The Ellis Act allows owners of residential real estate to take their properties off the rental market if they fulfill certain conditions, including the removal of all units at the property from the rental market.  A recent case entitled Hilaly v. Allen clarified one of the specific conditions precedent to an Ellis Act “eviction” and discussed the impact of a residential estoppel in the context of such eviction.  (2019 WL 2500495, Filed May 21, 2019).

As part of any Ellis Act eviction process: (1) the tenants must be notified of the intent to withdraw the unit, (2) the tenants must have sufficient move out time (one year in the case of an eligible or disabled tenant), and (3) during the notice period, the tenancy must continue on the same terms and conditions as existed prior to the notice of removal from the rental market.  In Hilaly, the owner of the San Francisco property (Hilalys) decided to recover possession of its property and issued an Ellis Act eviction notice to the tenants at the property, which included an elderly and disabled tenant named Allen.

Allen had an oral lease at the property with the prior owner for an apartment and use of a garage and driveway at the property.  During the Hilalys purchase of the property, a questionnaire was issued to Allen with no explanation of its significance.  The questionnaire included a question whether parking was included at the property and if so, what was the space number.  Allen stated no to the question because, although she had driveway and garage rights, she didn’t have the right to a numbered parking space.  The Hilalys thereafter closed on the property and later issued this Ellis Act eviction notice to the tenants.  During the one-year notice period (as to Allen’s lease due to age and disability), the Hilalys started using the driveway and blocked Allen’s access to use the same.

Allen set out to defeat the Ellis Act eviction on the premise that the owner changed a tenancy term when they blocked Allen’s access to the driveway and garage during the one year notice period.  The Hilalys argued that the Ellis Act confers a landlord with the unfettered right to leave the residential rental business and the requirement to maintain the tenancy on the exact same terms contradicts settled law which bars habitability defenses to an Ellis Act eviction.  As such, the removal of the driveway rights, even if it made the premises less habitable, did not negate her right to possession and was not a defense to the Ellis Act eviction.  The Court agreed with the premise that a withdrawing owner is relieved of affirmative repair obligations during the notice period, but also found that a landlord must refrain from taking affirmative steps to reduce an elderly or disabled tenant’s leasehold during the notice period.  The Court agreed with Allen and found that the owners unlawfully changed a term of Allen’s tenancy during the one-year notice period, and as such, allowed for an affirmative defense to the eviction.

The Hilalys also alleged that even if the Ellis Act supported such a defense for “change in tenancy terms”, Allen was barred from using such a defense based upon Allen’s answer to the questionnaire stating no parking or driveway rights were included in her lease.  Therefore, there was not a change in a term of tenancy since she confirmed no such rights  existed.  The Court again held for Allen stating that this questionnaire was not a contract and Allen was not bound by contract to complete the questionnaire.  Also, the questionnaire did not state that Allen’s answers would be binding on her leasehold.  The Court in Hilaly differentiated an estoppel in a commercial context stating that a commercial estoppel binds the tenant to its factual statements, in part because the parties in a commercial transaction have more equal bargaining power and share a widespread understanding that estoppel certificates are binding and relied upon.

The Hilaly case illustrates that a landlord must conform to very strict procedures to ensure an Ellis Act eviction will not be defeated, including that any term of the lease must remain the same during the required notice period.  Further, the Court in Hilaly confirmed that an informal “estoppel” in a residential context carries less weight than an estoppel in a commercial context and that a residential tenant may not be held accountable for statements made within said estoppel.

 

Authored by Reuben, Junius & Rose, LLP Attorney, Lindsay Petrone

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

 

This month, the California Supreme Court affirmed the Fourth District’s decision in Black Sky Capital, LLC v. Cobb (2017) 12 Cal.App.5th 887 (“Black Sky”), ruling that a creditor who holds two deed of trust on the same property may recover a deficiency judgment on a junior lien extinguished by a nonjudicial foreclosure sale on the senior lien.

In so holding, the California Supreme Court applied a strict construction of Code of Civil Procedure section 580d, which reads, in part, “…no deficiency shall be owed or collected, and no deficiency judgment shall be rendered for a deficiency on a note secured by a deed of trust or mortgage on real property or an estate for years therein executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust.” CCP §580d(a).

Relying on the plain language of section 580d, the California Supreme Court emphasized that the statute precludes a deficiency judgement on a note secure by a deed of trust on real property when the trustee has sold the property “under power of sale contained in the … deed of trust. The court concurred with the Fourth District’s reasoning that the phrase “the … deed of trust” makes clear that section 580d applies only where the sale of the property has occurred under the deed of trust securing the note sued upon, and not some other deed of trust. In the words of the California Supreme Court, “nothing in the text of section 580d indicates that the statute applies where no sale has occurred under the trust deed securing a junior lien, even if the lien is held by a creditor who has foreclosed on a senior lien on the same property.”

The Fourth District’s ruling – and the California Supreme Court’s affirmation of the same – stray from the long followed decision in Simon v. Superior Court, (1992) 4 Cal.App.4th, 63, 66, which held that the anti-deficiency protections of California Code of Civil Procedure 580d barred a creditor in such circumstances from pursuing a deficiency on the junior note. While noting that where there is evidence of “gamesmanship” (e.g. intentional loan splitting, bid rigging, etc.) by the holder of senior and junior liens on the same property, a substantial question may arise whether the liens should be treated as a single lien within the meaning of section 580d, the California Supreme Court concluded that such circumstances were not present in the case before it, as the loans at issue were made more than two years apart. The court did not elaborate on what other factors might be considered in determining the presence of “gamesmanship” by a holder of senior and junior liens on the same property.

Practical Considerations

The California Supreme Court’s upholding of the Fourth District’s ruling is likely to be heralded as a victory for lenders, as the opinion in Simon – which unequivocally rejected a lender’s ability to recover on a junior lien after foreclosing on the senior lien – is now a dead letter. So long as the two loans are truly separate and there have been no improprieties at the foreclosure sale, a lender foreclosing on a senior note should be able to pursue a deficiency judgment on the junior note.

Unfortunately, the California Supreme Court provided virtually no guidance on what would constitute “loan splitting.” In Simon, two loans were signed four days apart with the liens recorded on the same day, while Black Sky involved loans made two years apart. The large delta between the respective timelines of senior and junior loans being made in Simon and Black Sky creates a gray area that will at some point need to be addressed by the courts. When has enough time passed so that a subsequent loan made on the same property would not constitute loan splitting? Six weeks? Six months? A year? What were the motivations behind making the second loan? For now, those questions will remain unanswered at the judicial level. In the meantime, lenders should carefully consider these circumstances when making or buying multiple loans secured by the same property.

Authored by Reuben, Junius & Rose, LLP Attorney, Michael Corbett

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.

Later this summer, Oakland will be releasing its draft Downtown Oakland Specific Plan (the “Plan”).  A preliminary draft plan was released earlier this year (which can be accessed here).  The preliminary draft is the initial version of the draft Plan.  The Plan presents Oakland’s transformative ideas and recommendations for the future development of the downtown area.  The Plan encompasses approximately 850 acres, and is generally bounded by 27^th Street to the north, I-980, Brush and Market Streets to the west, Embarcadero and Jack London estuary waterfront to the south, and Lake Merritt and Channel to the east.

Before digging into the details, a quick rundown of the Plan’s projections for development through 2040 is as follows:

Approximately 55,000 jobs

Approximately 29,000 residential units

Approximately 17.2M square feet (“sf”) total commercial

Office: Approximately 13.8M sf

Retail/Neighborhood Commercial: Approximately 2.5M sf

Flex Commercial: Approximately 0.9M sf

Approximately 0.2M sf flex industrial

Approximately 1.3M sf institutional

14,062 parking spaces

Pre-Determined Community Benefits Program

The Plan calls for creation of a carefully calibrated bonus incentive program. The program is to have clearly identified benefits provided in exchange for increase in intensity that can be applied to mixed-use projects of any size.

The pre-determined community benefits program will be developed in partnership with the community. The program will establish a finite number of consistent, pre-defined project requirements based on the Plan’s goals. The increased intensity allowed can be in the form of increased height, floor area ratio limits, or increased density provisions (to encourage micro-units and other affordable-by-design residential unit types).

The community benefits program is still being developed. However, three options for priority benefits have been preliminarily identified: (1) affordable arts and maker space; (2) parks and open space; and (3) affordable commercial (including community-serving nonprofit)/neighborhood retail.

Opportunity Sites Identified for Increased Bonus Intensity

The Plan identifies “development opportunity sites” for new development downtown. Sites that meet one or more of the following criteria are considered “opportunity sites:” (1) land/improvements ratio < 0.25 (this ratio is the value of improvements divided by the total value of the property); (2) re-developable existing uses (i.e., parking, vacant, auto-related, low-rise commercial); or (3) minimum lot size of 30,000 sf. “Opportunity sites” are eligible to participate in the pre-determined community benefits program discussed above.

Within the plan area, four “transformation opportunity areas” are identified as having clusters of “opportunity sites” and areas adjacent to large “opportunity sites.” The areas are eligible to take advantage of the pre-determined community benefits program. The four “transformation opportunity areas” identified are:

• Victory Court/Lake Merritt Channel Park;
• Nimitz Freeway/I-880;
• Produce Market (adjacent to Howard Terminal); and
• Lake Merritt Office District.

The Plan recognizes increasing floor area ratio will make it possible to develop iconic skyscrapers in key locations, such as near the 12^th Street and 19^th Street BART Stations.

Office Development

The Plan proposes two areas with office development priority, the Lake Merritt Office District and the Central Core District. These two office priority areas are identified for increased bonus intensity. Not surprisingly, the two office priority areas are located near the two BART stations within the plan area, 12^th Street and 19^th Street BART Stations (Lake Merritt Station is within the Lake Merritt Area Plan).

The proposed office development identified in the Plan totals approximately 14M sf. Assuming buildout as projected, approximately $15M in impact fees for affordable housing will be generated. A key challenge to the proposed office development in the Plan area is the limited number of prime sites for office development. Approximately half of the Plan area has historic status.

Housing and Affordability Housing Development

The Plan proposes generation of 29,077 new residential units. With the creation of approximately 55,000 new jobs, the Plan has an approximate 1.9 jobs:housing ratio. Assuming this residential development potential is reached, approximately $639.7M in impact fees for affordable housing would be generated.

Of the new residential units, approximately 4,320 – 7,250 units are projected to be affordable housing. This would be a significant increase in affordable housing provided compared to the what was produced from 2015 through 2017, which totaled 492 affordable units out of the 7,176 new units.

Creation of “Green Loop”; Transit-Oriented Development

The Plan calls for establishing a “Green Loop.” The “Green Loop” will provide an integrated system of walking and biking paths though downtown. It will link cultural districts, and connect people to the Lake Merritt and Estuary waterfronts as well as to adjacent neighborhoods and districts. The “Green Loop” is proposed to extend along 20^th Street to the north, Lake Merritt and Channel to the east, Embarcadero and Jack London estuary waterfront to the south, and Martin Luther King, Jr. Way to the west.

As part of an effort to promote a transit-oriented development strategy for Downtown Oakland, the Plan includes the following strategies:

• Concentration of employment near downtown’s BART stations, supporting transit ridership and a commute destination outside of capacity-constrained Downtown San Francisco;
• Support for growth in a regional multimodal transportation hub that allows easy transfers to/from BART; and
• Support for retail, arts, entertainment, and restaurants near BART stations, supporting off-peak transit ridership.

Four Cultural Districts Proposed

The Plan seeks to leverage and protect Oakland’s diverse cultures as an engine for artistic innovation and economic growth by establishing and implementing cultural districts. Four cultural districts are proposed by the Plan:

• 14^th Street Black Arts Movement and Business District;
• Chinatown Cultural Heritage District;
• Arts & Garage District in Koreatown Northgate (“KONO”); and
• Jack London Maker District.

The cultural districts would have special zoning and land use regulations to preserve arts and culture, including:

• Requiring a certain percentage of floor area for projects in key areas accommodate uses consistent with the district’s overall character and vision;
• Allowing for additional height along 24^th and 26^th Streets in KONO in exchange for dedicated ground floor arts-related uses or other community benefits; and
• Restrictions on the amount of office, bar, restaurant, and cannabis uses.

The Plan is projected to be released later this summer along with a draft environmental impact report. The Planning Department is currently targeting Plan approval and implementation by the end of 2020. Additional information about the Plan is available on the Planning Department’s website at https://www.oaklandca.gov/topics/downtown-oakland-specific-plan

 

Authored by Reuben, Junius & Rose, LLP  Attorney Justin A. Zucker

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

On December 17, 2018, California’s Third District Court of Appeal affirmed a judgment setting aside El Dorado County’s approval of a proposed Dollar General store in Georgetown with a mitigated negative declaration.  The Court held that while aesthetics are subjective, “lay opinions can provide substantial evidence to support a fair argument that a project may have a significant aesthetic impact on the environment, triggering the need to prepare an environmental impact report (EIR) pursuant to the California Environmental Quality Act (“CEQA”).”  The Court also held that a planning or zoning finding conducted outside the requirements of CEQA (here, compliance with design guidelines), did not provide a substitute for CEQA review.

The case in Georgetown Preservation Society vs. County of El Dorado et al. ((2018) 30 Cal. App.5^th 358, filed Dec. 17, 2018), involved a proposed Dollar General store on the main strip of Georgetown, a state Historical Landmark known for its association with the California Gold Rush.  Described as a “quaint” town, it is characterized by older structures from the era.  The developer SimonCRE Abbie, LLC proposed a 9,100 square foot store with a 12,400 square foot parking lot to be constructed on three lots on Main Street.   From the start, the proposed project met resistance from the community, who felt that the building was too large and would not fit in visually or functionally with the surrounding context.  Throughout the approval process, numerous members of the public spoke in opposition of the project, including a licensed architect, professional engineer, and city planner.  The majority of the commenters were residents of Georgetown and felt that the project was “severely mismatched with the adjacent historic buildings.”

The project was approved by the Planning Commission and appealed to the Board of Supervisors, who found that the project complied with the County Zoning Ordinance, “substantially conformed to the El Dorado County Historic Design Guideline(s)” and that it would not substantially detract from Georgetown’s historic commercial district.  The County relied on the mitigated negative declaration, which was tiered off the County’s 2004 General Plan EIR.  The County’s CEQA analysis found that the project incorporated architectural features and styling, materials, and colors, consistent with the Historic Design Guide for the area.  As such, the “impacts would be less than significant”.

Both the trial court and District Court of appeal disagreed.  “A public agency’s own design review is not a substitute for CEQA review” – and that conformity with a general plan does not insulate a project from EIR review where it can be fairly argued that the project will generate significant environmental effects (known as the ‘fair argument’ standard).

The District Court found that the public testimony – lay opinion – was sufficient to qualify as substantial evidence to support a fair argument that there would be a significant aesthetic impact by the project.  As such, the County had to conduct an EIR to evaluate the potential impacts.  Importantly, the court found that lay commentary on nontechnical matters is admissible and probative, so that lay testimony can satisfy the fair argument test.  “Personal observation on [these] nontechnical issues can constitute substantial evidence” (citing Ocean View Estates Homeowners Assn., Inc. v. Montecito Water Dist. (2004) 116 Cal.App.4^th 396, 399).  In this case, a large number of interested people believed the project would have a significant and negative effects on aesthetics.  Their comments that the project was too big or boxy to blend in so that the final building would “damage the look and feel of the historic center of Georgetown” was “enough to trigger an EIR.”  Despite the subjective nature of aesthetic concerns, it “is clear that the project may have a significant adverse environmental impact.  Whether it will or will not have such an impact is a question that an EIR is designed to answer.”

While a few stray comments may not be enough, “the evidence here goes beyond a few people expressing concern about the aesthetics of the project.”  The court also held that County’s failure to make explicit findings in the record on the credibility of the public comments precluded its “manufacturing after-the-fact findings” to justify its dismissal of the public comments on the ground that they did not constitute “substantial evidence.”

Both CEQA practitioners and project proponents have long been frustrated by the lack of definitive ‘bright line’ standards for evaluating a projects’ aesthetic impacts.  What is important is that context is important, and this case highlights how projects within designated historic areas cannot solely rely on design guidelines to satisfy CEQA review.

 

Authored by Reuben, Junius & Rose, LLP  Attorney Tara Sullivan

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

Last Thursday, the City’s Planning Commission held a lengthy informational hearing on SB 50 – proposed statewide legislation intended to spur housing development in transit and job-rich areas.

SB 50 was introduced by Senator Weiner on December 3, 2018.  It is essentially a revised version of last year’s failed SB 827, reformulated to expand its area of impact and to address some critics’ concerns about the potential for tenant displacement.

The bill would apply to residential projects on sites zoned to allow housing and located within either a “jobs rich” area (which is not well-defined but would likely cover much of San Francisco) or in proximity to public transit (within ½ mile of an existing rail transit station or ferry terminal, or ¼ mile of a “high quality bus corridor”).  Qualifying projects must also designate at least 2/3 of their total area for residential development and meet a minimum on-site inclusionary housing requirement.  The inclusionary amount is not set, but Planning staff anticipates this criteria would be met through compliance with the City’s local program.

As written, SB 50 would provide the following incentives:

• Projects located within ¼ mile of a rail transit station or ferry terminal would have a minimum height limit of 55 feet; minimum Floor Area Ratio (FAR) of 3.25; and would be exempt from minimum parking requirements and residential density limits.
• Projects located between ¼ and ½ mile of a rail transit station or ferry terminal would have a minimum height limit of 45 feet; minimum FAR of 2.5; and would be exempt from minimum parking and residential density requirements.
• Projects located within ¼ mile of a “high quality bus corridor” or within a “jobs-rich” area would be able to waive minimum parking requirements up to 0.5 spaces per unit and would be exempt from residential density requirements.

Qualifying projects could also request up to three “incentives or concessions,” which are identical to those under State Density Bonus Law.  This could include exceptions or reductions to local zoning standards for rear yard setback, unit exposure, open space, etc.   These requests could only be denied if they would either (1) not result in an actual cost reductions for the project; or (2) result in a specific adverse impact on public health and safety, or an historic property listed on the California Register.

SB 50 would not eliminate local design standards or approval processes, so qualifying projects would still need to obtain all applicable discretionary approvals (i.e. Conditional Use Authorizations) and undergo CEQA review.

Planning staff also interprets the language of SB 50 to allow layering of its density bonus and zoning incentives with those provided under State Density Bonus Law.  This could potentially allow qualifying projects to achieve an additional state density bonus of up to 35% on top of increased development capacity under SB 50, and to request up to a total of 6 concessions and incentives.

Although staff anticipates SB 50 could potentially result in some up-zoning throughout most of San Francisco, the bill includes some significant exemptions intended to minimize tenant displacement.  SB 50 would not apply to any property where there has been a rental tenant in the past 7 years, or where a rental unit has been removed from the market through an Ellis Act eviction in the past 15 years.  The City does not currently maintain a registry of rental properties, but that according to a 2017 American Community Survey, roughly 63% of San Francisco’s occupied housing units are occupied by renters.

The bill would also provide a temporary 5-year exemption for “sensitive communities,” which are defined as areas vulnerable to displacement pressures.  These communities have not yet been identified, but staff anticipates they would include the areas identified as part of the recent Committee to House the Bay Area (CASA) process.  In these areas, local governments would be given up to 5 years to adopt local re-zoning that encourages development of multi-family housing near transit and meets the same overall residential capacity and affordability standards provided by SB 50.  If that is not done by January 1, 2025, SB 50 would take effect in those areas.

Planning staff also noted that the practical effect of SB 50 would be lessened by the fact that many San Francisco neighborhoods that have been rezoned in connection with Area Plans already de-control density and have height limits set above the minimum thresholds in SB 50.   The properties anticipated to experience the greatest change if the bill passes as-written would be single-family and owner-occupied duplex properties in the City’s lowest-density (RH-1 and RH-2) zoning districts.

Thursday’s hearing included nearly three hours of public comment, after which Commissioners weighed-in with their initial thoughts on the legislation.  Commissioner comments varied, from support for the bill as a necessary measure to correct years of housing under-production to strongly-voiced concerns that it will undermine local zoning discretion and misses the mark on providing adequate tenant protections.

SB 50 is currently winding its way through the legislative review process, and is anticipated for vote in the Senate Transportation and Housing Committee at some point in the coming weeks.  Amendments and modifications to the current language are to be expected as part of the legislative review process.   Additional information from Planning staff on SB 50 and its potential impacts on local development is available at: http://commissions.sfplanning.org/cpcpackets/SB%2050_Memo.pdf

 

Authored by Reuben, Junius & Rose, LLP  Attorney Melinda Sarjapur

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

Tomorrow, the San Francisco Planning Commission will consider two interesting legislative proposals on hot-button land use topics in the city. One would restrict—but not prohibit—new employee cafeterias in office developments, modifying a proposal from last year to ban them outright. The other would authorize accessory dwelling units in new construction.

Conditional Use for New Employee Cafeterias

The employee cafeteria proposal, introduced at the Board of Supervisors last summer, initially prohibited all new cafeterias. Finding an outright prohibition a bridge too far, the Planning Commission passed a motion disapproving the ordinance. In December 2018, the legislation was amended at the Board of Supervisors’ Land Use Committee to require a conditional use approval instead. That retooled proposal is back in front of the Planning Commission tomorrow.

The updated legislation proposes a number of factors for the Planning Commission to weigh when deciding on a cafeteria project. Some factors include: the cafeteria’s size; if it would be open to the public; its “impact” on existing businesses in the neighborhood; if meals would be free or heavily subsidized; if employers will also subsidize or pay for meals outside the cafeteria; the ability of existing restaurants to “absorb” increased demand that the office project would bring; the impact of cafeteria employees on demand for housing, public health, and social services; and if the cafeteria is open to all employees and contractors, such as janitors, servers, and security guards.

It appears the Planning Department recommends only including some of these factors, specifically cafeteria size; if it will be open to the public; impact on neighboring business; and if any subsidies or vouchers will be offered. Staff also recommends adding a factor about promoting economic opportunities for local residents and businesses through OEWD’s workforce system and First Source Hiring program.

At least a few of these factors may prove hard for project sponsors to demonstrate, including impact on existing businesses and those businesses’ ability to absorb increased demand, as well as the  cafeteria employees’ demand for housing, public health, and other social services throughout the city. Additionally, many criteria are specific to employers themselves and not to project sponsors or developers, potentially causing uncertainty about when an employee cafeteria could or should be proposed.

Notably, the Planning Department also recommends cafeterias be exempt from the CU requirement if they are located on the ground floor, open to the public, and employers either only subsidize 50% of meals or provide vouchers for use outside the cafeteria.

ADUs in New Construction

Recognizing that accessory dwelling units—historically called in-law units and now more commonly referred to as ADUs—can provide much-needed affordable by design housing, California lawmakers in recent years passed a series of amendments to streamline ADU production. San Francisco policymakers and elected officials have in large part worked quickly to implement state law. In particular, the Planning Department and the Mayor’s Office have consistently proposed ways to cut through red tape, while still maintaining certain development requirements. This most recent ADU ordinance continues that trend by addressing a simple way to add more housing: permitting ADUs in new construction, consistent with a new state law, and further streamlining some of these units that are the least likely to raise neighborhood concerns.

The Planning Department proposed a few interesting features for new construction ADUs. First, Planning staff recommends a 1,200 square foot cap on ADUs that can be approved ministerially. Larger ADUs can still be approved, but they would receive more input from staff and likely take longer to get through the permitting process. Staff also suggests reducing the amount of open space required for ADUs in RH zoning districts, recognizing that larger open space requirements for ADUs could lower the appetite of a property owner in these districts to pursue an ADU. Because the RH zoning districts cover a significant portion of San Francisco’s west side, this change could incentivize new housing in parts of the city with fewer residential projects.

On a macro level, being able to add ADUs into new construction projects is a helpful and logical next step to streamline production and get people living in those units. Currently, property owners in San Francisco can only process ADU permits after projects are constructed. While the Planning Department has implemented a number of best practices to streamline ADU permitting, eliminating the need to go through the building permit process twice is a common-sense solution.

We will continue to track these proposals as they make their way through the legislative process.

 

Authored by Reuben, Junius & Rose, LLP  Attorney Mark Loper

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.

Last week, Senator Nancy Skinner (D-Berkeley) introduced SB 330—the Housing Crisis Act of 2019. Unlike other housing-related bills introduced this legislative session, this bill would declare a statewide housing emergency. Through January 2030, the proposed legislation’s multipronged approach would streamline project approvals, freeze zoning controls once an application is deemed complete, restrict the assessment of fees to 2018 levels, limit new legislation that would impede residential development, suspend the applicability of certain development standards, and create new minimum standards for occupied substandard buildings. Most of these provisions would only apply in cities and counties with high rents and low vacancies, although the specific thresholds have not been defined yet.

The legislation attempts to streamline project approvals by limiting the number of “de novo” public hearings and requiring that a decision on the project be made at one of up to three hearings. This 3-hearing limit would eliminate the possibility of endless hearings and continuances, thereby reducing some of the risk associated with bringing a large and controversial housing development before the Planning Commission. Although it is unclear whether or not the 3-hearing limit also includes appeals, if it does, then this provision could have an even more profound effect on the approval process, especially in cities like San Francisco where there are multiple avenues for appealing a project.

To keep cities from delaying the third and final hearing, another streamlining provision would require cities to act on an application within 1 year after it is deemed complete. Although this may be a helpful provision to point to if it looks like the review process will exceed 1 year, it is unclear how effective it would be without a corresponding change under CEQA, which tends to drive the overall approval timeline.

The legislation’s proposed vesting of zoning controls is arguably the most aggressive provision. It prohibits any city or county from enforcing any changes in the zoning controls or the general plan after an application is deemed complete. This is much sooner than most other methods of establishing vested rights, which usually occur after project approval with a vesting tentative map or development agreement, or after construction begins for projects without those entitlements. This would also have the benefit of simplifying grandfathering issues.

Aside from the streamlining and vesting provisions, the legislation also:

• Freezes fees and exactions at the rates applied as of January 1, 2018;
• Eliminates any fees assessed against units that are affordable to households with incomes at or below 80% AMI;
• Requires cities to make a determination about the historic status of the site when the application is deemed complete;
• Prohibits the enforcement of parking requirements;
• Prohibits changes to the zoning or general plan classifications that would reduce the intensity of residential development permitted, including height, density, FAR, and open space;
• Prohibits design standards that would be more costly than those in effect as of January 1, 2018;
• Prohibits development moratoriums and caps on the number of discretionary permits for housing; and
• Requires the State to develop minimum health and safety building standards that would allow occupied substandard buildings to be deemed complaint with the Building Code for 7 years.

In an effort to avoid displacement, the bill would place an outright ban on the demolition of rent control units or Section 8 housing, while prohibiting the demolition of affordable housing units unless tenants are offered relocation benefits and the right of first refusal for units in the new development.

In introducing the legislation, Senator Skinner pointed out that California is ranked 49th out of the 50 states in terms of housing units per capita, and that the housing crisis is costing the State an estimated $140 billion a year in lost economic output. Just to keep up with current population growth, California needs an estimated 180,000 additional units of housing each year. And according to the California Department of Housing and Community Development, production has fallen far short, with an average of less than 80,000 new housing units being developed annually over the last 10 years. Although SB 330 would address some of the issues that are fueling the housing crisis, it may not go far enough.

 

Authored by Reuben, Junius & Rose, LLP  Attorney Sabrina Eshaghi

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

On December 11, 2018, the Board of Supervisors passed an ordinance (the “Ordinance”) eliminating required parking minimums citywide for all uses. The vote was 7-4, with Supervisors Cohen, Safai, Stefani, and Yee voting against it. Mayor Breed signed the Ordinance on December 21 and it went into effect on January 21.

Those in favor of the measure called it a forward-thinking policy that brings the Planning Code in line with the City’s Transit-First Policy. Proponents also argued that parking increases the cost to build housing and takes up space that could otherwise be devoted to walk-up residences, retail spaces, or landscaped areas. Those against the change expressed concern that it would hurt seniors and those in parts of the city where public transit options are lacking. To that point, Supervisor Cohen at one point asked that District 10 be carved out from the Ordinance, citing the lack of reliable transit in the area. She later withdrew that request.

In reality, the Planning Department and Commissioners have long been pushing back against proposals that include large amounts of parking, and developers looking to build less than the required amount could already circumvent the minimums by providing increased bike parking instead.

The elimination of the parking requirements was initially recommended by the Planning Commission as part of legislation to amend Better Streets Plan improvement requirements and curb cut restrictions. That legislation aimed to modify the triggers that would require project sponsors to construct streetscape improvements and to expand curb cut restrictions for off-street parking and loading to most zoning districts and certain designated streets, including those on the Citywide Transit Network and any officially adopted bicycle routes or lanes. The substance of that ordinance (BOS File No. 180914) was approved by the mayor on November 20, 2018, and the elimination of parking requirements was pulled out as a separate piece of legislation.

Historically, new residential projects in R districts were generally required to provide one parking space for each dwelling unit. Required parking minimums also applied to most non-residential uses, depending on the specific use type and zoning district.

With the enactment of the new changes, parking will not be required for any use type anywhere in the city.  Accessory parking is still allowed, up to a maximum amount. Previously, a use that triggered a minimum parking requirement could typically include accessory parking up to an amount not exceeding 150% the required number of spaces. Now, there is no minimum number of spaces that must be provided, and most use types may provide up to 1.5 spaces for each one space that was required under the old rules. You can review the maximum parking ratios for each use established by the new ordinance here.

The Ordinance does not amend Section 151.1, which regulates permissible off-street parking in the following districts: NCT, RC, RCD, RTO, Mixed Use, M-1, PDR-1-D, PDR-1-G, and C-3 Districts, and to the Broadway, Excelsior Outer Mission Street, Japantown, North Beach, Polk, and Pacific Avenue Neighborhood Commercial Districts.

As always, parking in excess of the maximum accessory amounts may be permitted only as a separate use, where the zoning controls for the particular district allow.

Notably, the Ordinance includes a grandfathering provision which carves out any project that submitted an environmental or development application prior to the effective date of the Ordinance. Which means that if you already have an application on file, the old rules will continue to apply.

 

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

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

On December 11, 2018, the San Francisco Board of Supervisors introduced legislation that would significantly impact the demolition and modification of residential units (BOS File No. 181216). The Planning Code requires most “demolitions” of residential units to obtain Conditional Use (“CU”) approval after a hearing by the Planning Commission, whether or not the unit is legal. Demolitions include not only the full elimination of a unit, but also renovations that remove a certain percentage of an existing structure. Therefore, changes to what is considered a demolition could dramatically increase the number of projects required to seek CU approval. In addition, the legislation would require CU approval for many residential additions.

As introduced, the legislation would do the following:

• require CU approval for most “major expansions” of residential buildings, defined as a 10% increase in square footage through vertical addition or 20% through horizontal addition, with exceptions for limited additions of one or two stories in the rear yard and Accessory Dwelling Units, and possible waiver of the CU requirement by the Zoning Administrator;
• remove the existing exception that allows demolition without CU approval of single-family homes in the RH-1 and RH-1(D) Districts that are demonstrably not affordable;
• provide new standards for what residential renovation projects constitute a “demolition” – removal of more than 50% of the sum of all existing above-grade external elements, removal of more than 25% of the surface of all external walls facing a public street, or removal of more than 25% of the building’s internal structural framework, bearing elements or floor plates, including all work permitted for the property within the prior five years;
• change the Building Code definition of demolition to align with the Planning Code and require submission of a report to DBI by a structural engineer;
• require the assigned planner to review demolition calculations, including the percentage of the interior and exterior elements of the existing structure to b removed and confirm the accuracy and completeness of plans for all projects, including conducting a site visit if necessary;
• impose a more restrictive standard on projects shifting square footage from one unit to another, requiring CU approval where a project reduces the square footage of a unit by more than 10% (currently 25%), and prohibiting merger of units resulting in any unit larger than 1,200 square feet; and,
• increase penalties for violation of demolition, merger and conversion restrictions, including both monetary penalties and the requirement that the original structure be rebuilt.

Projects that have received final approval from the Planning Department or Planning Commission prior to the effective date of the legislation would not be subject to the new rules unless the scope of work increases.

One interesting aspect of these changes is the interplay between demolition requirements and the Discretionary Review (“DR“) process, under which neighbors can challenge projects that propose an expansion of the existing envelope and have that challenge heard by the Planning Commission. If a project will be heard by the Planning Commission whether or not a DR is filed, there is less incentive for property owners to compromise with neighbors to avoid a Planning Commission hearing.  Therefore, we would expect both a greater number of hearings, and more contentious battles at the Planning Commission.

The legislation is currently scheduled to be heard by the Planning Commission on March 7. It could be amended before Planning Commission hearing or after it returns to the Land Use and Transportation Committee of the Board of Supervisors, which is chaired by the primary sponsor of the legislation, Supervisor Aaron Peskin. Given the number of projects impacted, City agencies and numerous property owners will be voicing their opinions about this legislation. Stay tuned for updates.

 

Authored by Reuben, Junius & Rose, LLP  Partner, Jody Knight

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.