​The Planning Department is anticipated to present a Draft Plan for the Central Corridor Project (“CCP”) to the Planning Commission in an informational hearing of February 28th.  The CCP EIR has already been initiated, and planners are currently targeting Plan approval by the end of 2014. 

The CCP would change zoning districts and building heights in the South of Market Area, surrounding the southern portion of the Central Subway Rail Corridor.  The Plan would also include a range of public realm improvements designed to enhance pedestrian experience and livability in the area.  The CCP area is composed of lots within approximately two blocks of the Central Subway Rail Corridor, in an area bounded by Mission Street to the north, Townsend Street to the south, Sixth Street to the west and Second Street to the east.   

A number of parcels in the southwest portion of the CCP area, located roughly between Sixth Street to west, Fourth Street to the east, Harrison to the north and Townsend to the south, will also fall within the boundaries of the Western South of Market Area (“Western SoMa”) Plan Area.  The Western SoMa Plan was approved by the Planning Department on December 6th and is anticipated for review and approval by the Board of Supervisors within the next few weeks.   The CCP will up-zone the Western SoMa parcels as discussed below.  

The goal of the CCP is to encourage future commercial, office and residential growth in the transit-rich area surrounding the Central Subway line, while preserving the existing mid-rise character of the South of Market Area.   To this end, industrial districts in the CCP Area would be rezoned to allow office, some hotel and residential uses, except along the freeway west of Fourth Street.   South of Harrison Street, controls would be placed on large parcels to encourage commercial uses.  The Plan is estimated to result in an increased capacity of 6,000 new housing units and 30,000 new jobs, above what is possible under the existing area zoning controls.

The CCP, which will be funded by a Transportation Planning Grant from Caltrans, has been in the works since early 2011.   Planning began its first community outreach efforts in February 2011, and spent the remainder of the year soliciting community feedback through public meetings, walking tours, a storefront charrette and community surveys.   In November 2011, Planning released a set of Draft Land Use Principles and Urban Form Principles for the area.   Most recently, in June 2012, the Planning hosted a public workshop to present and receive feedback on refined plan concepts for all aspects of the CCP.  

The CCP Draft Plan is anticipated to propose the following zoning changes:

– Zoning in the Downtown Area (roughly those parcels located north of the freeway, above Folsom Street) would remain unchanged;

– Current Mixed Use Districts (roughly those parcels located north of the freeway and along Second Street) would be consolidated in to MUO Districts east of 5th Street, and MUG Districts west of 5th Street;

– Current Industrial Districts (roughly those parcels located south of the freeway and west of Second Street) would be re-zoned to MUO, except for parcels along the freeway, west of 4th Street;

– A new South SoMa SUD would require commercial uses on new construction of large parcels over 20,000 square feet;

– A new SoMa Entertainment SUD, located in the southwestern portion of the Plan area (those parcels located between Bryant, Sixth, Townsend and Fourth Streets), would allow entertainment uses as-of-right.

The CCP Draft Plan is also anticipated to propose changes to height limits in the area.  Planners are considering two possibilities with regard to height limits in the CCP Area: (1) a “Proposed Height Limit”; and (2) a “Higher Height Limit Alternative.”

Under the “Proposed Height Limit”, the following changes would be made:

– Major street frontages in the plan area would be given a 65-foot to 85-foot base;

– Sculpting would be required along alleys and near open spaces;

– Large floor plate mid-rise buildings up to 130 feet would be allowed in key growth areas;

– 130 foot to 320 foot emphasis would be provided at stations, particularly at Fourth Street and Brannan Street, and Fourth Street and Townsend Street.

Under the “Higher Height Limit Alternative”, the following changes would be made:

– Greater height limits would be allowed for parcels at the southern end of the corridor;

– 180 foot to 400 foot emphasis would be provided at stations;

– 160 foot tall parcels would be allowed along Fourth and Fifth Streets;

– A 200-foot height district on Second Street would be extended southward toward the freeway;

Maps depicting these changes are available as part of the Planning Department’s June 13, 2012 Public Workshop Boards, at:  http://www.sf-planning.org/index.aspx?page=2557.

The CCP is also anticipated to propose changes to urban form, which would include expanding the boundaries of the existing South End Historic District by approximately one half block; applying the Transferrable Development Rights Program to the Central Corridor; setting new mid-block alley requirements for large lots; proposing new building scale and massing controls, including a 15 foot setback for all buildings above a street wall base of 65 to 85 feet; and creating a new Conditional Use requirement to discourage consolidation of multiple small lots in certain areas.   

The CCP would also implement a range of pedestrian-oriented improvements to encourage livability in the Central Corridor as residential and job density in the area increases.  These improvements would include widening of sidewalks on most major streets; creating pedestrian improvements to South Park Avenue at Third and Second Streets; reconfiguring travel lanes on Brannan, Fourth, Third, Folsom, and Howard Streets; creating 25 new signalized pedestrian crossings; and establishing new bicycle lanes on Brannan, Second, Third, Fourth and Fifth Streets.

In addition, the CCP would improve public open spaces.  Currently, the portion of CCP area located south of the freeway has few open space amenities that would support the Plan’s anticipated increase in population density, aside from South Park.  Planners have started discussions with the San Francisco Public Utilities Commission, to purchase a parcel located at the center of the block bounded by Bryant, Brannan, 4th and 5th Streets, and to develop this area as a new 0.87 acre public open space, with mid-block connections to 5th, Bryant and Brannan Streets.

The Planning Department will discuss the Draft Plan for the CCP at the Planning Commission’s February 28th hearing, and is currently targeting Plan approval and implementation by the end of 2014.  Additional information about the CCP is available at the Planning Department’s website at http://www.sf-planning.org/index.aspx?page=2557.

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.

​NEW CALIFORNIA STATE LAWS

A few new state laws went into effect on January 1st that affect condominium projects and homeowners associations (“HOAs” ).  While not groundbreaking, the new laws may be of interest to our readers in the condominium industry.  Below is a brief overview:

AB 2273: When a condo unit owner is in default on its mortgage and facing foreclosure, the owner is typically also in default on its payment of assessments to the HOA.  This may leave the HOA without sufficient funding to perform its maintenance and other obligations.  In the event a condo unit is foreclosed upon and sold at a foreclosure sale, it may be difficult for an HOA to quickly identify and bill the new owner in order to avoid a lapse in collection of assessments for that unit.  To facilitate an HOA’s ability to identify the new owner after a foreclosure sale, this law amends the Davis-Stirling Common Interest Development Act (“Act”) by adding Section 2924.1 to the Civil Code, and by amending Civil Code Section 2924b.  The law requires that (i) a trustee’s deed must be recorded within 30 days of the foreclosure sale (thereby making the new owner’s name public record), and (ii) information requested by the HOA about the new unit owner must be mailed to the HOA within 15 days after date of the sale.  These rules are intended to enable HOAs to minimize gaps in the collection of assessments in order to maintain financial stability.

AB 1838: Under the Act, HOAs must provide certain documents to a prospective condominium purchaser before transfer of title to the unit.  In connection with a request for such documents, the HOA must prepare a required form that contains an estimate of the fees and costs associated with providing the requested documents.  This law amends Civil Code Sections 1368 and 1368.2 of the Act in response to perceived overcharging of such costs and related fees to condo unit owners and prospective purchasers.  In the event such a document request is rescinded, the new law generally prohibits cancellation fees and requires the HOA to refund related fees and costs, so long as sufficient notice was given and the document copying has not already taken place.

SB 880: This law is intended to further promote use of electric vehicles in the state by clarifying existing provisions in the Act to facilitate installation and use of electric vehicle charging stations in condominium projects.  The new law amends Civil Code Sections 1353.9 and 1363.07 to provide that the governing documents of a condo project may not prohibit the installation or use of an electric vehicle charging station, subject to certain limitations.  The law applies to electric vehicle charging stations both in an owner’s exclusive use parking space, and in the general project common area.

Note: The laws described above are not intended to be an exhaustive list of all new state laws that may affect condominium projects or HOAs.  This list merely represents those laws that we believe will be of the most interest to our clients and readers of this Update.  The laws also apply to other types of common interest developments in California.

UPDATE ON PROPOSED SAN FRANCISCO CONDOMINIUM CONVERSION ORDINANCE

Condominium Conversion Impact Fee: The new ordinance sponsored by Supervisors Farrell and Wiener was discussed at the meeting of the Board of Supervisors Land Use and Economic Development Committee this Monday, January 28th.  After nearly 4 hours of public comment where the Committee heard impassioned statements from both tenancy-in-common (“TIC”) owners in support of the legislation, and tenants and tenants rights advocates in opposition of the legislation, the Committee voted to postpone its vote and continue the matter until February 25th in order to give the opposing interests time to attempt to negotiate a compromise.  As we reported in last week’s Update, the ordinance would provide qualifying TIC owners a one-time opportunity to bypass the onerous condominium conversion lottery upon payment of a fee to the City.  We will continue to monitor the legislation and provide future updates on its progress.  Those interested in this issue should contact their Supervisor to voice their opinion.

Correction: Last week’s Update erroneously stated that “the conversion of a building with more than six (6) apartment or tenancy-in-common units to condominium subdivisions is limited to 200 units annually, which are selected in a condominium lottery.”  In San Francisco, conversions of buildings with more than six (6) apartment or tenancy-in-common units to condominium subdivisions are not permitted.  The lottery is held for condominium conversions of buildings with six (6) or fewer apartment or tenancy-in-common units.  The maximum number of units that can be converted to condominiums City-wide in any given year is 200.  Certain qualifying conversions of buildings with two (2) apartment or tenancy-in-common units may bypass the lottery.

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.

​As the state’s Metropolitan Planning Organizations (MPO) begin to roll out their Sustainable Communities Strategies (SCS) pursuant to SB 375, the first agency to actually adopt an SCS has stumbled out of the gate.  On Dec. 3, 2012, Judge Timothy Taylor of the San Diego Superior Court has struck down the EIR for the SCS adopted by the San Diego Association of Governments (SANDAG).

The Legislature adopted SB 375 in 2008 as part of the implementation of Governor Schwarzenegger’s AB 32, which requires the State of California to reduce its greenhouse gas (GHG) emissions to 1990 levels by 2020.  SCS’s are the cornerstone of SB 375.  The purpose of the SCS is to use land use and transportation planning strategies to help the region meet its mandated GHG emissions reduction targets.  These new planning strategies could have a dramatic effect on metropolitan development patterns in the years to come.

The state Air Resources Board (ARB) has issued regulations for each MPO pursuant to AB 32 that set specific GHG emissions reduction targets by the years 2020 and 2035.  However, prior to AB 32, Governor Schwarzenegger issued Executive Order S-03-05, which calls for an 80 percent reduction in GHG emissions statewide by 2050.  Until the SANDAG decision, Executive Order S-03-05 had been largely forgotten.  ARB has set no target for 2050, nor did AB 32.  

The petitioners in the SANDAG case successfully exploited this inconsistency among target years. Like many MPO’s across the state, SANDAG’s SCS was combined with its regional transportation plan (RTP).  While the SCS projected out to 2050, the RTP projected out only to 2035.  Because the RTP projected out to only 2035, SANDAG’s EIR did not fully study the environmental impacts of the combined SCS/RTP out to 2050.  Judge Taylor concluded that this inadequacy violated CEQA.  He criticized the EIR for failing to recognize that “Executive Order S-03-05 is an official policy of the State of California,” and chastised SANDAG for analysis that did no more than “‘kick the can down the road’ and defer to ‘local jurisdictions.’”  

The SANDAG decision is important because it puts other MPO’s around the state on notice.  The Bay Area’s SCS, being drafted by ABAG, currently projects emissions levels out to 2040.  Their EIR is scheduled for release this Spring, with certification and adoption of the SCS scheduled for Summer.  ABAG now must decide whether to wait and see what happens with the expected appeal of the SANDAG decision, go ahead and revise the SCS and EIR, or assume the risk and proceed as is.  We will continue to inform readers of developments in the case and ABAG’s adoption of its SCS.   

The petitioners in the case were Cleveland National Forest Foundation and the Center for Biological Diversity, and they were joined by the state Attorney General after the lawsuit had been filed.  Cleveland Nat’l Forest Foundation, et al., v. San Diego Ass’n of Governments, San Diego Superior Court Case No. 2011-00101593.

      

SAN FRANCISCO CONSIDERS ALLOWING PAYMENT OF IMPACT FEE TO AVOID 2014 CONDO CONVERSION LOTTERY

Currently in San Francisco, the conversion of a building with more than six (6) apartment or tenancy-in-common units to condominium subdivisions is limited to 200 units annually, which are selected in a condominium lottery. To participate in the lottery, a specified number of building owners must continuously occupy a unit(s) in the building for at least three years in advance of the lottery. The selection process is based, in part, on seniority of participation in past lotteries.

Supervisors Mark Farrell and Scott Wiener have introduced an ordinance that would allow any building that participated in the 2013 condo conversion lottery but was not selected, or could have participated in the 2013 condo conversion lottery but chose not to, to avoid the 2014 lottery and qualify for a subdivision conversion by paying an impact fee of $20,000 per unit.  As currently written, the ordinance affects only the 2014 lottery.    The ordinance is scheduled to go before the Land Use and Economic Development Committee on Monday, January 28.

Additional ordinance details are as follows:

•       The fee is reduced based on the number of the years a building has participated in the lottery.  A building can receive a fee reduction of up to 80 percent per unit after 5 years or more of participation.

•       To participate, applicants must pay the full fee for the entire building no later than Jan. 24, 2014.

•       DPW will determine whether the condo conversion subdivision application is complete no later than July 24, 2014.

•       The applicant will obtain the final and effective tentative approval of the condo subdivision or parcel map no later than December 31, 2014. This time can be extended to July 24, 2015 by DPW.

•       Those participating in the fee conversion program must provide lifetime lease options for non-purchasing tenants.

•       A subdivider or subsequent condominium owner may not refuse to renew or extend a lease or rental agreement to any non-purchasing tenant at the time of final map or parcel map approval.

•       Fee reductions are available in exchange for the lifetime lease requirement.

      

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.

​As readers of our update are surely aware, infill development doesn’t just make business sense, it is a vital environmental policy as well.  Creating greater housing density near jobs, public transit and services reduces automobile (and fossil fuel) use, does not encroach onto undeveloped greenfields, beautifies our city, and creates a healthier life for those who can walk and bike to transport themselves.  Underscoring infill’s role as environmental policy is the U.S. Environmental Protection Agency’s annual report tracking infill and non-infill housing development throughout the country.

In EPA’s own words, infill development “can help to create new housing choices, make neighborhoods livelier, increase the tax base, protect rural landscapes, reduce infrastructure costs, and conserve natural resources…residents can drive less if they choose, reducing air pollution, and less paved surface is needed for roads and parking lots, reducing the amount of polluted storm water runoff flowing into waterways.”  Unsurprisingly, EPA’s 2012 report ranks the Bay Area as a region with one of the best records of infill development in the country.

Between 2005 and 2009, 58% of housing development in the San Francisco-Oakland-Fremont region was infill.  During that same time, 84% of housing development in the San Jose-Sunnyvale-Santa Clara region was infill.  This compares to 33% for all California metropolitan regions, and a dismal 21% for the largest 209 metropolitan regions in the country.  While we are doing are part in the Bay Area, unfortunately the report concluded that more metropolitan regions are growing outward rather than inward:  only four metropolitan regions had a percentage of infill development of more than 50% of all new housing development (San Francisco, San Jose, Los Angeles, and New York City).  One encouraging finding is that 70% of the largest 51 metropolitan areas in the country saw their share of infill development grow between 2000 and 2009.  You can find the EPA report at http://mytinyurl.com/zrfpsnxv6b.

…Well, Most of Us Get It…

Coincidentally, our friends Jennifer Hernandez and Daniel Golub over at Holland & Knight have just published a study they conducted of CEQA court cases since 1997, and have concluded that close to 60% of them involve – wait for it – infill development.  The analysis also concluded that 70% of plaintiffs in these cases are local organizations, and the breakdown of challenges to public and private projects is roughly 33% and 66%, respectively.  You can find Holland & Knight’s report at http://mytinyurl.com/z7x9xzrbrg.

…So CEQA Reform, Right?

What’s a region to do when it is trying to grow in a smart, responsible way, but existing laws provide tools that undermine these efforts?  Change those laws.  And it’s a convenient time to be considering these changes, what with the new Democratic supermajority in the State Legislature and Jerry Brown in the governor’s office.  Reports are, such efforts are already underway.

Progressive blogger Robert Cruickshank – a California progressive, rather than San Francisco progressive – reminds us in a recent post:  “Rather than promote environmentally friendly planning, CEQA’s primary use is for NIMBYs who wish to prevent sustainable change. At times it does serve to stop projects that are truly bad for the environment, but those are rare cases, and too many good projects are delayed or made more expensive by the flawed process.”  And the news out of Sacramento is promising.

According to the San Diego Union-Tribune, State Senator Michael Rubio of Bakersfield is currently developing a reform measure that would amend CEQA in a number of ways, including protecting projects from a court challenge if it complies with an approved city or county general plan, if those plans have an approved environmental impact report (EIR) and the project is consistent with the Sustainable Communities Strategy launched by Senate Bill 375.  That law established a path to lower greenhouse gas emissions linked to global warming through “smart growth” building policies that also encourage more alternative transit, from buses to bicycle paths.  (Key environmental law targeted for overhaul, San Diego Union-Tribune, December 23, 2012.)

The brilliance of this reform would be to use SB 375 – which requires regional transportation authorities to develop sustainable community plans with the main purpose of improving the environment – as an umbrella that would protect individual projects from CEQA challenges.  This is a substantially more efficient way to conduct environmental review.  Instead of leaving every new project – which cumulatively have a big effect on how well regions are improving the environment – to do its own analysis and fend for itself, we would, as a region, develop the environmental standards, likely have it out in court on a macro-level, and then projects would get the green light if they are consistent with region-wide plan.  

These are encouraging developments, and considering the current makeup of the legislature, the reform effort may actually have a chance of passing in this legislative session.  We will be following this issue closely over the next two years.  

Chiu Re-Elected Board President; Land Use Committee Assigned

Last week, Supervisor David Chiu was unanimously re-elected by his Board colleagues for an historic third term as President of the Board of Supervisors.  One of the first items on his to-do list: committee assignments.  Chiu assigned Supervisors to each committee earlier this week.  Supervisor Scott Wiener was named as chair of the Land Use Committee, and Supervisors Jane Kim and David Chiu will round out the three-person committee.

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.

​During its most recent session, the State Legislature passed six bills designed to revive aspects of redevelopment or in some way stimulate local economic development.  Governor Brown vetoed all six.  Does the Governor just have it out for redevelopment?  Maybe not.  In his vetoes of the bills Governor Brown wrote that he could not support the bills until the dissolution of redevelopment agencies was finally complete, but that he was supportive of the redevelopment intentions of the bills.  In other words, although it is now certain that redevelopment as we know it is going away, some new iteration of redevelopment may be on the horizon.  The question is, what might that new redevelopment look like?

Infrastructure Financing Districts     

Until Governor Brown first proposed to abolish redevelopment agencies two years ago, Infrastructure Financing Districts (IFD) were scarcely known.  IFD’s are a creature of state law designed, as the name suggests, to help cities and counties finance public infrastructure.  During the era of redevelopment, IFD’s were largely superfluous because they were not much different than redevelopment.  They use tax increment financing to pay back bonds that fund infrastructure.  IFD’s are different than redevelopment in that no finding of blight is needed to create an IFD, but they are difficult because their creation (and the subsequent issuance of the bonds) requires a 2/3 vote of the property owners in the proposed district.  Also, every public agency that would contribute tax increment revenues to the IFD must approve the formation.  The boundaries of an IFD cannot overlap with a redevelopment project area.

Without redevelopment, however, IFD’s begin to look like a reasonable Plan B.  With the demise of redevelopment looming, redevelopment proponents seized on IFD’s and pushed three bills through the Legislature this year:

* SB 214 by Lois Wolk (D-Davis), the most significant of the three bills, would have eliminated the voter approval requirement, allowed IFD’s to overlap with redevelopment project areas, and created greater oversight and accountability for IFD’s.

* AB 2551 by Ben Hueso (D-Chula Vista), would have allowed a city or county to form an IFD, without any voter approval, in renewable energy zone areas to pay for renewable energy projects.

* AB 2144 by John Perez (D-Los Angeles), would have reduced the voter approval requirement from 2/3 to 55 percent. 

As stated, the Governor vetoed all three bills, expressing concern that the measures “would likely cause cities to focus their efforts on using the new tools provided by the measure instead of winding down redevelopment.” However, he left the door open for their return by stating suggestively that “[e]xpanding the scope of infrastructure financing districts is premature.”   

Another IFD bill, AB 910 by Norma Torres (D-Pomona), would have allowed IFD’s to finance affordable housing and economic development projects.  But this bill never made it out of the Legislature.  The Governor did sign one IFD bill into law this Fall.  AB 664 by Tom Ammiano (D-San Francisco), allows San Francisco to create a special purpose IFD on the San Francisco waterfront to finance certain development work for the America’s Cup.

SB 375 and Sustainable Communities Strategies

In 2008, as a follow-up to AB 32, the 2006 greenhouse gas emissions reduction law, the Legislature passed into law SB 375.  SB 375 requires each of the state’s metropolitan areas to adopt a Sustainable Communities Strategy that uses integrated land use, housing and transportation planning to meet the area’s AB 32 greenhouse gas reduction targets.  Two of the pro-redevelopment bills from the last session sought to integrate redevelopment with the objectives of SB 375.

SB 1156 by Darrell Steinberg (D-Sacramento) was the most ambitious of all six bills in that it authorized the creation of a new public agency, much like a redevelopment agency, empowered to collect property tax increment in a blighted project area.  Unlike redevelopment agencies, no tax increment could be diverted from school districts.  

The link to SB 375 came in that the project areas had to be located in transit priority areas, and the project area “redevelopment” plan had to implement the goals of the local Sustainable Communities Strategy.  AB 345 by Norma Torres added to and was contingent upon the passage of SB 1156.  

In vetoing both of these bills, the Governor was even more encouraging than with the IFD bills, stating that he “prefer[s] to take a constructive look at implementing this type of program once the winding down of redevelopment is complete … .  At that time, we will be in a much better position to consider new investment authority.”

The last of the six bills, by the Committee on Budget and Fiscal Review, would have provided additional redevelopment dissolution funds to three counties that lost school funding due to an oversight in the redevelopment dissolution legislation.

As the foregoing indicates, the elimination of redevelopment agencies is certain.  However, it seems likely that the neighborhood revitalization and economic development aspects of redevelopment will return, and the leading policy approaches to achieve that are IFD’s and coordination with Sustainable Communities Strategies.  We will continue to monitor and report on these legislative efforts.

Good News for Mills Act Contracts

A Mills Act Contract is an agreement between the City and County of San Francisco and the owner of a qualifying historic property.  The property owner receives property tax reductions in exchange for taking certain measures to preserve and restore the historic character of the property.  Among other qualifications, residential properties must have a pre-contract assessed value of $3,000,000 or less, and commercial properties must have a pre-contract assessed value of $5,000,000.

Recently, the Mayor and Board of Supervisors approved changes to the City’s Mills Act Contract program to make it more appealing to landowners.  The two significant changes were:

* Specific deadlines designed to expedite the processing of applications; and

* A reduction in application fees from $9,159 to $2,500 for residential properties and from $18,310 to $5,000 for commercial properties.

Reuben & Junius is experienced with the Mills Act Contract program.  Please let us know if we can assist you in any way with a Mills Act Contract.

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.

          

Copyright 2012 Reuben & Junius, LLP. All rights reserved.

​This past year was a much better year for real estate (at least in San Francisco) than we have seen in a long time.  Office rental rates are up, construction cranes are everywhere, and properties are trading.  As we turn the calendar for another busy real estate year, let’s take a look at some of the new laws that will impact real estate in 2013.

Gross Receipts Tax (San Francisco Measure E)

San Francisco voters approved the measure that eliminates the existing payroll tax and replaces it with a tax on gross receipts.  The new tax will be phased in over five years, starting in tax year 2014.  The change will directly impact the real estate community, since most property owners have few employees.  The tax rate for real estate ranges from 0.285% to 0.3%.  Business registration fees will increase significantly beginning July 1, 2014.

Anti-Deficiency Protection (SB 1069)

Homeowners that refinance their homes will be subject to protection from deficiency judgments (balance of loan remaining after foreclosure sale) for loans entered into after January 1, 2013.  Previously, if an owner refinanced, they would lose this protection.  If an owner “cashes out” and takes cash out of the equity, then this protection will not apply.

“Obamacare” Tax on Real Estate Deals

While not a direct tax on real estate transactions, the sale of property will trigger a 3.8% tax on the gain for certain sales.  The tax will apply only to those earners that haven an adjusted gross income over $200,000 for individuals, and $250,000 for couples.  The 3.8% is calculated on the lesser of (i) the investment income received, or (ii) the excess of adjusted gross income over the threshold described above.  Investment income includes capital gains in real estate.  This is a complicated income tax issue, so you should consult with your tax advisor about the impact of this tax.  The National Association of Realtors has put out a helpful pamphlet summarizing the tax.  (www.realtor.org)

Residential Mortgage Renegotiation (AB 278)

As part of the Legislature’s efforts to protect homeowners from foreclosure, AB 278 imposes a number of protections for borrower’s that are working to prevent a foreclosure, including (i) mandating a single point of contact required for certain mortgage servicers, (ii) precludes recordation of a notice of default when foreclosure prevention measures have been approved, (iii) requires mortgage servicers (not just the lender) to contact borrower’s to explore foreclosure options, and (iv) allows borrowers to seek injunctions and damages for certain violations.  

Eviction after Foreclosure (AB 2610)

For residential properties that are foreclosed upon, tenants will be entitled to 90 days notice of termination , rather than 60 days.  Also, fixed term leases are recognized even if the loan was recorded first, with some exceptions.  The foreclosing owner must notify the tenant that the lease must be honored unless he/she intends to occupy the premises as a primary residence.  

Disclosure of Hazardous Materials (AB 1511)

Just in case you thought you could avoid disclosing the existence of gas and hazardous materials pipelines when selling residential property, the law now makes this a specific requirement.

Easements (AB 1927)

Allows parties to an easement to pursue a claim against joint easement holders for proportionate allocation of maintenance costs, in the absence of a written agreement.  

Notaries (AB 2326)

Those annoying finger prints are now required for the recordation of any document that affects real property – so just about every document that is notarized.  (Previously just applied to deeds and deeds of trust).

New LLC Law (SB 323)

Effective January 1, 2014, the California LLC law will be revised based on the national Uniform LLC Act.  Look for future updates on this topic in 2014.  This will affect many real estate owners since LLCs are often used as the entity to hold real estate.  

Landlord/Tenant – Animals (SB 1229)

For you pet lovers out there – Landlords that accept pets cannot require tenants to declaw or devocalize their animal as a condition to rental.

The above is just a brief overview, if you have questions about the details, please give Kevin Rose a call.

West SOMA Update – Historic Controls Expanded

After a week of efforts by local stakeholders, the Planning Commission agreed to expand the universe of historic buildings eligible for relaxed use controls.  The Planning Commission voted to permit all uses, regardless of the underlying zoning, in the following types of historic buildings:

1. Article 10 individual landmarks

2. Article 11 buildings with a rating of I, II, III, or IV

3. Buildings individually eligible for the California or National Registers

The Commission refused to expand the controls to buildings that are eligible for the California or National Registers as contributors to eligible historic districts.  While this excludes a significant number of buildings in West SoMa that have been identified as historic resources by the Planning Department, it represents a major expansion of eligibility for the controls than what the Department was originally proposing.

The full West SoMa plan was approved last night 7-0 at the Planning Commission.  It now heads to the Board of Supervisors where additional changes are likely to be made before final passage.  We will continue to keep you posted on its progress.

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.

Copyright 2012 Reuben & Junius, LLP. All rights reserved.

​While the West SoMa Community Plan has been in the works for over ten years, Planning Commission review and approval looks likely to wrap up after just a month of public hearings next Thursday.  Surprisingly, there has been little public comment over the course of several hearings on the plan in November.  Why surprising?  Because many of the new zoning districts will severely limit the uses that can be conducted in existing buildings.  And very little discussion of this has been conducted to date.

Yesterday, the Planning Commission discussed this issue at an informational hearing on the plan.  In the proposed Regional Commercial District, which will apply to much of 9th and 10th Streets in the plan area, only five non-residential uses will be permitted on the third floor of buildings and above.  On the second floor, not much is permitted beyond retail and industrial use.  Office is permitted on only the first or second floor, not both.  The use controls for the proposed Folsom Street Neighborhood Commercial Transit District are similar.

What the Planning Commission is now considering is allowing for relaxed use controls (i.e. permitted office) for certain types of historic buildings.  The Planning Department has conducted a historic survey for the area, and a large number of buildings in the area have been recognized as having some level of historic character – so these historic use controls could mean the difference between a vacant building and an occupied building for many owners.

While the Planning Commission has expressed some interest in applying these historic use controls in West SoMa, they won’t feel much urgency to do so, or the need to apply them broadly, if existing owners don’t make their voices heard.  This is a key moment in the West SoMa rezoning process, and owners could seriously improve their zoning situation with some effort over the next week.  The new zoning will likely be in place for decades.

Those who are interested can write a letter to Planning Commissioners expressing their desire to see the historic use controls apply broadly.  Even more importantly, owners can attend next week’s hearing, which will take place at 12 p.m. on Thursday, December 6, in Room 400 of City Hall to express their interest.  

Reuben & Junius is following the development of the West SoMa plan closely, and can provide further guidance to those interested parties who would like to see the zoning controls for historic buildings in West SoMa to be relaxed.  You can contact John Kevlin at (415) 567-9000 or jkevlin@reubenlaw.com.  We will continue to report on the West SoMa plan as it nears adoption.

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.

Copyright 2012 Reuben & Junius, LLP. All rights reserved.

As many of our readers have likely heard, Supervisor Wiener has proposed an amendment to the Building Code that would reduce the minimum size of efficiency apartments by 70 square feet.  These “micro-units” or “efficiency dwelling units” would have to be at least 220 square feet in area with a primary living space of at least 150 square feet.  The California Building Code allows cities and counties to make this change and several jurisdictions in California and elsewhere have done so in an effort to bring down housing costs. 

After being unanimously recommended for approval by the Building Inspection Commission and Land Use Committee, the full Board of Supervisors continued the micro-unit legislation so that the concerns of so-called housing advocates could be addressed.  As is often the case with land use policy in San Francisco, facts and real-world data can take a back seat to amorphous fears and worst-case conjecture.  The debate over micro-units is no exception, with opponents of the legislation alleging that they would drive up land prices, create a shortage of affordable housing sites, and result in units that are occupied almost exclusively by reverse-commuting tech workers or that will be illegally converted to hotels.  

In fact, most small units in San Francisco have been built for special needs populations, particularly youth transitioning out of foster care and the formerly homeless.  In Seattle, where 11 micro-unit projects have been built, vacancies are at about one percent and rents are about one-third the price of an average apartment. 

In spite of the evidence that micro-units provide a low-cost housing alternative, opponents insisted on a cap on the total number of market-rate micro-units that can be built under the new ordinance. On October 9, 2012, Supervisor Wiener introduced an ordinance to do just that.  

The ordinance as drafted would create a pilot program whereby the number of market-rate efficiency dwelling units with reduced square footage that may be approved by the Planning Department would be limited to 375 units total.  Affordable units or units used for student housing would be exempt from the limit.  At the time when 325 efficiency units of reduced size have been approved by Planning, the Planning Department must submit a report to the Board of Supervisors that would evaluate the new program, including an analysis of whether additional reduced square footage efficiency dwelling units should be allowed.  Also included in the ordinance is a requirement that, whenever possible, efficiency dwelling units with reduced square footage provide 10 square feet of usable common open space per unit, such as a reading room, media room, game room, or fitness facility.  The ordinance would apply only to new construction.  Owners of existing structures may not subdivide dwelling units to take advantage of the reduced square footage.

Yesterday, the Planning Commission expressed doubts about the need for a cap and whether it could be effectively administered.  Nonetheless, it recognized the cap as a necessary political compromise brokered by Supervisor Wiener and endorsed the concept of a cap to allow future study.   The Board of Supervisors is scheduled to consider both the Building Code and Planning Code amendments next week.   

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.

Copyright 2012 Reuben & Junius, LLP. All rights reserved.

​As we reported in our August 17, 2012 Update, the California Supreme Court upheld the enforceability of provisions in condominium project CC&Rs requiring binding arbitration of construction defect claims against the project developer.  The Court’s opinion in Pinnacle Museum Tower Association v. Pinnacle Market Development (US), LLC, S186149, is an important decision for condominium developers, who should benefit from the typically more streamlined and cost-effective process of arbitration, rather jury trial.

Pinnacle was not the only case pending before the Supreme Court on the issue of enforceability of binding arbitration for construction defect claims in condominium CC&Rs.  The Court also accepted for review four other California Court of Appeal cases involving the enforceability of such arbitration clauses:  Villa Vicenza Homeowners v. Nobel Court Development, LLC, S190805; Diaz v. Buckey, S194150; Promenade at Playa Vista Homeowners Association v. Western Pacific Housing, Inc., S198722; Verano Condominium Homeowners Association v. La Cima Development, LLC, S202596.

On October 10, 2012, the Supreme Court transferred back to the California Courts of Appeal the Villa Vicenza, Diaz, Promenade and Verano cases for vacation of the Court of Appeals’ previous decisions and reconsideration of the cases in light of the Pinnacle decision.  We expect the Courts of Appeal to follow suit and uphold the arbitration provisions at issue in the respective cases.  However, due to the different facts of each case, the decisions in the Court of Appeal cases may turn on different issues and result in different outcomes.   We will continue to monitor these cases as they progress through the courts and provide future updates on their outcomes.

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.

Copyright 2012 Reuben & Junius, LLP. All rights reserved.

​Those readers with a particular interest in CEQA may remember our previous updates on the inefficient CEQA appeal process currently in place in San Francisco.  CEQA – the state law mandating environmental review of projects requiring discretionary approval – requires that all environmental determinations (exemptions, negative declarations, EIRs) must be appealable to the Board of Supervisors.  Currently, city code is written so that there are no time limits for appeals of exemption determinations or negative declarations.  This has led some project opponents’ to abuse of this loophole, whereby they use a CEQA appeal simply as a way to continue to oppose a project (even if there are no valid issues with the environmental determination).  

The worst example of this abuse is when a categorically exempt project which requires no Planning Commission approval is taken to the Planning Commission on Discretionary Review.  After being approved by the Planning Commission, the project sponsor can spend months preparing detailed architectural and building plans.  Once the permit is issued, an appeal can be filed at the Board of Appeals.  Even if the Board upholds the permit, the project can still have its exemption determination appealed to the Board of Supervisors and overturned – potentially over a year after obtaining Planning Commission approval.

Legislation introduced last week by Supervisor Scott Wiener would fix the current situation, by simply enacting appeal periods for negative declarations and exemption determinations.  To appeal a negative declaration to the Board of Supervisors, the document must have already been appealed to the Planning Commission, and the Board appeal must be filed within 20 days after adoption by the Planning Commission.  To appeal an exemption determination, the appeal must be filed within 20 days of the granting of the first entitlement (such as a conditional use).  This appeal period would be shortened if the appeal period for the underlying entitlement is shorter than 20 days (such as approval of a permit that does not require Planning Commission approval, which is 15 days).  Importantly, the appeal period begins after the first entitlement – if a complex project requires more than one entitlement, the appeal period begins once the first entitlement is granted.  We do believe that the term “entitlement” should be more clearly defined to include any Planning Commission action, including a hearing before the Commission on Discretionary Review.

CEQA is intended to provide decision-makers with information regarding environmental effects caused by a project up front – so that they can make an informed decision weighing the benefits of the project versus any potential impacts it would cause.  As currently implemented in San Francisco, a CEQA exemption determination or negative declaration could be called into question at the very last moment of project approval – after months or years of approval and appeals hearings on the merits of a project.  By simply applying appeal periods to all CEQA documents, Supervisor Wiener’s legislation would make the process fairer, since project sponsors wouldn’t be at risk of getting a CEQA determination appealed and overturned months or years after it has first been relied upon.  It also better fulfills the intent of CEQA, which is to provide decision-makers with accurate environmental information up front.  It is wasted time and energy to continue through the many steps of the entitlement process if the initial environmental review is inadequate.

We commend Supervisor Wiener for taking on this common-sense reform of an important issue.  This is not the first attempt at this simple reform – an earlier effort by former Supervisor Alioto-Pier died at the end of the last Board of Supervisor’s session in 2011.  With the current pragmatic, get-things-done Board, this legislation should be a no-brainer.

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.

Copyright 2012 Reuben & Junius, LLP. All rights reserved.