As previously discussed in a February 2024 Update, the Planning Commission has been holding informational hearings concerning its state-mandated implementation actions and zoning amendments identified in the certified 2022 Housing Element. The Housing Element was adopted in January 2023.  Beginning in Spring 2023, the Department began working on four key Housing Element implementation areas:

• Affordable Housing Funding and Strategies
• Activating Community Priorities
• Housing Production and Process Improvements
• Expanding Housing Choice (Housing Element Rezoning Program)

On June 6, the Planning Department updated the Commission and public on the Expanding Housing Choice program and coordinating with the Mayor’s Executive Directive on “Housing for All”.

Expanding Housing Choice

Expanding Housing Choice will amend zoning policies in Housing Opportunity Areas (“Well-Resourced Neighborhoods”) to increase capacity for multi-family housing to satisfy the City’s Regional Housing Needs Allocation (RHNA) gap of 36,200 housing units.  Within the broad geography covered by the Housing Opportunity Areas, the rezoning program is focused on transit corridors, commercial corridors, and key opportunity sites, as these locations leverage existing infrastructure and feature the types of sites more likely to be developed and expected to yield the greatest amount of new housing.  Most rezoned areas will allow midrise housing (65’-85’ tall, or 6-8 stories), with higher height limits considered in selected locations.  In the areas surrounding these transit corridors and key sites, parcels will be permitted to build 4-plexes and 6-plexes under recently adopted legislation.  The Planning Department has set a target of building 25-50% of the City’s new permanently affordable housing units in the Housing Opportunity Areas.

Objective Design Standards

As discussed in previous Commission hearings, the Planning Department is developing Objective Design Standards (ODS) in parallel with Expanding Housing Choice that will complement the Planning Code and provide objective development standards. Under the California Housing Accountability Act (HAA), local jurisdictions cannot use subjectivity in determining whether a project can be approved or denied. They may only evaluate projects against objective standards, defined as rules which:

“…Involve no personal or subjective judgment by a public official and are uniformly verifiable by reference to an external and uniform benchmark or criterion available and knowable by both the development applicant or proponent and the public official before submittal.”

A copy of the draft ODS is available here:  SF Objective Design Guidelines

Ultimately, the Planning Department will create Objective Design Standards for every scale and typical residential project type subject to the HAA.  Subsequent updates will expand these standards to apply to other residential project types, sizes, and geographies.  As an initial step, the ODS will be primarily applicable to housing projects in the Housing Opportunity Areas. Specifically, the draft standards were created to apply to midrise housing developments (e.g., 65’ to 85’ tall, or 6-8 stories), large sites (e.g., greater than 1 acre), and sites allowing tall buildings (>85’). These standards were scoped as a companion to the rezoning and focus on the Housing Opportunity Areas and rezoned parcels.

The Planning Department is continuing to meet with community organizations to solicit feedback to refine the draft zoning proposal and will schedule additional informational hearings to provide updates and delve into additional topics related to the rezoning.  We will continue to keep readers apprised.

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

On March 28, 2024, the Department of Housing and Community Development (“HCD”) issued a Letter of Technical Assistance[1] to the City of Compton that potentially creates a new complication to the approval of Builder’s Remedy projects.

The Builder’s Remedy allows developments that meet certain affordability thresholds to bypass local zoning when a city or county is out of compliance with housing element requirements. As Reuben, Junius, and Rose partners Melinda Sarjapur and Matthew Visick explained in their April 24 update (State Law Could Overhaul “Builder’s Remedy”), some cities have pushed back on the validity of the Builder’s Remedy as a tool to overcome burdensome zoning controls, and there are numerous Builder’s Remedy cases making their way through the courts.

The Builder’s Remedy is part of the Housing Accountability Act (“HAA”)—which provides that cities and counties must make one of five findings in order to deny a project that would create very low, low, or moderate income housing. One such finding states that a project’s inconsistency with a city or county’s zoning ordinance or general plan can only be used to reject the project if the city or county has adopted a compliant Housing Element.

HCD’s March letter to the City of Compton confirms that when a city or county does not have a compliant Housing Element, it cannot deny a project that meets the requisite affordability thresholds because of the project’s inconsistency with the applicable zoning or general plan land use designation. However, HCD’s letter explains that the Builder’s Remedy does not prohibit a city or county from requiring Builder’s Remedy projects to obtain discretionary permits or zoning or general plan amendments that would be required for similar non-Builder’s Remedy projects.

The letter notes that in this case, the City of Compton intended only for the required general plan amendment and zoning change “to remedy the inconsistencies between the project and applicable regulatory documents that will result when the project is approved.” Even so, the guidance cuts directly against the benefit that the Builder’s Remedy is arguably meant to provide—an open door for projects with sufficient affordability in jurisdictions that have failed to adopt a valid housing element.

Significantly, the HCD letter goes on to explain that if a city or county’s insistence on a general plan amendment or zoning change makes a project infeasible, then that jurisdiction would be in violation of the HAA. The letter specifically notes that “if insisting on a GPA or Zoning Change delays project approval or increases the cost of the approval process, a violation of the HAA would result.”

It is almost impossible to imagine how a requirement to pursue a zoning or general plan amendment wouldn’t delay a project or increase costs. Zoning and general plan amendments are legislative actions requiring approval by a city council or board of supervisors. Adding a legislative component to Builder’s Remedy projects automatically politicizes these approvals.

The March letter to the City of Compton is a bit contradictory:  on the one hand, the HAA does not prohibit cities from requiring discretionary permits or legislative actions as part of Builder’s Remedy entitlements; but on the other hand, anything that delays project approval or increases costs would amount to an HAA violation.

With numerous Builder’s Remedy cases making their way through the courts, and pending state legislation to revise the Builder’s Remedy, this HCD letter potentially muddies the water for Builder’s Remedy projects in the meantime.

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

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

[1] HCD RE: 1601 W. El Segundo Blvd., Compton – Letter of Technical Assistance (March 28, 2024).

Two recent California court decisions, involving all-too-common neighbor disputes, have provided new guidance concerning easements and property ownership.

In Romero v. Shih (S275023 [2024]), the California Supreme Court ruled that a neighbor (Sierra Madre, L.A. County) can acquire an exclusive right to a driveway easement by implication even where all of the elements of adverse possession are not met, namely, where the party claiming an easement has not paid taxes on the land in question.  The Court reversed the Court of Appeal, which had held that as a matter of law, such an easement could have been created only by a written instrument.  According to the Court of Appeal, the key fact was that the easement was “exclusive”.  Because it was used as a driveway, no other use of the property was possible.  Given the significance of this property right, such an easement could be created only by a written instrument.

The California Supreme Court disagreed.  The driveway had existed and been used by the neighbor for at least 30 years.  The two properties had been bought and sold over the years, but the respective deeds made no mention of the driveway.  Nevertheless, the Supreme Court found that a writing evidencing the easement wasn’t necessary, nor was it necessary that all of the elements of adverse possession be met.  The Court concluded that an easement by implication can be created where any reasonable person observing the two properties and an existing driveway would have assumed the neighbor using the driveway retained at least some continuing interest in the disputed strip of land.

The key facts were that for over 30 years, between the original separation of the properties and the discovery that the user of the driveway didn’t actually own the property, every successive owner of either property had allowed for and/or behaved as if the easement owner had the right to encroach upon the disputed strip of land with the driveway, which had remained unchanged in its use and function since at least the initial property separation.  This was enough to establish an implied easement.

The case of Goodhart, et al v. Honeybadger Acquisitions (A165781 [2023]) concerned the creation of an “equitable easement” in Tiburon.  For over ten years, the Goodharts improved and maintained approximately 950 square feet of land, believing the area was part of their front and rear yards.  The defendant discovered the area was his property when he commissioned a survey in connection with his plan to build a perimeter fence.  After defendant commenced construction of the fence, the Goodharts brought suit, seeking injunctive relief and a declaration that they are entitled to an equitable easement to use the disputed area.

The court’s decision was not a final judgment but rather granted a preliminary injunction, finding that the easement claimant (Goodhart) was “likely to prevail on the merits”.  The court explained that an [equitable] easement over the trespassed-upon property in the trespasser’s favor is created if the trespasser shows that (1) her trespass was ‘ “innocent” ’ rather than ‘ “willful or negligent,” ’ (2) the public or the property owner will not be ‘ “ ‘irreparabl[y] injur[ed]’ ” ’ by the easement, and (3) the hardship to the trespasser from having to cease the trespass is ‘ “ ‘greatly disproportionate to the hardship caused [the owner] by the continuance of the encroachment.’ ” ’ ”  (Shoen v. Zacarias (2015) 237 Cal.App.4th 16, 19.)

The court found that the Goodharts’ trespass was innocent because they thought the property was theirs.  As to potential injury to the defendant property owner and the balancing of harms, the court found this favored the Goodharts.  If the defendants built a fence on the true property lines as planned, it would come within two feet of the Goodharts’ driveway and front steps and the back of their house, and the Goodharts would lose approximately 950 square feet of their yards.  In comparison, the disputed areas constituted less than 1% of the defendants’ property and was located downhill from their residence on undeveloped hillside that was largely unusable to them.  Under these circumstances, the Goodharts were entitled to an equitable easement over the subject area of defendant’s property.

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

The San Francisco Planning Department has released more details on its Expanding Housing Choice Program, a citywide rezoning that will primarily target the city’s westside. The rezoning proposal originates in the city’s 2022 Housing Element Update, which was adopted last January, and requires the city to rezone to allow for approximately 36,000 housing units in order to meet its regional housing need allocation (RHNA) goal. Much like last year’s Constraint’s Reduction Ordinance legislation, the Expanding Housing Choice Program proposes sweeping changes to the Planning Code that are meant to spur housing development. These changes include upzoning along various transit and commercial corridors, relaxing of development standards and density controls, adoption of objective design standards, and the creation of a local “housing program” to rival the state’s density bonus law.

The most visible–and perhaps most controversial–aspect of the Expanding Housing Choice Program is the proposed upzoning along commercial and transit corridors in the city’s “well-resourced neighborhoods”.  At the end of January, the Planning Department released its final draft proposal map, which would see height limits of 65-85 feet (or 6-8 stories) on most major streets on the westside, where near uniform 40-foot (4 stories) height limits have reigned for decades. Although the proposal may look simple at first glance, it should also be noted that the draft map shows “final heights” that are intended to be the maximum height after the application of any density bonuses, and the actual base height limits will be lower than those shown on the draft map.

On February 1, 2024, the Department gave an informational presentation on the rezoning to the Planning Commission, and it was met with several hours of public comment. Many residents expressed disagreement over the upzoning, including concerns about the loss of quieter neighborhoods, impacts to traffic and infrastructure, and displacement of longtime residents and commercial uses. The comments were well received by the Planning Commission, who asked Department staff to consider altering the proposal to address the comments. If last year’s Constraints Reduction Ordinance is any indication, it is likely that the upzoning proposal will be modified several times and go through several heated hearings at the city’s Board of Supervisors, Land Use committee, and Planning Commission.

A less controversial aspect of the Expanding Housing Choice Program includes the creation of a new “local housing program” that will provide an alternative to the state density bonus law that has risen in popularity in recent years. The new local housing program will offer housing projects various development benefits, such as density bonuses and streamlined processing, in exchange for providing affordable housing units. Unlike the state density bonus, however, which gives developers the ability to override development standards, the local housing program will give the city more control over these projects’ physical aspects and design character.

In addition to these major changes, the city will also adopt objective design standards to streamline project review and give projects more certainty from the initial design phase. Other changes include “density decontrol” along transit and commercial corridors, which will remove hard density limits (i.e. 2 units per lot) and allows projects to construct as many units as would reasonably fit within the envelope of a code-complying project. The proposal would also provide an alternative way to comply with the city’s inclusionary housing requirements by allowing small developments (less than 25 units) to provide units as rent-controlled units rather than BMR units.

While the Planning Department has finalized its Expanding Housing Choice proposal after almost a year of outreach and public engagement, the legislation still needs to be introduced, reviewed, and adopted by the city’s legislative body. Due to the wide-reaching changes and controversial reaction to the proposal so far, we expect it will continue to evolve over the coming months.

Leases, construction contracts, easement agreements, and other contracts often require one party to name the other as an “additional insured” under its liability insurance policy.  The insuring party often provides its counterpart with a “certificate of insurance.”  The receiving party may believe that the insuring party complied with its obligations.  But unless an additional insured endorsement is issued, the negotiated risk transfer to the insuring party’s insurance carrier was not accomplished.

A certificate of insurance is nothing more than evidence of insurance.  It typically identifies the insurance carrier, states the kinds of coverage that are maintained, and outlines the insured’s policy limit(s).  A certificate does not provide additional insured status to the certificate holder.

Additional insured status may be conferred by a “scheduled” or “blanket” additional insured endorsement.  A “scheduled” endorsement is specific to the additional insured, includes its name on the endorsement, and amends the insurance policy:

Section II—Who Is an Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule. . . .

(Insurance Services Office, Inc. (“ISO”) endorsement CG 20 10).  When an insured who is frequently required to provide additional insured coverage to other parties (e.g., a subcontractor), its insurance carrier may simply include a “blanket” additional insured endorsement in the policy.  Such endorsements may identify the “Name of Additional Insured Person(s) Or Organizations(s)” as follows:

Any person whom you have agreed in a written and executed contract, prior to an “occurrence”, that such person or organization be added as an additional insured on your policy.

(ISO CG 20 10 12 19).  But the coverage is typically limited by the endorsement.  For instance:

If coverage provided to the additional insured is required by a contract or agreement, the insurance afforded to such additional insured will not be broader than that which you are required by the contract or agreement to provide for such additional insured.

Additional limitations often appear, including:

If coverage provided to the additional insured is required by a contract or agreement, the most we will pay on behalf of the additional insured is the amount of insurance:

1. Required by the contract or agreement; or
2. Available under the applicable limits of insurance;

Whichever is less.

(ISO CG 20 10 12 19 (2018)).  The limitations outlined in additional insured endorsements are important because the additional insured may receive less coverage than it might otherwise expect, or none at all.

An example highlights the issues:

A construction contract requires a contractor to procure and maintain a minimum of $5,000,000 in liability insurance coverage.  The contractor assumes indemnity obligations and agrees to provide $5,000,000 in additional insured coverage for the benefit of the property owner.  The parties agree that the contractor will cause its subcontractors to indemnify and provide additional insured status to the owner and contractor, and that any subcontractor that performs excavation will insure against subsidence risks.  The owner’s objective is to assure that if damage results from the excavation, the excavation subcontractor’s insurance company will defend the owner and pay the loss.  The owner intends to transfer the risk to the subcontractor’s insurance carrier.

But when the contractor enters into its subcontracts, the excavation subcontractor is only required to carry $2,000,000 in liability insurance coverage, agrees to provide additional insured status to the contractor only, and is not explicitly required to carry subsidence coverage.  The contractor provides a certificate of insurance to the owner that (a) shows the owner as the certificate holder on a $10,000,000 liability insurance policy, and (b) attaches a blanket additional insured endorsement.

During construction, the excavation subcontractor is negligent, and a neighboring property is damaged.  The owner asks the subcontractor’s insurance carrier to defend the claim.  But the insurance carrier will likely not defend or indemnify the owner, because the subcontractor did not agree to provide the owner with additional insured status.  If the carrier does provide coverage, it is likely that only $2,000,000 of the subcontractor’s $10,000,000 insurance coverage will be available.  Worse yet, the carrier may deny the claim entirely because the loss was caused by land subsidence, and the excavation subcontractor did not agree to provide that coverage (even if the subcontractor’s policy actually insures against that risk).  The insurance carrier will rely on the language of the blanket additional insured endorsement to support its positions.

When parties negotiate risk transfer provisions, they intend that losses will be allocated between them (and their insurance carriers) in a particular way.  But the risk transfer is not typically complete when the contract is signed.  Business owners and property owners will be well-served by paying attention to the details of insurance coverage – before there is a problem – to assure that their objectives are achieved.

Authored by Reuben, Junius & Rose, LLP Attorney Corie A. Edwards.

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

Can cities and states really ban natural gas hookups? On January 2, 2024, the Ninth Circuit handed down a decision in California Restaurant Association v. City of Berkeley finding that Berkeley’s natural gas ban was preempted by federal legislation and struck the ordinance down.

In 2019, the City of Berkeley adopted first-of-its-kind legislation amending the city’s building code to prohibit the use of natural gas in virtually all newly constructed buildings, with some limited exceptions. Berkeley’s ordinance was originally enacted with the goal of curbing greenhouse gas emissions and encouraging all-electric infrastructure in the city. Soon after its enactment, however, the California Restaurant Association sued, arguing that the ordinance was preempted by the federal Energy Policy and Conservation Act (EPCA). The EPCA, enacted by Congress in 1975, provides a comprehensive scheme for federal energy regulation. For the purposes of this lawsuit, however, the statute also governs federal regulation of consumer goods using natural gas. Under the EPCA, these consumer goods are referred to as “covered products.” Under the EPCA, once a federal energy conservation standard is adopted for a covered product, state and local governments are prohibited from further regulating the product with some minor exceptions.

The district court, which first heard the case back in 2019, was largely favorable to Berkeley’s arguments that the ordinance was not preempted by federal law. After rejecting the city’s motion to dismiss the California Restaurant Association’s suit, the district court interpreted the EPCA narrowly so that the Act would not “sweep into areas that are historically the province of state and local regulation.” [i] The district court concluded that the EPCA was not preempted because the ordinance did not explicitly regulate or mandate the installation of any particular product or appliance, and because the ordinance’s effect on consumer products was “at best indirect.” [ii]

The majority for the Ninth Circuit disagreed with the lower court, explicitly abandoning the district court’s limited reading of the EPCA’s preemption statue. As the majority at the Ninth Circuit observed, following the plain language of the EPCA, once the federal government adopts an energy conservation standard for consumer products covered by the EPCA, state and local governments are limited in their ability to further regulate those products. At the appeals court, Berkeley had argued that the EPCA’s concern with covered products should be understood narrowly to exclude the distribution of natural gas. But the court was unpersuaded.

An inherent aspect of regulating covered consumer products under the EPCA, the majority observed, is whether those products can access natural gas at all. Therefore, the EPCA must preempt local and state regulations like Berkeley’s natural gas ban affecting natural gas supply to those covered products. But, as the court opined, the EPCA’s scope is not infinite and the statute may not preempt state or local regulation of a utility’s distribution of natural gas.

At the appeals court, Berkely had also argued that a finding that the city’s natural gas ban was preempted by the EPCA would necessarily repeal the Natural Gas Act, a comprehensive ban and federal regulatory scheme for the sale of natural gas. The Court, however, did not find any implied preemption because the Natural Gas Act only restricts the Federal Energy Regulatory Commission’s ability to regulate local distribution of natural gas, and therefore did not implicate the EPCA.

This ruling leaves other California jurisdictions with similar natural gas bans, such as San Francisco, San Jose, and Los Angeles, in an awkward position and will likely temper efforts by other jurisdictions to adopt similar bans. The case, though, is widely expected to be appealed to the Supreme Court, which may address the extent of the EPCA’s preemption of local gas regulation in the years to come.

[i] Cal. Rest. Ass’n v. City of Berkeley, 547 F. Supp. 3d 878,891 (N.D. Cal. 2021).

[ii] Id.