zoning ordinance.  Accordingly, a jurisdiction that refuses to process or approve a project subject to the Builder’s Remedy due to the applicant’s refusal to submit a GPA/ZC requested or required by the jurisdiction to resolve such an inconsistency violates the intent of the HAA.

. . . In other words, the requirement for a GPA/ZC is essentially a requirement for consistency, and disapproving the project for failure to resolve that inconsistency is effectively a disapproval on the grounds of inconsistency.  The HAA prohibits such a disapproval.”

Following the June letter, HCD issued a Notice of Violation after the Beverly Hills City Council ignored HCD’s prior guidance and denied the applicant’s appeal of the City’s incompleteness letter, based on a finding that a general plan amendment and zoning change are required for the application to be deemed complete.

HCD confirms in the Notice of Violation that, irrespective of the HAA, the Permit Streamlining Act prohibits a city from determining that an application is incomplete on the basis that it does not include an item (in this case, a general plan amendment and zoning change application) that was not included in the submittal requirement checklist.

The Notice of Violation also offers two important reminders about processing preliminary development applications (pursuant to Government Code section 65941.1) and the rights provided by a vested preliminary development application:

(1) The 90-day deadline that an applicant has to respond to a notice of incompleteness resets each time a city issues a notice of incompleteness, such that a project with multiple incompleteness letters and responses could have multiple 90-day response periods without losing the vested right of a preliminary development application.

(2) A vested preliminary development application remains vested unless the number of units or the square footage changes by at least 20%. Other project changes do not affect the rights conferred by a vested preliminary development application.

[1] HCD RE: 1601 W. El Segundo Blvd., Compton – Letter of Technical Assistance (March 28, 2024); available at https://www.hcd.ca.gov/sites/default/files/docs/planning-and-community/HAU/compton-hau604-ta-03282024.pdf.

[2] HCD RE: 125-129 Linden Drive, Beverly Hills – Notice of Violation (August 22, 2024) and HCD RE: 125-129 Linden Drive, Beverly Hills – Letter of Support and Technical Assistance (June 26, 2024); both available at https://www.hcd.ca.gov/sites/default/files/docs/planning-and-community/HAU/beverly-hills-hau-1071-nov-082224.pdf.

 

Authored by Reuben, Junius & Rose, LLP Partner, 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.