The Planning Department and the Department of Public Health (“DPH”) have joined together to propose amendments to the 1986 Maher Ordinance (SF Health Code Article 22A) in order to expand the scope of required soils testing and remediation for hazardous substances at all properties that DPH determines may cause a public health risk, as a condition of issuing a building permit.  The Maher Amendments were introduced to the Land Use Committee of the Board of Supervisors on April 16, 2013.

Benefits for Developers

A significant benefit of the Maher Ordinance amendments will be their effect of authorizing the City to issue Community Plan Exemptions from CEQA, as well as categorical CEQA exemptions, as envisioned by the Eastern Neighborhoods Plan, adapted in 2008.  The Eastern Neighborhoods Community Plan EIR has already performed CEQA review for properties within the Eastern Neighborhoods, in order to avoid repeating an additional CEQA review for every project.  Despite the City’s certification of the Eastern Neighborhoods EIR, a conflicting view of the law by Planning Department staff caused it to require Mitigated Negative Declarations for all projects located at former gas stations and industrial properties, due solely to the need to excavate soil from the property.  While excavation and testing of soil for disposal in a landfill is a routine, common-place event for nearly all development projects, the Planning staff made a determination that CEQA exemptions could not be granted where DPH had not issued a “No Further Action” letter, or case closure, for a former gas station or industrial property.  CEQA Exemptions were not granted even when 95% of a property had already been excavated and the soil disposed at a landfill.

The Maher Amendments have the effect of authorizing the City to issue CEQA exemptions in cases where soil or groundwater testing or remediation is required by DPH.  The Planning Department has concurred with this analysis.

In essence, the requirements of the Maher Amendments will replace the Planning Department’s current practice of requiring mitigation measures, attached to mitigated Negative Declarations, to ensure soil and groundwater investigation and remediation where indicated by prior uses of the property.  This should save everyone a lot of time and energy without in any way compromising environmental safety procedures when it comes to soils issues.

Existing Law 

Under existing law, in order to obtain a building permit for any project that includes excavation of at least 50 cubic yards of soil, all properties located along the City’s Eastern Shoreline must be tested by the applicant for the presence of hazardous substances.  The applicant must prepare and submit to DPH a soils testing report disclosing and quantifying the presence of any hazardous substances at the property.  DPH will review the report and determine the appropriate remediation for the property, if any.  The Applicant is also required to submit remediation work plans to DPH for approval.  The applicant is responsible for the excavation and removal of any underground storage tank and contaminated soil at the property, under DPH oversight, and for such other steps as DPH may require, including testing and remediation of groundwater contamination where appropriate.

Proposed Amendments 

For nearly three decades, the Maher Ordinance has applied only to properties located along San Francisco’s Eastern Shoreline.  The proposed amendments would expand the geographic scope of the Maher Ordinance to cover all properties throughout the City that (1) have the potential to contain hazardous substances, based on site histories that indicate prior use for industrial uses, gas stations, or any other uses associated with underground storage tanks or located within 100 ft. of any properties containing underground storage tanks, and (2) properties located within 150 feet of freeways.  The owner must prepare a use history for all such properties, and submit the findings to the DPH for review.  DPH will require soil testing and/or groundwater investigation where appropriate.  DPH will also require remediation where the investigation indicates the presence or absence of any one of the materials designated by DPH as hazardous. 

Property owners are required by the Maher Ordinance, as well as by State and Federal law, to notify DPH whenever hazardous substances are encountered in significant concentrations at their property.  Upon notification, DPH will take jurisdiction and oversight over the investigation and remediation of the property, including both soil and groundwater.  Self-help without DPH oversight would be a violation of the Maher Ordinance and should not be attempted.

Remediation of the property, once commenced, must continue until completion of a final closure report prepared by the property owner’s environmental consultant, approval of the report by DPH, and issuance by DPH of a “No Further Action” letter addressed to the owner and to the Department of Building Inspection (“DBI”).  In most cases, remediation is required prior to DBI issuance of a permit to commence building the project.  However, DBI retains jurisdiction to issue site permits and site permit addenda to undertake soil sampling or remediation at any time.   

Notification to Buyers of Real Property

A seller or a seller’s agent involved in the sale or exchange of any real property located on any parcel of land that is subject to the Maher Ordinance (identified as such on a list to be prepared by the Director of DPH)​ shall provide a copy of a summary of the Maher Ordinance, prepared by DPH, to the buyer or buyers, and shall obtain a written receipt from the buyer or buyers acknowledging receipt of the DPH summary.  Until the Director’s list of properties subject to the Maher Ordinance and the summary are available, sellers should provide a copy of the Maher Ordinance (SF Health Code Article 22A) to buyers for any property that may have once been used for a gas station, an auto repair shop, any type of industrial use, or that is known or suspected to have contained or released hazardous material.

The proposed Maher amendments are a welcome expansion of the City’s efforts to ensure mandatory testing and remediation of properties with a history of uses having indicators of the potential presence of hazardous materials.  The proposed regulations will provide more certainty for project applicants as to their obligations with respect to investigation and cleanup of hazardous substances at their property, as well as for buyers and sellers of real property.  And it will finally coordinate local CEQA and DPH processes when it comes to soils issues.

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 April the Planning Commission unanimously approved a new policy that will create new hurdles for formula retail (a.k.a. “chain stores”) trying to locate in the Upper Market Street neighborhood.  The policy prohibits the Planning Department from recommending approval of new uses that would bring the concentration of formula retail within 300 feet of the proposed location to a threshold of 20% or greater.  The policy was a collaborative effort of the Department and members of the Duboce Triangle Neighborhood Association (“DTNA”).

For years, the City has been requiring Conditional Use authorization to locate formula retail in neighborhood commercial districts, citing an interest in protecting San Francisco’s vibrant small business sector.  The Hayes Valley Neighborhood Commercial District (“NCD”) and North Beach NCD have even chosen to ban the location of formula retail uses entirely.  Formula retail is defined by the Planning Code as “a type of retail sales activity or retail sales establishment which, along with eleven or more other retail sales establishments located in the United States, maintains two or more of the following features: a standardized array of merchandise, a standardized facade, a standardized decor and color scheme, a uniform apparel, standardized signage, a trademark or a service mark.”

Under the new policy, applicants seeking to locate any formula retail store in the Upper Market neighborhood will be required to provide the Department with an analysis of the concentration of formula retail within 300 feet of the proposed site.   If locating proposed formula retail use within the Upper Market neighborhood would bring the concentration of formula retail within a 300 foot radius to greater than 20%, the Department will not be allowed to recommend approval of the application to the Commission, regardless of the level of public support.   A detailed description of the formula for assessing the concentration of formula retail under this policy is provided in the Department’s Executive Summary of the policy: http://www.sfplanning.org/index.aspx?page=3438.

However, if the Department determines the surrounding concentration to be lower than the 20% threshold, it would evaluate the proposed Formula Retail application and make its recommendation to the Commission based on other criteria set forth in the Planning Code.   These criteria include: (1) the existing concentrations of formula retail uses within the district; (2) the availability of other similar retail uses within the district; (3) the compatibility of the proposed formula retail use within the existing and aesthetic character of the district; (4) the existing retail vacancy rates within the district; and (5) the existing mix of Citywide-serving retail uses and neighborhood-serving retail uses within the district. 

Of course, even if the Department recommends disapproval under the new policy, the Commission retains its discretion to approve or disapprove the formula retail application.  And, the Department will still evaluate each proposed Formula Retail application based on all applicable criteria under the Planning Code, in order to aid in the Commission’s deliberation. 

How important is the Department’s recommendation in these kinds of cases? The Commissioners’ comments at the April 11, 2013 Commission meeting may shed some light on the issue.   Commissioner Antonini noted that it places a restriction on the total concentration of formula retail in the area, without differentiation due to the type of formula retail proposed – banks, restaurants, pharmacies, groceries, cell-phone retailers and clothing stores are all treated as one general formula retail category.  He also voiced concerns that a number of long-term retail vacancies exist along Upper Market Street, and that new and existing commercial spaces containing larger square footages could be difficult to fill with non-formula retail uses.   Prior to casting his vote in support of the policy, Commissioner Antonini reiterated that the policy will not eliminate the Commission’s discretion to weigh these factors before making is ultimate decision on a proposed formula retail use, stating, “It’s just the staff recommendation, which might not carry the day.” 

However, most of the Commissioners’ comments were supportive of the policy and of increased restrictions on formula retail uses.  Commissioner Hillis questioned whether the 20% threshold was low enough to effectively restrict new formula retail in the area, stating that “I would like to make sure that the percentage is low enough that…we are setting the signal to formula retail that you don’t want more formula retail on this corridor, which is what we are trying to do.”  Likewise, Commissioner Borden explained that although the Commission has gone against Department recommendations in the past, they often lead the Commission to more robust discussion of the proposed uses and lead the Commission to “think harder about why we believe a particular business should be in a particular location.”   The new policy on formula retail in the Upper Market Street neighborhood was unanimously approved by the Commission in April.  More information on formula retail uses in San Francisco can be found on the Planning Department’s web site at: http://www.sf-planning.org/index.aspx?page=2839.

Real Estate Round Table – May 9 – Let’s Talk Gross Receipts Tax

Last year’s passage of the gross receipts tax in the City brought us an entirely new tax regime for business.  Next week the RERT will feature Manny Fishman of Buchalter Nemer to explain this new world of the gross receipts tax.  If you would like to attend or learn more about the RERT, please contact Lenore ElKarou at lelkarou@reubenlaw.com or (415) 567-9000 x452.

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.

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Central Corridor Draft Plan Released:  Adoption Hearings May be as Early as Mid-2014

At long last, the Planning Department last week made public the draft Central Corridor Plan.  This document will provide the policy basis for the rezoning, Planning Code amendments, fees and neighborhood improvements associated with the Central Corridor Plan.  The plan is quite ambitious, and beyond the rezoning and Planning Code amendments, foresees significant upgrades and overhauls of the local transportation system (beyond the obvious Central Subway), creation of new parks and “public ways,” and establishment of an “eco-district” to improve urban sustainability in the area.  This week’s Update provides highlights of those plan elements that are most relevant to development in the area, but we recommend reading the full plan for anyone interested in the broader picture:  http://centralcorridor.sfplanning.org.

The biggest news from the Draft Plan is that the Planning Department is suggesting that the plan could be adopted as early as mid-2014.  Considering the Notice of Preparation of the EIR for Central Corridor was just issued this week, that is a fast turnaround – and shows the plan to be a priority for the Planning Department.
 
At a high level, the Plan is intended to maximize the value of the multi-billion-dollar Central Subway currently under construction along 4th Street.  The Plan will allow for an additional 5,563,700 square feet of new office space above what is currently permitted, and an additional 3,490 dwelling units.  The Plan generally favors commercial development over residential development – and enforces this by requiring commercial use on larger lots generally south of the freeway.  Big-box standalone retail will not be permitted.  Tourist hotels will no longer be limited by room count.

The Plan gives new details on how taller buildings will be regulated.  Higher-zoned sites will have a no-bulk-limit base up to 85 feet, with towers above set back at least 15 feet.  Tower floor plates will be limited to 15,000 square feet for commercial uses and 12,000 square feet for residential uses.  Tower separations of 115 feet will be required.  Some height limits have been tinkered with since the last proposed height map was published. 

The Plan will encourage retention or additions to existing buildings in several ways.  Lot mergers of smaller lots in the area will be restricted, although higher FAR limits will apply to smaller lots.  Building retention will be incentivized by providing an FAR bonus for additions instead of demolitions.  A Transferable Development Rights program will be established for historic buildings – development sites may need to purchase TDR for floor area above 4:1 or 5:1 FAR.

Eastern Neighborhoods impact fees would generally remain the same, with the exception of a new tier of higher fees that will apply to properties that received a height limit increase of more than 60 feet (roughly $20/sf for residential use, $18/sf for non-residential use).  For lots formerly zoned SLI or SALI, minimum below-market rate housing requirements will increase, similar to the requirements in the UMU districts.

We will continue to track the Central Corridor Plan’s progress, and keep you posted on all major milestones. 

CEQA Reform Effort:  Inching Closer to a Possible Deal

We informed readers last week about the Land Use Committee’s hearing on CEQA reform on Monday and the progress towards a potential deal on setting time limits for filing appeals on CEQA exemptions and negative declarations.  Progress continues to be made, although it has been anything but smooth.  First, Supervisor Kim has amended her legislation to include time limits on appeals.  This now leaves us with two pieces of CEQA reform legislation, BOTH including time limits on appeals of all CEQA documents.  This is a major victory – just last November, Supervisor Wiener’s legislation underwent a major assault of opposition at the Planning Commission and many observers predicted reform was dead.  We now have competing CEQA reform proposals, both including appeal period limits.
 
Supervisor Chiu requested several amendments to Wiener’s legislation on Monday that, upon first review, Supervisor Wiener believed he could accept.  The hearing was again continued for another two weeks to May 6, to give time for the public to review the amendments.  In the meantime, Supervisor Kim’s legislation is being heard at the Planning Commission today. 
There is still some serious legislating to be done on CEQA reform, but barring a complete failure of the process, it appears we are on track for CEQA appeal periods this legislative term.

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.
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Update on Local CEQA Reform – Next Hearing on Monday

There continue to be a number of twists and turns in Supervisor Scott Wiener’s attempt to reform local implementation of CEQA to include appeal deadlines for exemptions and negative declarations – but, according to public statements made by a key member of the Land Use Committee, a compromise does seem to be within reach.

As many of you already know, Supervisor Jane Kim, who serves on the Board of Supervisors Land Use Committee with Supervisor David Chiu and Supervisor Scott Wiener, introduced a competing legislative proposal a few weeks back.  In short, her proposal does not include any CEQA appeal deadlines.  That being said, Supervisor Kim was quoted last week by the Chronicle saying:  “If we’re going to put a firm deadline to appeal on the back end, then we have to have a strong notification process on the front end,” she said.  “We clearly need a deadline for negative declarations and exemptions, but making it more difficult for people to appeal the process is not the answer.”

This appears to be a major movement towards a compromise deal.  We think most people in the development community would be happy to have stronger noticing requirements of CEQA decisions in exchange for a clearly-defined appeal period. 

The next, main event in this process is this Monday, April 22.  The Land Use Committee will once again hold a hearing on Supervisor Wiener’s proposal.  Public comment really does matter – especially in this case where anti-reformers will be out in droves.  The hearing will be held at City Hall, Room 263 at 1:30 p.m.  CEQA reform is the first item on the agenda. 

Condo Conversion Bypass Fee – Could We Finally Have Reached a Deal?

It has become a biennial ritual in San Francisco that every legislative session of the Board of Supervisors, an ordinance is proposed to allow Tenancy-In-Common (TIC) owners to bypass the annual condo conversion lottery and pay the city a fee for the right to convert to condominiums.  Also part of the tradition:  the ultimate failure of the legislation.  But something funny happened at the Land Use Committee on Monday:  After a rally was held outside of City Hall by tenants rights’ activists (typically opposed to making condo conversions easier) calling for a compromise measure, Supervisor David Chiu and Supervisor Norman Yee introduced amendments to the proposed ordinance that would do just that.

The compromise is just another example of the current Board’s practical, get-things-done approach to legislating after years gridlock and antipathy during the previous decade.  Here’s the deal:  the existing 2,200 of so TIC units in the city have the one-time opportunity to pay a $20,000 fee to the city to gain approval for a condo conversion.  The fees would be put towards affordable housing preservation and development in the city.  In exchange, the annual condo lottery would be put on hold for roughly 10 years, and when it does start back up, only TIC buildings with 1-4 units can apply.  Buildings with 5 or 6 units, currently eligible for the lottery, would be completely prohibited from converting. 

The Land Use Committee will be hearing the new proposal on Monday, right after the CEQA reform hearing.

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

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This week’s update reports on three recent planning policy measures of import to the San Francisco real estate community.

Stimulus Program

Last week, the Planning Commission adopted a “Stimulus Policy for Recession Recovery & Project Implementation.”  This measure gives sponsors of approved projects that have exceeded their performance commencement deadlines a one-time opportunity to submit Building or Site Permit Applications immediately, without going through the typical lengthy Planning Commission extension process.  The Stimulus Program does not change existing policy subjecting the new Building or Site Applications to current fee amounts and other current Code requirements.

Eligible projects are those with construction costs over $500,000 and approvals no more than 10 years old.  The Planning Department is mailing notice of the Program to approximately 65 identified eligible project sponsors.  The project sponsor will have 60 days to “opt in” to the Program.  Planning also has produced a list of the eligible projects.  Please contact our office if you would like to know if your project is on the list.  Further details on the Stimulus Program are provided below.

Office Allocation

The Planning Department recently announced that it has added 800,000 square feet to the City’s Large Project Office Development Allocation pool.  This additional square footage previously had been incorrectly deducted from the pool.  This is welcome news as many in the development community are concerned about the availability of allocations due to the recent abundance of office development applications.

CEQA Reform

The Board of Supervisors’ Land Use and Economic Development Committee considered Supervisor Wiener’s CEQA reform legislation (see our March 29, 2013 Update) at its April 8, 2013 hearing.  It was an overflow hearing room, with both supporters and opposition present and vocal.  Over 50 speakers addressed the Committee.  In the end, the Committee voted to continue the matter until April 22.  Supervisor Kim introduced her alternative CEQA legislation this week, and the Committee intends the use the continuance period working to reconcile the two measures.

Further Stimulus Program Details (and Performance Condition Clarification)

In order to be eligible for the Stimulus Program, the development project must meet the following specific requirements:

• Has a Conditional Use Authorization, a Downtown Project Authorization, or an Eastern Neighborhoods Large Project Authorization approved by the Planning Commission between April 4, 2003 and October 4, 2011;
• Has a condition of approval with a performance time frame that has expired;
• Is not subject to specific Planning Code provisions that limit the time frame for project implementation (e.g., § 321(d) for large office projects);
• Has an estimated construction cost of no less than $500,000; and
• Does not involve any Wireless Telecommunications Facility.

A submitted Building or Site Permit Application (the “Application”) will be approved only if it meets the following specific requirements:

• The Application complies with all other conditions of approval and is consistent with the project’s granted approval(s);
• The Application complies with all Planning Code provisions currently in effect, including but not limited to use limitations, building form controls and development impact fees; and
• The Application is approved by the Planning Department and issued by DBI no later than October 4, 2014.  This 18-month period may be extended at the discretion of the Zoning Administrator only where implementation of the project is delayed by an appeal or by a legal challenge, and only by the length of time for which such an appeal or challenge had caused delay.

In a related action, the Planning Commission formalized its existing policy concerning the performance time frames imposed on future Conditional Use Authorizations, Downtown Project Authorizations, and Eastern Neighborhoods Large Project Authorizations.  The performance time conditions for these Authorizations will provide that a Building or Site Permit must be issued within three years from the date of approval.

The conditions of approval also will provide that if the three-year period lapses without issuance of a Building or Site Permit, the project must seek renewal of the Authorization through an amendment of the original Authorization or an application for a new Authorization.  If the project sponsor does not file for such a renewal, the Planning Commission must conduct a public hearing in order to consider revocation of the Authorization.  

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’s update reports on three recent planning policy measures of import to the San Francisco real estate community.

Stimulus Program

Last week, the Planning Commission adopted a “Stimulus Policy for Recession Recovery & Project Implementation.”  This measure gives sponsors of approved projects that have exceeded their performance commencement deadlines a one-time opportunity to submit Building or Site Permit Applications immediately, without going through the typical lengthy Planning Commission extension process.  The Stimulus Program does not change existing policy subjecting the new Building or Site Applications to current fee amounts and other current Code requirements.

Eligible projects are those with construction costs over $500,000 and approvals no more than 10 years old.  The Planning Department is mailing notice of the Program to approximately 65 identified eligible project sponsors.  The project sponsor will have 60 days to “opt in” to the Program.  Planning also has produced a list of the eligible projects.  Please contact our office if you would like to know if your project is on the list.  Further details on the Stimulus Program are provided below.

Office Allocation

The Planning Department recently announced that it has added 800,000 square feet to the City’s Large Project Office Development Allocation pool.  This additional square footage previously had been incorrectly deducted from the pool.  This is welcome news as many in the development community are concerned about the availability of allocations due to the recent abundance of office development applications.

CEQA Reform

The Board of Supervisors’ Land Use and Economic Development Committee considered Supervisor Wiener’s CEQA reform legislation (see our March 29, 2013 Update) at its April 8, 2013 hearing.  It was an overflow hearing room, with both supporters and opposition present and vocal.  Over 50 speakers addressed the Committee.  In the end, the Committee voted to continue the matter until April 22.  Supervisor Kim introduced her alternative CEQA legislation this week, and the Committee intends the use the continuance period working to reconcile the two measures.

Further Stimulus Program Details (and Performance Condition Clarification)   

In order to be eligible for the Stimulus Program, the development project must meet the following specific requirements:

     Has a Conditional Use Authorization, a Downtown Project Authorization, or an Eastern Neighborhoods Large Project Authorization approved by the Planning Commission between April 4, 2003 and October 4, 2011;

     Has a condition of approval with a performance time frame that has expired;

     Is not subject to specific Planning Code provisions that limit the time frame for project implementation (e.g., § 321(d) for large office projects);

     Has an estimated construction cost of no less than $500,000; and

     Does not involve any Wireless Telecommunications Facility.

A submitted Building or Site Permit Application (the “Application”) will be approved only if it meets the following specific requirements:

     The Application complies with all other conditions of approval and is consistent with the project’s granted approval(s);

     The Application complies with all Planning Code provisions currently in effect, including but not limited to use limitations, building form controls and development impact fees; and

     The Application is approved by the Planning Department and issued by DBI no later than October 4, 2014.  This 18-month period may be extended at the discretion of the Zoning Administrator only where implementation of the project is delayed by an appeal or by a legal challenge, and only by the length of time for which such an appeal or challenge had caused delay.

In a related action, the Planning Commission formalized its existing policy concerning the performance time frames imposed on future Conditional Use Authorizations, Downtown Project Authorizations, and Eastern Neighborhoods Large Project Authorizations.  The performance time conditions for these Authorizations will provide that a Building or Site Permit must be issued within three years from the date of approval.

The conditions of approval also will provide that if the three-year period lapses without issuance of a Building or Site Permit, the project must seek renewal of the Authorization through an amendment of the original Authorization or an application for a new Authorization.  If the project sponsor does not file for such a renewal, the Planning Commission must conduct a public hearing in order to consider revocation of the Authorization.  

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.

​Transferable Development rights or “TDR”, are valuable tool for developers looking to build in downtown San Francisco. Essentially it allows developers to exceed the allowable floor area ratio (“FAR”) for their development site, by purchasing development rights from historic buildings.  Although the TDR concept is fairly simple, there are some very strict rules about which properties are eligible to transfer and receive TDR.  Recently there have been some changes in the Planning Code regarding TDR in Downtown Commercial, or “C-3” districts, and more changes are likely on the horizon, with legislation currently at the Board of Supervisors.

How does TDR work in C-3 districts?

Currently, TDR can be transferred downtown only between buildings in the Same C-3 district, with some very specific (and slightly complicated) exceptions that apply in a limited number of cases. In most districts there are maximum floor area ratios (“FAR”). Once that maximum is reached, no further development is permitted at the site.  While this system worked well for a while, TDR is running out, but the need for it is increasing, as development in downtown is booming after the recession.  With an eye toward intensifying development in downtown San Francisco, several changes are being made to these policies.

Recent changes to TDR Rules

With a focus on making San Francisco the major business and transportation hub of the West, there have been some changes to allow denser commercial development around the Transbay Terminal.  The Downtown Office Special Development (“C-3-O (SD)”) district which is located south of Market Street, and centers around Transbay Terminal, has no maximum allowable FAR. Instead, in the C-3-O (SD) district, TDR must be purchased to exceed the base FAR  of 6.0 to 1, up to a ratio of 9.0 to 1. Developers are not permitted to use TDR above the FAR of 9.0 to 1, and instead may increase FAR without restriction through participation in the Transit Center District Mello-Roos Community Facilities District, which requires fees to be paid based on square footage of the building. This allows very dense development around the Transbay Terminal without the struggle of searching for significant amounts of TDR to meet development needs.

Future changes In the Works

This week, the Board of Supervisors Land Use and Economic Development Committee, recommended legislation that would relax TDR policies in C-3 districts. The proposed ordinance would allow TDR to be transferred freely throughout C-3 districts, instead of only allowing transfers between buildings in the same exact C-3 district.  This ordinance would also permit TDR to be transferred into C-3 districts from the South of Market Extended Preservation District, and would eliminate all of the complicated exceptions found in the existing law.  If passed this ordinance would allow TDR to be easily transferred to the parts of downtown where it is most needed, making development of large commercial buildings just a little bit easier.  The Board of Supervisors should be voting on this ordinance sometime in April or May of 2013.

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.

​CEQA Reform

      Stop me if you’ve heard this one before.  Well-intentioned legislator seeks approval of a modest, narrowly-tailored, much-needed repair of the CEQA process, only to walk into a firestorm of opposition determined to defeat the measure.  Welcome to the latest episode of CEQA reform.  Last fall, Supervisor Wiener introduced a reasonable measure that would bring some certainty to the CEQA appeal process in San Francisco.  The problem addressed by Supervisor Wiener’s legislation concerns categorical exemptions and negative declarations, the lowest possible level of environmental review under CEQA.  Under existing law, when the City approves a categorical exemption or negative declaration for a project, no time limit exists for when that CEQA approval may be appealed.  Some project opponents have exploited this oversight and have appealed projects at the last moment after months (or years) of work has been devoted to the project.  Supervisor Wiener seeks to correct this glaring problem by introducing time limits within which these CEQA approvals must be appealed.

      Not so fast.  Supervisor Kim recently introduced her own “CEQA reform” legislation that not only would thwart Supervisor Wiener’s efforts, but would severely worsen the already broken CEQA regulatory regime in San Francisco.  Among Supervisor Kim’s proposals are the following:  

• Every project on every building 50 years of older – nearly ¾ of San Francisco’s building stock – would no longer be eligible for a CEQA Categorical Exemption stamp (often issued over the counter in a matter of hours) for a minor change, such as changing a window, replacing a rotted out handrail, or replacing a failing roof. Instead, any and all such projects will be required to get a “Categorical Exemption Certificate”, which is a detailed report that can take 3-6 months to issue and currently costs $5,000, as opposed to $300 hundred dollars for a Categorical Exemption stamp.
• Similarly, all projects in parks and “open space”, which is a very broad term, would require the same 3-6 month and $5,000 certificate instead of the current Categorical Exemption stamp.
• Currently, a CEQA document for a single project can be appealed only once, even if the CEQA document covers numerous permits associated with the same project.  Under Supervisor Kim’s proposed legislation, the CEQA document could be appealed each time a discretionary permit is issued for a project. So, for example, if a home remodel required 3 building permits, a street tree permit, and a curb cut permit – all covered by the same CEQA document – the CEQA document could be appealed five different times, triggering 5 separate appeal hearings at the Board of Supervisors for that single project.

      Supervisor Wiener’s legislation is scheduled to be considered at the April 8 meeting of the Board of Supervisors’ Land Use and Economic Development Committee.  We urge anyone interested in real CEQA reform to attend the meeting and show their support.

Mandatory Soft-Story Building Seismic Retrofit Program

What had been a matter of discussion for the last two years is now close to being a legislative reality.  This week, the Land Use and Economic Development Committee approved legislation creating a mandatory soft-story (i.e., wood-frame) building seismic retrofit program.  In particular, the program would require owners of wood-frame structures built before 1978, and possessing at least three floors and five apartments, to prove with an engineer’s inspection that they are not soft-story hazards.  The owner of a building subject to the mandatory retrofit program must engage an architect or engineer to prepare and submit to the Department of Building Inspection a screening form and optional evaluation form within one year from the operative date of the legislation.  For those buildings needing a retrofit, the city would require the retrofit to meet certain engineering standards. Buildings subject to the seismic retrofitting program are organized into four compliance tiers intended to address the most dangerous situations first, and all retrofitting work under the program must be completed within seven years from the legislation’s operative date.  The legislation is scheduled for a first reading at the Board of Supervisors on April 2.

Elected Office Wheel Keeps On Turnin’

Because of previous Assessor-Recorder Phil Ting’s November 2012 election to the State Assembly, two newly appointed officials recently assumed their respective duties in elected office.  Mayor Lee appointed Supervisor Carmen Chu (4th District) to replace Phil Ting as Assessor-Recorder, and then appointed Supervisor Chu’s legislative aide, Katy Tang, to replace Supervisor Chu at the Board.  Both Assessor-Recorder Chu and Supervisor Tang will be up for election this November.   

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.

    In the last several years multiple lawsuits have been filed against property owners alleging technical violations of the American with Disabilities Act and other access and disability related laws.  There has been concern that these laws have been exploited by a few plaintiffs at the expense of businesses who are substantially complying with their intent.  As a result, the California state legislature adopted a bill entitled S.B. No. 1086, which was filed with the Secretary of State on September 19, 2012 (“Bill”), to address access litigation reforms.  The Bill is intended to encourage and facilitate access compliance by building owners and businesses, as well as to amend certain litigation requirements to discourage meritless lawsuits.  Certain modifications addressed in the Bill include requiring additional procedural requirements for a plaintiff to file an access related lawsuit and developing educational material for businesses with respect to accessibility compliance.  Although there are a multitude of reforms set forth in the Bill, one change specifically affects commercial landlords entering into new leases.  Section 1938 of the California Civil Code, enacted as a result of the Bill, provides that any lease or rental agreement executed after July 1, 2013 by a commercial property owner shall state whether the property being leased has undergone an inspection by a Certified Access Specialist (“CASp”), and if so, whether the property has met all applicable construction-related accessibility standards.

The CASp Inspection

    The CASp inspection procedure was in effect prior to the passage of the Bill and is set forth in California Civil Code Section 55.53.  That statute provides that if a property owner so elects, a building inspector who is a certified access specialist shall inspect the property and determine whether it meets current accessibility standards.  If the property does not meet such standards, the CASp inspector shall detail specific changes the owner would need to make and the timeframe in which to do so, in order to comply.  If and when the CASp inspector has deemed that the property meets all accessibility standards, the building owner is issued a numbered disability access inspection certificate, which is then recorded in a book held by the CASp.  The certificate may also be posted at the affected property.  In order to obtain an inspection by a CASp member, a building owner would need to request a consultation with the local agency that would then provide the CASp certified inspector and charge a reasonable hourly rate to do so.  Although an inspection by CASp is not required, a defendant in a disability or access lawsuit may be entitled to a court stay of the claim (an order temporarily stopping any lawsuit) and an early evaluation conference if their property has received the certificate.  Essentially, an approval by CASp is evidence to the court that the building owner has most likely complied as necessary with the accessibility laws and perhaps the lawsuit is without merit.

Disclosure Now Required

    In order to comply with the Bill’s mandate, landlords should ensure their commercial leases executed after July 1, 2013 include language stating whether the property has been inspected by CASp, and if so, the results of such inspection.  It is important to note that a review by CASp continues to remain voluntary by a property owner.  The Bill simply requires disclosure in the lease whether an investigation by CASp has been completed or not.  It seems advantageous for an owner to request an inspection if they believe they are in compliance for the added protection against a disability lawsuit and the comfort to a potential tenant.  However, if the property does not pass, the owner would be required to disclose that fact in the lease.  This could be disconcerting to a prospective tenant who may wonder if any future compliance costs for the building will be passed down to them or if all of their guests will have proper access to the property.

    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.

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Today the Planning Commission took up consideration of a policy related to the life of Planning Commission approvals.  This has been an evolving area of San Francisco Planning policy over the last decade.  While certainty surrounding the subject has generally improved over the years, there are still several areas where standardized Planning Commission motion language is confusing or conflicting.  New proposed Planning Commission conditions relating to entitlement validity, expiration and renewal should improve clarity going forward.  New performance conditions for future projects may also include a “law of the day” provision that would require the project to comply with all provisions of the Planning Code in place at the time the building or site permit for the approved project is issued.  Finally, the proposed new policy includes a “stimulus program” that may help a number of projects delayed by the recession move forward more quickly.

We believe that the stimulus program may in fact provide some relief to a group of projects approved in the last eight years where building permits have not yet been issued and have either gone past their performance requirement or are in danger of doing so shortly.  As for the new performance conditions, it will add some clarity to the status of entitlement following commission approval, but will not dramatically change the existing system.  Projects will still be allowed to seek extensions from the Commission when they get near or past the three year entitlement performance period.  Finally, the law of the day policy is one that should be looked at more closely in the future, possibly through legislation, so that the City can come up with a more formalized and certain vesting program that will give developers and property owners more certainty with respect to what rules apply when.

Summary

Past Projects ‘Opt-in’ Stimulus Program: Projects authorized in the last eight years will be able to ‘opt-in’ to the stimulus program.  Enrolled projects’ authorizations would not need further extensions or consideration by the Planning before issuance of a building permit, on the condition that the sponsor secures a site or building permit within 18 months.  These projects would have to comply with the “law of the day” policy described below.

Future Projects: Three-year implementation time frame.  If period expires, sponsor can apply for extension.  If sponsor declines, Planning Commission must hold public hearing to consider revocation of authorization.

Law of the Day: The sponsor would have to conform to all provisions of the Planning Code in effect at time of approval of the site or building permit.

The Commission is scheduled to have a second hearing, and possibly take action, at their April 4, 2013 meeting.

Approved But “Expired” Entitlements – The Opt-In Stimulus Program

The proposed policy opens a 60 day window during which projects approved between April 4, 2005, and October 4, 2011, but which have not yet received a building or site permit, would have an opportunity to ‘opt in’ for an extension.  These projects would not need to seek a separate extension for re-approval or extension.  The extension is conditional on the sponsor receiving a site or building permit no later than October 4, 2013 (18 months after the Resolution) and would have to comply with the law of the day.  

Projects that do not receive a building or site permit within the 18-month period shall apply for an amended or a new authorization.  If the sponsor chooses not to file such an application, the Commission shall hold a public hearing to consider revocation or extension of the authorization.  Projects that choose not to enroll in the program will need to seek new authorization or extension from the Planning Commission on an individual basis.

The ‘opt-in’ program will only be available to projects that have not already received extensions of performance time periods, do not involve any wireless telecommunication facilities, and have an estimated construction cost of no less than $500,000.

Clarifying Performance Conditions For Future Projects

The new draft ordinance proposes to keep the three-year implementation policy and requires a project sponsor, where the three-year period has expired, to seek renewal of the authorization by filing an amendment or a new application with the Commission.  If the project sponsor declines to file or withdraw the project, the Commission will hold a public hearing to consider revocation or extension of the approval.

These new policies would only apply to Conditional Use Authorizations, Downtown Project Authorizations, and Eastern Neighborhoods Large Projects Authorizations; they would not apply to Prop M controlled office projects or tower projects in Rincon Hill.  

Re: “Law of the day”

Both proposed new policies would implement the “law of the day” rule.  As such, a site or building permit would not be signed off on by the Planning Department unless the project complies with all provisions of the Planning Code in effect at the time of approval, regardless of whether such provisions were in effect at the time of the original authorization.

A special thanks to our law clerk Vadim Sidelnikov, who assisted in preparation of 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.