Japantown Proposed for a Zoning Facelift

This month, the Planning Department is unveiling its years-in-the-making community strategy to preserve and promote the cultural heritage of Japantown.  The Japantown area generally runs along Geary Boulevard and Post Street between Fillmore and Laguna Streets, and along Buchanan Street for a block and a half north of the well-known Peace Pagoda building.  After Japanese immigrants relocated to the area after the 1906 earthquake, Japantown became one of the largest Japanese enclaves outside of Japan – and today is the oldest and largest such enclave in the United States (the only other remaining Japantowns in the US are in San Jose and Los Angeles).  The Japantown planning process was initiated in response to concerns in recent years that the neighborhood was losing its cultural identity and that the community had not been involved in its recent planning and development.

The Japantown Cultural Heritage and Economic Sustainability Strategy (JCHESS) outlines a number of goals, including creating community groups that can help develop or guide development, improving the various pedestrian malls in the area, creating area-specific design guidelines, and rezoning the area within a new Japantown Special Use District (“SUD”).  The proposed SUD generally promotes greater retail uses in the area by relaxing controls on upper stories and requiring retail uses on the ground floor.  Automobile uses are further discouraged, new curb cuts are prohibited along most streets, and only two banks are allowed.  Housing is also allowed at greater densities.

The JCHESS document provides a detailed and fascinating history of San Francisco’s Japantown, as well as the City’s Japanese population.  It can be accessed at http://www.sf-planning.org/ftp/files/plans-and-programs/in-your-neighborhood/japantown/JCHESS_Revised_Draft_9-12-2013_WEB.pdf.  The Planning Commission initiated the Code amendments earlier this month, so expect them to be enacted in late 2013 or early 2014.

Easier Alterations to Non-Conforming Dwelling Units Proposed

Citing the need to provide greater flexibility to improve and alter existing dwelling units in the City, Supervisor Avalos has introduced legislation, reviewed last week by the Planning Commission, that would do just that.  Of the roughly 360,000 dwelling units in the City, nearly 52,000 are non-conforming with respect to density (they were built before current density limits and now exceed the permissible density).  As a result, these units currently may not be enlarged or altered.  The legislation would allow the expansion or alteration of these units so long as it does not expand the envelope of a building as it existed on January 1, 2013.  These dwelling units would still be subject to the Planning Code’s dwelling unit removal controls – which require Department or Commission approval for removal of dwelling units and enlargement of certain units.  But such enlargements would at least be permitted.  This common-sense legislation was recommended by the Planning Commission last week and now moves on to the Board of Supervisors.

San Francisco Formula Retail Debate Makes it into the New Yorker

Those of us in the development and land use community love our jobs, but we all recognize that our field does not typically inspire the same interest and excitement in the literary community outside of local blogs and industry publications.  However, do not fear, those of you who would like to elevate our profession to be material for cocktail parties on the Upper West Side.  This week, the New Yorker magazine published an online article covering the ongoing debate over formula retail in our fine City.  And the angle of this liberal-ish publication isn’t necessarily what you would expect – which sheds light on the ironies involved in the fight against Big Retail. 

Check it out:

http://www.newyorker.com/online/blogs/currency/2013/09/what-it-means-to-keep-chain-stores-out-of-san-francisco.html

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 in-lieu fee options and increased requirements for bicycle parking, and dwelling unit mergers are becoming even more difficult.

New Bicycle Parking Requirements

On July 23, 2013, the Board of Supervisors approved an ordinance amending bicycle parking requirements in the City.  In part, this ordinance establishes an in lieu-fee program that allows developers to pay $400 per space for up to 50 percent of the required Class Two parking spaces up to 20 spaces.  The ordinance also allows for waivers of Class Two parking requirements to be approved by the Zoning Administrator in certain circumstances.  In addition to these changes, the ordinance will increase bicycle parking requirements for individual uses. The new basic requirements for residential, office, and retail uses are as follows:

Residential

• One Class One bicycle parking space for every dwelling unit, up to 100 units, and 1 Class One space for every four dwelling units over 100.   (Class One spaces are secure, weather-proof parking for long-term storage by employees and residents.)

               And

• One Class Two bicycle parking space for every 20 dwelling units.  (Class Two spaces are bicycle racks located in publicly-accessible, highly-visible locations and intended for short term use.)

Residential units that are also considered Student Housing will be required to provide 50% more spaces than would otherwise be required.

Office

• One Class One space for every 5,000 occupied square feet;

              And

• Minimum of two Class Two spaces for any office use greater than 5,000 gross square feet, and one Class Two space for each additional 50,000 occupied square feet.

Retail

• One Class One space for every 7,500 square feet of occupied floor space

              And

• (minimum of two spaces) One Class Two space for every 2,500 square feet of occupied floor area.  For uses larger than 50,000 gross square feet, 10 Class Two spaces plus one Class Two space for every additional 10,000 occupied square feet.

The Administrative Approval for Dwelling Unit Mergers…Going, Going….Gone?

Removing dwelling units through demolition, merger, and conversion can be a very difficult process.  Partly because the Planning Department has a general policy against removal of dwelling units, and partly because there are different standards that apply to various neighborhoods around the City, found in Code sections spread throughout the Planning Code.   As David Silverman in our office wrote a few weeks ago, Supervisor Avalos introduced legislation that would streamline the definitions and requirements pertaining to the removal of dwelling units so that Section 317 would apply City-wide and offer universal definitions and standards for dwelling unit removal.  While this new legislation will simplify things, it will also make it a bit more difficult to get a merger approved due to new language and restrictions added to Section 317.

Because of the Planning Department’s policy against mergers, most people rely on qualifying for administrative approval of their merger, in order to avoid almost certain disapproval of their project at a Planning Commission hearing.  Currently, dwelling unit mergers can be administratively approved in one of two ways:

1. By proving that each of  the units merged is demonstrably “unaffordable”  (appraised at or above $1,342,000); or

2. By satisfying a supermajority (four out of five) of the existing criteria in Section 317(e):

(i)      Whether removal of the units would eliminate only owner occupied housing;

(ii)      Whether removal of the units and the merger is intended for owner occupancy;

(iii)     Whether removal of the units will bring the building closer into conformity with prevailing density;

(iv)     Whether removal of the units will bring the building closer into conformance with prescribed zoning; and

(v)      Whether removal of the units is necessary to correct a deficiency that cannot be corrected through interior alterations.

As proposed, the new legislation would remove criteria (iii) and (iv), and instead focus on whether the removal of the units would, (1) remove affordable housing, and (2) if so, whether replacement housing will be provided equal or greater in size, number of bedrooms, affordability, and suitability to households with children as the removed units.  In addition to these new criteria, the ordinance would amend Section 317 so that administrative approval for dwelling unit mergers that satisfy a supermajority of the criteria would no longer be allowed. With these new changes, all dwelling unit mergers would be subjected to a mandatory Discretionary Review hearing before the Planning Commission, unless the units being merged are demonstrably unaffordable.

In July, the Planning Commission recommended that the zoning and density considerations be maintained and the affordable housing criteria be added in addition to the existing criteria. It is unclear at this time what will happen, but either way it will be much more difficult to complete a dwelling unit merger in the City once this legislation passes.

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 battle over California cities’ and counties’ ability to require developers to provide on-site affordable rental units in new residential projects is raging in Sacramento.  On September 9, legislation that would allow cities and counties to impose such requirements was presented to Governor Jerry Brown and is awaiting his signature.  The bill, Assembly Bill 1229, was co-authored by State Senator Mark Leno and passed in the State Assembly on May 30, 2013 by a vote of 41 to 31, and the State Senate on September 3, 2013 by a vote of 21 to 16.  This vote is not surprising given the current composition of the State Legislature.  Similar bills in recent years have failed to move out of the Legislature.    

The California Constitution grants what is referred to as the “police power” to each city and county, giving them the power to “make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.”  State planning and zoning laws set forth minimum standards for cities and counties to follow in land use regulations.  However, the State Constitution establishes the Legislature’s intent to “provide only a minimum of limitation in order that counties and cities may exercise the maximum degree of control over local zoning matters.”  

Using the police power, cities and counties throughout California have adopted inclusionary zoning or inclusionary housing ordinances which force developers to ensure that a percentage of residential units in a new development, whether rentals or individually owned, be affordable for lower income households.  There is wide variation in the percentage of affordable units required, the depth of the affordability required and the options for compliance by developers.  Often, developers do not build the required affordable units themselves or pay their full cost; rather, developers may donate land and/or make a financial contribution toward development costs.  Some jurisdictions permit developers to pay in-lieu fees to finance a city or county’s own low income development.   This may enable a developer to receive certain entitlements, like more density and floor area.  Inclusionary zoning’s intent is also to achieve inclusiveness in certain neighborhoods, leading to a greater mix of housing products with varied prices within a neighborhood.  The real estate development industry is one of the few industries that are required to provide below market pricing for its products. The Legislature has determined that inclusionary housing ordinances have provided affordable housing to approximately 80,000 people in the California in approximately 30,000 units of affordable housing over the last decade.  

The ability of cities and counties to require the provision of on-site affordable rental units (as opposed to ownership units) in new residential projects was called into question by the holding in Palmer/Sixth Street Properties, L.P. v. City of Los Angeles, which was handed down by the California Court of Appeal on July 22, 2009.  Palmer was a developer that argued that the City of Los Angeles’s affordable housing requirements violated and conflicted with the Costa-Hawkins Act.  Enacted in 1995, Costa-Hawkins established what is referred to as “vacancy decontrol,” declaring that “notwithstanding any other provision of law,” all residential landlords may, except in specified situations, “establish the initial rental rate for a dwelling or unit,” even if the local rent control ordinance would otherwise limit rent levels across tenancies.  The practical effect of this, according to the Palmer decision, was to permit landlords to “impose whatever rent they choose at the commencement of a tenancy.”  The Palmer court found Los Angeles’s requirement that Palmer to provide a certain number of affordable rental housing units in a new residential project violated Costa-Hawkins.  As a result of the Palmer, decision, many cities and counties no longer require developers to provide on-site affordable rental units as part of a new residential project.

The intent of AB 1229 is to expressly overturn the decision in Palmer.  Specifically, AB 1229 authorizes California cities and counties to “establish, as a condition of development, inclusionary housing requirements, which may require the provision of residential units affordable to, and occupied by, owners or tenants whose household incomes do not exceed the limits for lower income, very low income, or extremely low income households … .”

We will keep you updated on the status of AB 1229 and the Governor’s decision.  

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.

​What are landlord’s rights and obligations when entering a unit that has been leased to a tenant? In a commercial context the answer is usually governed by the terms of the lease. Sometimes a landlord is granted a blanket right to show the property to prospective purchasers or lessees without any liability or obligations to the tenant.  Typically, however, a lease will require reasonable advance notice to a commercial tenant so they are aware when the landlord will be accessing the space for showings.  Again, these terms are generally provided for in the lease and based on the business deal between the parties.

The situation is different when it comes to residential leases. California law provides residential tenants with certain safeguards, notwithstanding the terms of the lease, in order to protect the place where one lives and sleeps.  One such law is California Civil Code Section 1954 (“Section 1954”). Section 1954(a) forbids a landlord from entering a dwelling except in limited, certain circumstances, specifically, “(1) in cases of emergency, (2) to make necessary or agreed repairs or agreed services or exhibit the dwelling unit to prospective or actual purchasers, and (3) when the tenant has abandoned or surrendered the premises.”  Subsection (b) of Section 1954 further provides that “except in cases of emergency or abandonment, entry may not be made during other than normal business hours (unless the tenant consents to other than normal business hours at the time of entry).”

One recent case decided by the Court of Appeal posed the unanswered question, what are “normal business hours?  In Dromy v. Lukovsky, the landlord wished to sell the leased property, but the tenant would not allow the real estate agent to conduct weekend open houses at the premises.  This was a problem for selling the unit since many potential buyers work during weekdays.  Dromy sought a declaration as to his rights under Section 1954, including whether he could require the tenant to allow weekend open houses at the leased property.

To address the issue, the Court of Appeal charged itself with interpreting the phrase “normal business hours”, which is not defined in Section 1954.  The Court of Appeal reviewed the Uniform Residential Landlord and Tenant Act, which provides that a tenant cannot unreasonably withhold consent with respect to the landlord’s proscribed rights to enter a leased property under Section 1954.  The Court of Appeal also looked at Black’s Law Dictionary, which defines “normal business hours” as “those hours during which persons in the community generally keep their places open for the transaction of business”.  The relevant community in this context was determined to be licensed professionals in real estate whose custom and practice is to hold open houses on the weekend.

Ultimately, the Court of Appeal tried to balance two overarching concerns, the implied right of quiet enjoyment for a tenant and a property owner’s inalienable right to sell its property.  The Court of Appeal recognized that a landlord’s ability to sell his or her property might be negatively impacted if the property could not be exhibited to prospective buyers at reasonable times. Therefore, they upheld the lower court’s decision to allow weekend open houses, provided the tenant received proper advance notice and the showings were limited to twice per month during limited afternoon hours.

Dromy v. Lukovsky illustrates that a landlord, especially in a residential context, should tread lightly when entering a tenant’s leased premises, but should also feel confident that a tenant must be reasonable when imposing limitations on a landlord’s right to access the property pursuant to a sale.

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.

​Anyone even remotely connected to development in California has heard the ills of CEQA by now.  In San Francisco, where following land use could be one of the most popular hobbies, blogs dedicate entire posts to the intricacies and pitfalls of the local CEQA appeal process.  And these ills of CEQA are not illusory – the law continues to have unintended consequences on the development process in California.  In an age where graduate level environmental and planning programs are teaching smart growth as a solution to climate change, high-gas prices and unhealthy living, CEQA continues to give a powerful tool to those who oppose change.  With Democratic super-majorities in Sacramento, there has been increasing discussion and news coverage of potential improvements to the law.  But while the legislature has gotten all the attention, the San Francisco Planning Department has been quietly and deliberately acting on a local level to significantly improve the CEQA process in the city.

One of the key problems with CEQA – and especially its implementation in San Francisco – is that new projects need to undergo a bevy of studies before even being determined exempt from the law.  These studies add costs and – just as importantly – significant time to the entitlement process.  And in a market where 6 months can put you on one side or another of a business cycle, months lost to the entitlement process can be critical.  Further delay and cost can be caused by the need for a mitigation measure for a project, triggering the need for a negative declaration or an EIR.  For many projects, the difference between an exemption and negative declaration can mean a cost difference of $150,000 and a delay of 6 to 12 months.

Area Plans

As far back as 2005, when the city enacted the Rincon Hill area plan, the Planning Department understood the potential of targeted rezonings, and their associated Environmental Impact Reports, to improve the CEQA process.  If a project is consistent with the new zoning, it should be able to rely on the area plan EIR and skip case-by-case review by the Planning Department.  In many ways, these area plans have worked – significant amounts of previous analysis can be relied upon for code-consistent projects in these areas.  Further, these area plans also incorporate mitigation measures that can allow a project to delay analysis on a particular environmental issue until after entitlement, when the project sponsor has the major discretionary city decisions (i.e. risk) out of the way.  For example, the Eastern Neighborhoods EIR has effectively taken archeology off the table as a potential trigger of heightened environmental review.  The EIR essentially states that if you are in an area that could have impacts on archeological resources, you need to conduct additional study and potentially develop a plan to be sensitive to potential resources – after entitlement and without the need for a negative declaration or EIR.

Air Quality

Some unexpected CEQA curveballs have also been thrown at the Planning Department.  Many readers may remember in early 2012 when the Bay Area Air Quality Management District issued new air quality “thresholds” – essentially the measurements used to determine whether a project has a significant adverse effect on air quality – that would eliminate the possibility of a CEQA exemption for even modest-sized projects.  The Planning Department actively pursued a patchwork of regulations that have basically solved the problem, by relying on performance-based ventilation requirements that already exist in the city’s Health Code.  Once again, so long as a project conducts a limited air quality study and complies with the requirements of the already-in-effect ventilation rules, no heightened CEQA review is necessary.  The Planning Department is currently developing legislation to codify these rules, expected to be introduced in the near future.

Hazardous Materials/Soils

While these area plan EIRs were intended to remove as much uncertainty in the CEQA process as possible, there has been at least one hole to plug.  Both the Eastern Neighborhoods and Market-Octavia area plans failed to include a mitigation measure that would avoid the potential for required soils testing prior to entitlement.  As a result, heightened environmental review could be triggered, such as a negative declaration or EIR.  Projects proposed on sites with a history of industrial use would then be required to conduct soils testing to determine if any hazardous soil removal was necessary.  This was previously required to take place before entitlement, and actual soil remediation would be required prior to entitlement if any hazardous materials were detected.  This was particularly a problem in the Eastern Neighborhoods, where much of the area has been historically dedicated to industrial uses.  Most projects would be unable to rely on the Eastern Neighborhoods EIR, undercutting the whole purpose of the area plan EIR in the first place – to minimize environmental review.  

Fortunately, over the past few months the Planning Department has shepherded a piece of legislation through a multi-agency review process which would expand the boundaries of the “Maher Zone” – an area, mostly adjacent to the bay, where local law required that soil study and remediation take place when excavation was proposed.  Due to technical subtleties of CEQA, the fact that it is a legal obligation of properties within the zone to conduct the studies, no mitigation measure would be required to bind a project to the remediation requirements.  And because no mitigation measure is required, there is no potential for the soils testing to trigger a negative declaration.  The legislation would expand the zone to cover all properties that have ever been used or zoned for industrial use.  The Board of Supervisors passed the legislation in July, and it went into effect starting next week.  As a result, the potential for soils testing to trigger a negative declaration in the Eastern Neighborhoods and Market-Octavia plan areas has been eliminated.

Few Potential Heightened Environmental Review Triggers Remain

As a result of these efforts by the Planning Department, the number of environmental issues that could potentially trigger a negative declaration or EIR for a Planning Code-consistent project has been drastically reduced.  Under normal circumstances, the only remaining environmental issue that could trigger such heightened review in the Eastern Neighborhoods and Market-Octavia is transportation.  Even outside those plan areas, the Planning Department has effectively reduced the relevant environmental issues to transportation and archeology.  The Planning Department is not done yet – they are currently conducting environmental review on a proposed transportation sustainability fee.  While many understandably loathe new development fees in an already fee-rich process, this fee is intended to eliminate the need for ever conducting a transportation study for an individual project.  Some may find it worthwhile to eliminate the risk and time involved with a $50,000, 6-month transportation study with an across the board fee.

As a creature of state law, CEQA cannot directly be avoided or changed by the city, but the Planning Department has done a commendable job at making the law’s local implementation as efficient as possible.  This benefits the Planning Department as well, as staff is currently faced with a significant workload.  The increased efficiency also significantly furthers the environmental purpose of CEQA, by clearing the way for some of the best positioned smart growth in the country.

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.

​Demolition of dwelling units is strictly regulated by the San Francisco Planning Code.

Current Demolition Rules

In general, residential demolition will be approved only if:

(1) A recent appraisal shows the value of the dwelling unit to be in excess of 1.3 million dollars, for a single family home, 1.9 million for a two family home, or 2.5 million for a three family home. These values are adjusted annually. If the value of the existing structure and land is equal to or greater than these amounts, the demolition is not required to undergo a Discretionary Review Hearing at the Planning Commission, unless a member of the public requests a hearing; or

(2)   the applicant provides to the Planning Department a soundness report prepared by a licensed architect, engineer, or contractor which demonstrates, according to strict Planning Department criteria, that the cost to upgrade construction deficiencies exceeds 50% of the replacement cost of the building. Replacement of foundations and certain other improvements are excluded. Structures of one or two units proposed for demolition may be approved administratively by the Planning Department staff, without a Planning Commission hearing, if the staff accepts a soundness report demonstrating that the building is not sound, according to the Planning Department criteria.   This potential avenue to demolition is very difficult to satisfy.

The Planning Department will require submittal of “Historic Resource Evaluation” for buildings built more than 50 years ago.  If a structure is deemed to be of “Historic Significance”, approval of demolition is highly unlikely.

In theory, it is possible to demolish a sound dwelling unit if the Planning Commission finds that the proposed demolition complies with sixteen criteria set forth in the Planning Code. Both the Planning Department and the Planning Commission are predisposed to disapprove demolition applications, in accordance with policies set forth in the City’s General Plan that are intended to preserve the existing stock of housing, and in particular affordable housing. An example of an applicable General Plan policy is “to conserve existing housing, to preserve cultural and economic neighborhood diversity.”

Current Merger Rules

A merger occurs when two or more legal residential units are combined into one unit, whether by installing a connecting doorway, removing a demising wall, or otherwise. As with demolitions, mergers of residential units are disfavored by the Planning Department and Planning Commission. Merger applications are decided by the Planning Commission at a Discretionary Review Hearing, in most cases. Residential units proposed for merger that exceed the values set forth above are exempt from mandatory Planning Commission Discretionary Review hearings, and can be approved administratively by Planning Department staff.

Projects that meet four out of the five criteria listed below may also be approved administratively by the Planning Department staff: (1) Removal of the unit (by merger with another unit) would eliminate only owner-occupied housing; (2) Removal of the unit and the merger of another is intended for owner occupancy;  (3) Removal of the unit will bring the building closer into conformance with the prevailing density in its immediate area and in the same zoning district; (4) Removal of the unit will bring the building closer into conformance with applicable zoning restrictions; and (5) Removal of the unit is necessary to correct design or functional deficiencies that cannot be corrected through interior alterations.

As with demolitions, the City’s General Plan policies and Planning Code restrictions strongly discourage mergers of residential units. Approval of applications for residential mergers is uncommon.

New Proposal

On July 30, 2013, Supervisor Avalos proposed legislation to amend the Planning Code to revise the criteria for residential demolitions and mergers and to standardize those criteria across zoning districts and to enhance the already strong presumption in favor of preserving existing housing.  The proposed rules would make it even harder to demolish or merge residential units:

Additional criteria for “Residential Demolition” would include:

“Whether the project increases the number of family-sized units on-site”

“Whether the project is of superb architectural and urban design, meeting all relevant design guidelines to enhance existing neighborhood character”

Additional criteria for “Residential Merger” would include:

“Whether the removal of the unit(s) will remove an affordable housing unit as defined in Section 415 of this Code or housing subject to the Rent Stabilization and Arbitration Ordinance”.

“If removal of the unit(s) removes Affordable Housing or units subject to the rent Stabilization and Arbitration Ordinance, whether replacement housing will be provided which is equal or greater in size, number of bedrooms, affordability, and suitability with children to the units being removed”.

“Whether the number of bedrooms provided in the merged unit will be equal to or greater than the number of bedrooms in the separate units” .

An application for a permit that would result in the loss of one or more dwelling units through merger or demolition is required to obtain a Conditional Use Authorization in the RTO,RTO-N, NCT, and Upper Market NCD zoning districts, as well as the loss of any residential unit above the ground floor in the C-3 (downtown) zoning district. The application for the proposed replacement building is also subject to obtaining conditional use authorization.

The proposed legislation adds “affordability” of the replacement unit to the criteria for removal of dwelling units. The legislation would establish a strong presumption in favor of preserving existing dwelling units that occupy non-conforming structures or lots.

In sum, the proposed legislation will tighten up the already stringent Planning Code restrictions on residential demolitions and mergers.  

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.

​Assessment Appeals Deadline is Looming

The market upswing has resolved many owners’ concerns about real property taxes.  For owners that believe their assessment is still above market value, the deadline to appeal the San Francisco Assessor’s valuation for tax year 2013-2014 is September 16, 2013.  This deadline cannot be waived, so appeals should be filed as early as possible.  (For other counties check the Assessor’s website.)

Many appeals are still pending for the last few years.  According to the Assessment Appeals Board, appeals from 2010-2011 are still being heard, leaving two tax years to resolve.  Due to the high caseload, for the most part, the Assessor’s office has been unable to focus on resolving appeals before they are heard by the Assessment Appeals Board.  

With all of the sales activity buyers should be aware that if they disagree with the new property value assessed due to the sale, the deadline to file an appeal is 60 days after receipt of the notice or the new tax bill.  Owners should confirm that the Assessor/Tax Collector has their current contact information for notices.  It could take 2-3 years for a new tax bill to be issued, so owners should reserve funds to pay taxes and follow up with the Assessor’s office regularly.  Failure to receive a tax bill does not excuse the payment obligations.

Reassessment Exclusions are Available for Certain Projects

For developers building a new project or renovating existing property, there are a number of real estate tax exemptions available for issues like seismic upgrades and ADA renovations (to existing buildings), low income housing, and immediate sale after construction (most applicable to condominiums).  There are strict filing requirements and deadlines for these exemptions, so check with the Assessor or legal counsel to be sure that you do not lose the potential benefits.

New Disclosure Laws are in Effect

    Commercial Energy Disclosures.  

In a previous update we mentioned that the long-postponed commercial energy disclosure requirements were supposed to kick in as of July 1, 2013.  These disclosures would initially apply only to the sale of commercial property with over 50,000 square feet.  However, because the website established by the California Energy Commission is unavailable for utility companies’ uploading of energy data, the enforcement of the regulations have been suspended until September 1, 2013.  The California Energy Commission recommends that the disclosures be made “to the extent feasible.” More information about these disclosure requirements may be found at www.energy.ca.gov/ab1103/index.html.  

    Accessibility – Lease Disclosures.  

New disability access disclosure requirements took effect as of July 1, 2013.  Despite the additional administrative burden, the stated goal of reducing lawsuits is beneficial to owners.  California Civil Code Section 1938 requires landlords to disclose whether the premises has undergone inspection by a “Certified Access Specialist”.  Performing an inspection would give some legal defenses to landlords.  (See our March 22, 2013 update for more information.)  Even without an inspection, the disclosures help focus attention on any issues.

The City and County of San Francisco added additional and more detailed disclosure requirements at the local level.  Effective as of July 1, 2013, the City requires that a specific notice be provided to all commercial tenants occupying less than 7,500 square feet of space, which must include a copy of the Small Business Commission Access Information Notice under Section 38.6 of the Administrative Code in the tenant’s requested language.  The notice informs the tenant that the lease must specify who is responsible for disability access upgrades that are required by law, and that the tenant should investigate these issues before signing the lease.  While there are no specific penalties for ignoring the disclosure requirements, landlords should comply in order to avoid any failure to disclose or negligence claims, and to be sure the lease properly allocates responsibility for delivery access.

Other local jurisdictions may have specific requirements, and these should be confirmed before finalizing a lease.

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.

​History: San Francisco has a lot of it.  From its oft-admired ornate buildings dating back to the Victorian and Edwardian eras, to its association with powerful political and cultural movements that helped shape our national identity, San Francisco has much to celebrate and preserve.   So, it’s not surprising that the City has developed and implemented a range of detailed administrative procedures and legislation surrounding the need to preserve historically-significant buildings, neighborhoods, and resources.   And, it is equally unsurprising that these procedures sometimes prove difficult for private citizens to understand and navigate.

In July 2013, SPUR, a local public policy think tank, and San Francisco Architectural Heritage, a non-profit known for its preservation advocacy, released a joint policy report aimed at trouble-shooting San Francisco’s historic preservation processes.   The Report, entitled: “Historic Preservation in San Francisco: Making the Preservation Process Work for Everyone” includes an overview of San Francisco’s existing system for the documentation and preservation of historic resources, as well as a frank analysis of which policies and procedures are currently working well, and which are not.  The Report is split into three parts: (1) the formation of historic surveys, (2) the creation of historic districts, and (3) the evaluation of resources under the California Environmental Quality Act (“CEQA”).

While the authors believe it is critical to protect the rich historic fabric of the City, they also recognize San Francisco as a major urban center with a projected growth of nearly 1 million residents by 2035, necessitating the need to support growth and change in appropriate areas.

Historic Surveys

Historic surveys are the process by which San Francisco identifies, evaluates and documents properties and places that reflect important historic themes.   They’re often conducted by the Planning Department (“Planning”) as part of an area plan or rezoning effort (such as the Transbay, Market/Octavia, and Easter Neighborhoods efforts in recent years), but are sometimes initiated directly by a community who engages their own consultant.  The City has implemented a range of procedures for conducting and certifying the results of these surveys, involving review of Planning and the Historic Preservation Commission.  

The SPUR/Heritage Report recognizes that these surveys provide valuable information to planners, residents, property owners and developers.  However, the existing survey process is complex, and the outcomes and impacts are not always clear to members of the public who may be affected.  

The SPUR/Heritage Report recommends implementing a range of measures to simplify and de-mystify the historic survey process, including (1) completing a citywide survey; (2) conducting surveys early in the area plan process so that their results can be used to inform planning activities; (3) soliciting public input in the development of historic context statements and themes; (4) notifying the public and other key stakeholders at the outset of the survey process and explaining its significance; (5) publishing community outreach standards and policies for historic surveys; and developing a user-friendly grievance process.

Historic Districts

An historic district is a collection of built resources (buildings, structures, landscapes, sites and/or objects) that are historically, architecturally, and/or culturally significant.   Since the late 1960s, the City has designated 13 local historic districts, in addition to the nearly 40 historic districts listed in the California Register of Historic Resources and National Historic Landmark Program.   

The SPUR/Heritage Report recognizes the importance of historic districts in ensuring that the most distinctive physical qualities of a community are maintained and fostering neighborhood conservation and stability.  However, the authors also note that the process for establishing new historic districts can be complicated, and the potential impacts of being included within such a district are not always known to landowners and area residents at the time districts are formed.

The SPUR/Heritage Report recommends the following measures to improve the City’s treatment of historic districts: (1) publishing Planning policies for community engagement and procedures for historic districts in a new administrative bulletin; (2) developing clear design guidelines that interpret how best to apply established standards for the treatment of historic districts; (3) providing clear mechanisms for project applicants to request advisory opinions from the Historic Preservation Commission on compliance with design guidelines early in the review process; and (4) expanding local access to historic preservation incentives, including state Mills Act property tax relief.

California Environmental Quality Act

At its core, CEQA is an information-gathering process that requires public agencies to analyze environmental impacts when deciding whether or not to approve a particular project.   In San Francisco, the CEQA process is administered by Planning through its Environmental Planning Division.  

CEQA affects the development of historic buildings and sites in San Francisco because any project that will cause a “substantial adverse change” in an historic resource is considered to have a significant effect on the environment.  As a result, CEQA can trigger a layer of state-mandated review on top of local historic preservation protections already in place for projects involving buildings that are 50 or more years old – more than 135,000 buildings in the City.

The CEQA review process for historic resources is highly-complex.  A thorough discussion is available for readers in the report.  The authors recognize that current CEQA procedures are valuable because they “provide broad protection for the vast majority of buildings in the City,” and “give ordinary citizens a powerful mechanism to question projects large and small, identify important aspects of history to matter to them, and propose alternatives and mitigation measures.”  However, they also includes unclear standards for evaluating the impacts of major alterations or demolitions of buildings that contribute to historic districts, and have the potential for inconsistent evaluation of potential historic resources.

The SPUR/Heritage Report identifies several recommendations for reforming current CEQA evaluation and treatment of projects involving potential historic resources, including, among others: (1) Publishing guidelines that identify significant historic themes, associated property types and thresholds of significance for the purpose of making CEQA determinations on individual buildings; (2) revising Preservation Bulletin 16 to provide clear guidelines on how to evaluate the impacts of major alterations or demolitions to contributor buildings within an historic district; (3) encouraging collaboration between Planning and property owners (and their architects) so that compliance with standards for the preservation of historic resource can be achieved more quickly and efficiently; (4) providing a clear mechanism to enable project applicants to seek an advisory opinion from the Historic Preservation Commission when they cannot reach agreement with Planning on interpretation of standards for the preservation of historic resources;  and (5) completing a citywide survey so that historical resources are identified systematically and prospectively, rather than on an ad hoc basis during CEQA review.

How effective this joint policy report will be in influencing change remains to be seen, but it offers a fresh perspective on San Francisco’s local historic preservation procedures that will likely be welcomed by many landowners and residents.  A copy of the full report containing detailed recommendations is available on the SPUR web site at: http://www.spur.org/publications.

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.

​This week, the Board of Supervisors finally approved a compromise ordinance revising and clarifying the City’s procedures for California Environmental Quality Act (“CEQA”) appeals.  The legislation places firm deadlines on CEQA appeals and expands public access to CEQA determinations through an online subscription service.  A piece of trailing legislation proposes giving the public the right to appeal an Environmental Review Officer’s determination that a modified project is exempt from CEQA.

Firm Limits on Appeals

The legislation goes a long way toward addressing long-standing concerns in the development community about the uncertain appeal deadlines:  in some circumstances a negative declaration or exemption could be appealed almost up until the start of construction.  On the other hand, Environmental Impact Reports (“EIR”) have long been subject to a definite, 30-day appeal period that starts running as soon as the Planning Commission certifies an EIR.

Under the new rules, negative declarations and exemptions will also have 30-day appeal periods that run from the first “Approval Action” on a project. An “Approval Action” occurs at the sooner of the following two situations: (1) when the first city agency approves the project in reliance on the CEQA determination after a public hearing, or (2) if there is no public hearing, when a city agency issues a building permit or an entitlement for the project.  Notably, approval at a discretionary review hearing is considered an “Approval Action,” a silver lining for projects which find themselves undergoing discretionary review.

For projects that go before Commissions for approval, the changes are a benefit.  They ensure that CEQA appeals are resolved early in the process, meaning that money spent preparing construction drawings and processing building permits will no longer be at-risk if there is a late filed environmental appeal.  For projects that don’t require a public hearing, the appeals deadline will not run until the first building permit is issued.  This still allows relatively late appeals, but is nonetheless a marginal improvement over the current situation where even incidental permits for tree removal or street space occupancy can result in CEQA appeals.  

Public Notice Requirements

The legislation also enhances both optional and mandatory notice requirements.  In particular, actions associated with projects which received exemptions or negative declarations must be made available to the public.

Of note, the Planning Department is tasked with establishing a web-based system for public notice.  The system will provide automatic notices to individuals or organizations that sign up as subscribers.  Subscribers have the option of receiving notifications for all CEQA-related determinations made by the city, or for certain types of determinations.  The menu includes: (1) specific projects, (2) specific neighborhoods, (3) historic districts, (4) exemption determinations, (5) negative declarations, and (6) full EIRs.

Additionally, the legislation imposes a number of public notice requirements for exempt projects and projects which received negative declarations. Public notice will be required for the following actions: (1) exemption determinations, (2) approval actions for exempt projects, (3) notices of exemption, (4) modifications of exempt projects, (5) negative declarations, and (6) mitigated negative declarations.

The combination of an expanded scope of actions requiring public and the web-based electronic notification system means that interested parties will have immediate and easy access to far more CEQA-related actions than before this legislation was passed.  On the one hand, this may be a welcome development in responding to project opponents who complain they were unaware of a project’s environmental review status.  On the other hand, it provides enterprising anti-development types with a tool to track the entirety of the city’s CEQA-related actions at the click of a button.

Coda: Changed Projects and Appeals to the Environmental Review Officer

One final aspect of the compromise the Board of Supervisors reached in passing CEQA reform was to consider a piece of trailing legislation. As currently written, the trailing legislation provides for a process to appeal a determination by the Environmental Review Officer (“ERO”) that a change to an exempt project is not a “substantial modification” requiring a new CEQA decision.  Members of the public would be able to present new information to the ERO at a public hearing.  However, project approvals and construction related to the changes in the project would be able to proceed during the appeal process.

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.

​After a contentious legislative process where the original sponsors withdrew their support for the ordinance and the Mayor did not sign it, on June 18, 2013, the San Francisco Board of Supervisors passed an ordinance establishing the Expedited Conversion Program (“Program”).  The Program was promoted to alleviate the huge backlog for conversion of Tenancy in Common (“TIC”) units to condominiums stemming from the existing condo conversion lottery system, which limits conversions to 200 units per year.  The ordinance goes into effect July 28, 2013, and will permit hundreds of TIC owners to convert their units to condominiums, in exchange for payment of an “impact fee” of $20,000 per unit (although this may be reduced) in addition to the condo conversion application fee of over $9,600 per building.

Of course, this is San Francisco… and the ordinance includes trade-offs for offering so many TIC owners the privilege to convert to condos under the Program.  The trade-offs include: (i) existing tenants living in a converted unit must be offered a lifetime lease, (ii) more stringent tenant eviction limitations that could restrict the ability to convert, (iii) increased owner-occupancy rules requiring owners to continually occupy their units for lengthy periods of time, and (iv) perhaps most controversial, a “poison pill” provision that will suspend many condo conversions in the event anyone files a legal challenge to the ordinance (subject to exceptions).

TIC conversion to condos under the Program will occur in phases over the next several years.  Certain buildings will be eligible to convert immediately, while other buildings will become eligible in April of each year from 2014 through 2019.  TIC buildings that participated unsuccessfully in the 2012 or 2013 lotteries are the primary beneficiaries under the Program, and will be eligible to convert to condos under the Program either (a) immediately (if owner-occupancy requirements met for 5 years as of 4/15/13), or (b) beginning on 4/15/14 (if owner-occupancy requirements met for 3 years as of 4/15/14).

Other “Additionally Qualified Buildings” under the Program include those that did not participate in the 2012 or 2013 lotteries, but had a signed TIC agreement in place as of 4/15/13.  These buildings may become eligible for conversion in April of each year, beginning in 2014 and ending in 2019, with the order of eligibility depending on when the buildings meet the required owner-occupancy periods.  For example, a TIC building may apply for conversion under the Program beginning on 4/15/15 if the required number of owners continuously occupied their units for six years (from 4/15/09 to 4/15/15).  The following year, a TIC building may apply for conversion under the Program beginning on 4/15/16 if the required number of owners continuously occupied their units for six years (from 4/15/10 to 4/15/16).  And so forth until April 2019.

Future TIC owners and existing buildings that did not have a signed TIC agreement in place as of April 15, 2013 bear the brunt of the ordinance, and will be negatively impacted.  These buildings must wait until the condo lottery resumes, ten or more years from now, before becoming eligible to convert.  When the lottery does resume it will do so with much more restrictive owner-occupancy requirements and tenant eviction rules.  Conversions under the condo lottery will generally be limited to 2-4 unit buildings, with 5-6 unit buildings being eligible to convert only in very limited circumstances.

While the Program provides a path to condo conversion for many TIC owners, the devil may be in the details.  Those interested in the Program should understand the significant trade-offs contained in the ordinance.  In particular, the real possibility that a building’s condo conversion application may be suspended midway through the process pending the outcome of a lawsuit challenging the ordinance.  Owners must decide whether they can live with this risk and associated expenses, when their condo conversion could be held up for years, or potentially canceled, depending on the outcome of such a lawsuit.

Please note that the above is only a brief summary of the main points of the Program, and is not a complete description of all applicable rules.  Owner-occupancy standards may vary for 2-4 unit and 5-6 unit buildings.  The eviction history of a building may restrict or completely disqualify a building from converting to condos.  Various deadlines for payment of fees and submittal of applications apply.  All condo conversions must meet the applicable requirements of Article 9 of the San Francisco Subdivision Code and the San Francisco Department of Public Works, the lead City agency for processing of condo conversion applications.

A copy of the ordinance is available at the following link:  http://www.sfbos.org/ftp/uploadedfiles/bdsupvrs/ordinances13/o0117-13.pdf

Special thanks to law clerk Andrew Guess, who contributed significantly to this update.

 

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.