The implementation of the Eastern Neighborhoods (“EN”) Plan is kicking into high gear and this month the Planning Department mailed letters to property owners in the EN Plan area informing them of their potential eligibility for a newly-created “legitimization” program. The program provides “amnesty” for existing uses that were legal under the old zoning but had no building permit or other authorization to back that up, and are no longer permitted uses under EN.
In parts of SOMA and the old industrial “M” districts, it was common for tenants to come and go in buildings over the years with little or no tracking by the City and few or no building permits filed or issued. This can create a messy situation for an owner. For example, when an owner goes to refinance or sell a building, one of the first questions a bank or buyer wants to know is “are the uses in the building legal?” Unless the owner has been particularly diligent over the years to document use changes and work done in the building, all with proper building permits, the answer is often muddled.
This program, in effect now, expires on January 19, 2012, and after that, unpermitted uses discovered by the Planning Department will be subject to enforcement proceedings and will likely have to cease.
We recommend that property owners in the EN Plan area consider participating in the legitimization program if eligible. The program could protect you from any future enforcement proceedings, leave you with a “clean slate” in the City records and make refinancing and sale that much easier in the future.
Generally, to be eligible for this program, a use to be legitimized must have been a permitted use under the old zoning when it was established and either:
1. regularly operating on a continuous basis in the same location since at least January 19, 2007, or
2. regularly operating on a continuous basis in the same location since at least April 17, 2008 and be associated with a business or enterprise which was also in the same location prior to January 20, 2007.
The Zoning Administrator makes the call on whether a property is eligible to participate in the program. If the legitimization application is accepted and approved, all current development fees must be paid as if the property was entitled today (minus any fees that were paid when the current use was established). The use would then become a legal non-conforming use within the new zoning district, and is for the most part allowed to continue indefinitely.
Based on our experience, the two following property scenarios are the most likely to benefit from the program:
Buildings in former industrial districts (M) that are now zoned Production, Distribution and Repair (PDR)
Former industrial zoning districts, such as M-1 and M-2, permitted a broad range of uses, including residential and office. Many of these districts have been rezoned to PDR districts where residential use is prohibited and office use is severely limited. Any existing residential or office uses within rezoned PDR districts that were never properly permitted can take advantage of the legitimization program.
A caution with respect to legitimization of office uses – in addition to being regulated by the specific zoning district, office uses in San Francisco are governed by “Proposition M” which imposes a cap on total new office uses permitted in any given year. The Prop M rules kick in at 25,000 square feet of new office use. After that point, a Planning Commission hearing is required for approval, and significant development impact fees are applicable (starting at about $30/sf). So if you have a building in a former M district that today has 30,000 sf of office space, but you never received a Prop M approval, participating in the program and “legitimizing” means you will ultimately need to go to the Planning Commission for approval and end up paying at least $900,000 in development fees.
Buildings originally permitted for non-office uses that now more closely resemble office uses
In the early 1990s, new office-like use categories were added to the Planning Code, such as business service and workspace of design professionals. These were permitted in some zoning districts where “typical” office was not. As time has passed, many uses that were permitted under these new categories have come to resemble the traditional definition of office use. Many of us remember the “business service” determinations of the early 00’s that were part of the dot-com boom. These were specific determinations made by the Zoning Administrator on a tenant by tenant and building by building basis. These uses may also be eligible for the legitimization program and, if successful, would be permitted as an office use, a broader use category than any of the office-like uses. This would be particularly useful for buildings in the MUG (formerly SLR) district and the SLI district, which both formerly prohibited almost all office uses and now either restrict office use by floor (MUG) or continue to prohibit most office use (SLI).
We can help
Our attorneys have spent many hours analyzing the legitimization program and discussing its implementation with Planning Department staff. We are available to determine your eligibility for the program and to guide you through the process in the case you would benefit from it. Please contact Andrew Junius, Tuija Catalano or John Kevlin if you would like to talk about whether this program may be right for you.
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 leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.