Can New Rules Jumpstart Downtown?

| Melinda Sarjapur
ordinances

Last week, two new ordinances were introduced, both seeking to encourage residential conversion projects downtown, which have been recently touted by the media and policy advocates as one potential solution to address San Francisco’s office vacancy; combat the housing crisis; and draw retail foot traffic back to the City’s core.

The “Commercial to Residential Adaptive Reuse and Downtown Economic Revitalization” ordinance, sponsored by Supervisor Aaron Peskin and Mayor London Breed, proposes an expansive list of Planning, Building and Fire Code amendments that share a common goal of encouraging downtown residential conversions and revitalizing the downtown core.

The “Development Impact Fees for Commercial to Residential Adaptive Reuse Projects” ordinance, sponsored by Supervisors Asha Safai and Matt Dorsey, is limited in scope but also seeks to incentivize residential conversions by exempting them from development impact fees.

The Breed/Peskin ordinance proposes the following Code modifications, which, if adopted, would not only encourage downtown residential conversions but would also broaden the types of uses allowed downtown, streamline process, and reduce costs for new businesses:

  • Creates a new definition for “Adaptive Reuse” project, which would apply to downtown projects that change existing GFA from non-residential to residential. Qualifying “Adaptive Reuse” projects must be located in a C (commercial) zoning district that is east of or fronting on Van Ness/South Van Ness Avenue and north of Harrison Street; can’t utilize California State Density Bonus Law; can’t propose an addition to the building envelope that exceeds 20% of the existing building’s GFA; can’t propose an addition of more than one vertical story; and must submit an application on or before December 31, 2028.
  • Relaxes zoning controls for qualifying “Adaptive Reuse” projects. Such projects would be exempt from zoning requirements that often trigger discretionary exceptions through a Downtown Project Authorization entitlement and/or drive-up development costs, such as lot coverage (which the ordinance substitutes for rear yard setback in C districts); usable open space; streetscape and pedestrian improvements; bike parking; dwelling unit mix.  “Adaptive Reuse” projects would also be subject to reduced dwelling unit exposure, and Intermediate Length Occupancies would be principally permitted regardless of the number of units in the project.  In addition, eligible “Adaptive Reuse” projects would not be subject to public hearing requirements for Downtown Project Authorization entitlements, unless seeking Planning Code exceptions beyond those listed above.
  • Raises the thresholds for public hearings of permits in Downtown Residential Districts and C-3 Districts so that public hearings are only triggered by proposed construction of new buildings or vertical additions greater than 120 feet in height (its currently triggered for any project of 75 feet in height or that adds 50,000 gsf of floor area).
  • Changes dimensional limits on exemptions to height restrictions for mechanical equipment, elevator, stair, and mechanical penthouses on existing buildings;
  • Proposes a range of zoning code tweaks intended to draw business back to the downtown core. These include creating a new definition for “Flexible Workspace” and allowing it as active ground floor commercial uses along certain street frontages in the C-3 District; authorizing large-scale retail uses (> 50,000 gsf) in the C-3 District; allowing window displays to be at least four-feet deep in the C-3 District; allowing accessory storage in the C-3 Districts; allowing temporary signs for 60 days in the C-3-R district; allowing temporary “pop-up” non-residential uses in vacant spaces for up to a year in certain C, NC, NCT, or Mixed-Use districts; principally permitting Lab, Life Science, Agricultural and Beverage Processing, and Animal Hospitals in C-2 Districts; principally permitting office and design professional uses on the second floor and above for C-3-R districts; and requiring consideration of office vacancy rates in consideration for granting code exceptions in the Transit Center Commercial Special Use District.
  • Streamlines sign permit requirement in the C-3 District and Citywide by exempting existing business sings in the C-3 District from certain requirements and allowing non-conforming neon signs to be physically detached from a building for repairs or maintenance, under certain conditions.
  • Streamlines Historic Preservation Review for administrative certificates of appropriateness and minor permits to alter for awnings.
  • Allows for In Lieu Fee payment to satisfy POPOS requirements in certain C-3 Districts.
  • Amends the Building Code by directing the Building Official and Fire Code Official to develop an alternative building standards manual, providing building standards specific to “Adaptive Reuse” projects.

The Safai/Dorsey ordinance is focused solely on economic incentive.  It would exempt certain downtown residential conversion projects from all development impact fees except for Inclusionary Housing Program requirements.

To qualify for these fee waivers, an “Adaptive Reuse” project would need to be located in a C zoning district that is east of or fronting on Van Ness/South Van Ness Avenue north of Harrison Street; can’t utilize California State Density Bonus Law; can’t expand an existing building envelope by more than 20% of the existing buildings GFA; and can’t add more than one vertical story.  Fee waiver would not apply to the area of any non-residential use proposed within a broader conversion project.

The above ordinances clearly aim to incentivize downtown residential conversions, but it’s unclear whether they go far enough to trigger a significant up-tick in “Adaptive Reuse” projects.

On April 3, 2023, the Board’s Land Use and Transportation Committee held a public hearing to review a Policy Analysis Report drafted by the Board’s Budget and Legislative Analyst’s Office on feasibility of repurposing existing commercial real estate for residential use in San Francisco.  While the Analysts report identified that zoning and policy changes in line with those under review could help to incentivize residential conversions, it also noted that “converting commercial properties to residential use is not a panacea for solving California’s housing shortage” because such conversions face a number of challenges “including architectural and building design limitations, municipal development approval processes that add time, cost, and uncertainty to conversions…”  Likewise, a recent policy paper issued by the San Francisco Policy and Urban Research organization (“SPUR”) found that given current economic conditions and development costs, most conversions of underperforming office buildings would not pencil.

The Breed/Peskin and Safai/Dorsey ordinances were both introduced on April 4, 2023 and assigned to the Board’s Land Use and Transportation Committee under the Board’s 30-Day Rule, which means they cannot be heard by Committee until at least early May 2023.

 

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.

Cars to Casas Nearing Adoption

| Tuija Catalano
housing

Approximately a year ago we reported on Mayor London Breed’s introduction of the “Cars to Casas” legislation which proposed to make it easier to build housing on existing parking lots, gas stations and properties improved with certain other automotive uses.  The legislation has now been rebranded as “Automotive Uses to Housing Uses” and made significant progress in the last two weeks with a positive recommendation from the Land Use and Transportation Committee on Monday, December 5th, and unanimous votes at the full Board of Supervisors on first reading on Tuesday, December 6th and on second and final reading on Tuesday, December 13th.  The legislation will be forwarded next to the Mayor for her signature, and if signed, will become effective 30 days thereafter.

The legislation has been pending since October 2021, in part due to the Land Use and Transportation Committee’s request for an economic analysis.  If adopted, the legislation will eliminate a conditional use authorization requirement that currently applies to conversion of existing gas station uses, and would create an exception to the permitted residential density at eligible sites.  Sites that are eligible under the legislation are those that are currently used for auto-oriented uses, allow residential uses as a principally permitted use but do not currently contain any residential uses, and have not had a Legacy Business on the site within four years prior to the application submittal date.

As proposed, including amendments by the Land Use and Transportation Committee, the legislation will not apply to any properties that are zoned for the RM (Residential-Mixed) or RC (Residential-Commercial) district, or to properties that are located in a historic district.

The permitted residential density for RH (Residential-House) districts is up to four units per lot, and for all other eligible sites density is unlimited provided the project complies with applicable height, bulk, setback and other Planning Code requirements.  That said, eligible sites can also utilize the state density bonus program, which can allow waivers and concessions from otherwise applicable Planning Code requirements.

The legislation is one example of efforts by Mayor Breed and the City to make it easier to build more housing and to get entitlements and permits for development proposals, and as such, a welcome proposal.  If the legislation is signed by the Mayor in the next 10 days, it will become effective in approximately mid-January 2023.

 

Authored by Reuben, Junius & Rose, LLP Attorney Tuija Catalano.

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.

Supervisor Mandelman’s Fourplex Legislation Clears Planning Commission

| Mark Loper
legislation

On Thursday, November 18, 2021, the San Francisco Planning Commission unanimously recommended that the Board of Supervisors approve legislation proposed by Supervisor Rafael Mandelman to allow four units on any residential lot, as well as up to six units on corner lots, in “RH” zones.

Supervisor Mandelman’s proposal—actually two pieces of legislation—only proposes minor changes to the Planning Code itself, and is quite simple in its effect: (1) up to four dwelling units per lot would be allowed either on every corner lot or on every lot in an “RH” zoning district, and (2) those sites would be subject to the development controls of the RH-3 zoning district. All other aspects of the SF Planning Code would continue to apply. That includes height, rear yard, setback, and open space requirements, as well as the standard entitlement and environmental review process. The Planning Commission also recommended the Planning Department’s proposed modifications, including that the Board of Supervisors allow six units on corner lots.

Supervisor Mandelman has been pushing for this legislation for nearly a year. He expanded the reach of the ordinance after the state passed SB 10, which allowed moderate upzoning near transit without a cumbersome and years-long CEQA review process that ordinarily would be required (not to mention that each project utilizing the increased density would undergo its own CEQA review). In spite of well publicized denials of major housing projects by the Board of Supervisors, Supervisor Mandelman proposed legislation that can become a key solution to San Francisco’s housing crisis. This is not an easy time to propose pro-housing laws in San Francisco, much less expanding its scope when presented with the opportunity.

The Planning Department’s staff report contains an insightful point that seems to get lost in the debate over adding new units in formerly single-family housing districts. 12,568 residential buildings in San Francisco have more units than would be allowed under current zoning. That represents about 31% of all homes in the city. As the Planning Department’s staff report notes, Supervisor Mandelman’s proposal rectifies policy decisions made in the 1970s which effectively downzoned large swaths of western and southern San Francisco. Multifamily buildings coexist with single-family homes currently and can in the future.

The Planning Department’s recommendations included an increase on corner lot density to six units, amending the residential design guidelines to add objective standards, eliminating the RH-1 zoning district and adopting a local alternative to SB-9, increasing funding for supportive housing programs, and establishing an impact fee on homes over 4,000 square feet. Ensuring all San Franciscans have access to capital in order to benefit from the legislation will be crucial to create new fourplex housing. Development impact fees have become a primary cost consideration for development projects; taxing housing instead of looking for a more generalized funding source might not prove successful. Also, establishing objective residential design guidelines will be critical to ensuring that fourplex projects can actually be approved, and in an orderly fashion without overburdening Planning Department staff or dissuading San Franciscans wary of an overly complicated set of guidelines or process. For example, in spite of the RH-4 zoning, the Residential Design Guidelines could effectively limit some sites to a lower density.

As noted above, Supervisor Mandelman’s ordinances as currently proposed are straightforward and clear to understand and execute. They now move to the Board of Supervisors, which will be able to add the Planning Commission and Planning Department’s suggestions and make proposals of their own. It remains to be seen what final form the legislation could take.

Finally, this update includes two maps from the Planning Department’s staff report. The first shows the areas in San Francisco that are currently zoned RH, where the proposed legislation would allow fourplexes. The second shows where new housing has been built in San Francisco since 2005. The maps generally do not overlap.

 

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.

Size Restrictions Proposed on San Francisco Homes

| Thomas P. Tunny
size

San Francisco policy-makers continue to scrutinize the size of dwellings in an attempt to manage affordability and housing stock.  Merits aside, policy-makers have expressed a consistent concern about demolitions, expansions, and new large-home construction.  The latest measure is an ordinance introduced last month by Supervisor Rafael Mandelman (District 8), whose district includes the Castro, Noe Valley, Glen Park, and Bernal Heights.

Planning Code Section 317 already requires a conditional use authorization for residential demolitions, mergers, and removals.  Supervisor Mandelman’s proposal would discourage residential units over 2,500 square feet by requiring, with some limited exceptions, a conditional use for them in RH (residential, house) zoning districts:

Expansions

  • On a developed lot where no existing dwelling unit exceeds 2,500 square feet of gross floor area, expansion of the residential use that would result in an increase of more than 50% of gross floor area to any dwelling unit or would result in a dwelling unit exceeding 2,500 square feet of gross floor area, except where the total increase of gross floor area of any existing dwelling unit is not more than 10%.
  • On a developed lot where any existing dwelling unit exceeds 2,500 square feet of gross floor area, expansion of the residential use that would result in an increase of more than 10% of gross floor area of any dwelling unit.

New Construction

  • Residential development on a vacant lot, or demolition and new construction, where the development would result in only one dwelling unit on the lot or would result in any dwelling unit with a gross floor area exceeding 2,500 square feet.

New Conditional Use Criteria

In addition to the standard conditional use criteria, the Planning Commission must consider the following new criteria:

  • the property’s historic preservation status;
  • whether additional dwelling units are added;
  • whether the proposed development preserves or enhances the existing neighborhood character by retaining existing design elements;
  • whether the development proposes to remove more than 50% of the existing front façade; and
  • whether the project removes rent control units.

Exceptions

The legislation would except developments from the new conditional use authorization requirement where a complete development application was submitted before February 2, 2021. The legislation would also except developments that increase the number of dwelling units on the lot provided that no dwelling unit exceeds 2,500 square feet of gross floor area as a result of the development, no proposed dwelling unit is less than one third the gross floor area of the largest dwelling unit resulting on the lot, and that neither the property or any existing structure on the property: (i) is listed on or formally eligible for listing in the California Register of Historic Resources; (ii) has been adopted as a local landmark or a contributor to a local historic district under Articles 10 or 11 of the Planning Code; or (iii) has been determined to appear eligible for listing in the California Register of Historic Resources.

The legislation has been referred to the Planning Department for review and consideration by the Planning Commission.  To date, there is no estimate of how many projects would be affected by this requirement in a typical year, how many hours of staff time it would take to process them, or how the volume of new conditional uses would affect backlogs for all projects. No hearing date has been set for the Commission to consider the legislation, but we will continue to monitor and keep readers informed.

 

Authored by Reuben, Junius & Rose, LLP Attorney Thomas P. Tunny.

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

New Interim Density Controls for Residential-Commercial Districts

| Tara Sullivan
interim zoning controls

In January the Board of Supervisors passed interim zoning controls for parcels in RC, RM, and RTO (excluding RTO-M) zoning districts. The controls require Conditional Use Authorization (“CU”) for most new construction or alterations that do not maximize residential density. Sponsored by Supervisor Peskin, the interim zoning controls became effective on January 21st and are in place for 18 months, until July 2022. They apply to all projects—even ones currently under review by the Planning Commission—where a final site or building permit has not been issued (i.e., any project currently on file with the City).

The controls aim to disincentivize low-density projects, restrict the construction of large residences, and prevent the loss or conversion of rent-stabilized housing units.  The zoning districts cited allow for a higher density (i.e., more units at a smaller size), but often are developed with larger units that are more suitable to higher-income families (i.e., less units at larger sizes).

The controls apply to any (i) new construction of a residential building or (ii) a proposed alteration that would result in the expansion of the building. A CU from the Planning Commission will be required if the residential building does not maximize the principally permitted residential density while meeting minimum unit size requirements. The following minimum unit sizes must be used in density studies under the interim controls: 450 sf for 1-bedrooms, 700 sf for 2-bedrooms, 900 sf for 3-bedrooms, and 1,100 sf for 4-bedroom units.

There are exceptions to the Conditional Use requirement where site constraints prevent a project from maximizing density or for certain minor expansions. To fall under the site constraints exception, a project must meet the following criteria:

  1. Existing lot conditions or form-based restrictions on development (e.g., height, bulk, rear yard requirements) prevent a project from maximizing density without seeking a variance or subdividing units (while adhering to the minimum unit sizes in the Planning Code);
  2. The proposed project increases density on a subject lot; and
  3. No unit is greater than 2,000 square feet in size.

Expansions of existing residential buildings are permitted without a CU if the proposed expansion is 25% or less of the existing residential building and:

  1. Does not increase the size of any units that is already larger than 2,000 square feet in size;
  2. Does not create a new unit larger than 2,000 square feet, or
  3. Cause an existing unit less than 2,000 square feet in size to exceed 2,000 square feet.

It is unclear how many projects the interim zoning controls will impact, or whether it will result in changes to proposed development. Until the Planning Department or Planning Commission adopt clear guidelines for implementing the controls, including standards for density studies, the impact of the interim zoning controls remains uncertain. Reuben, Junius & Rose LLP will continue to monitor the implementation of the interim controls.

 

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.

New California ADU Laws Aim to Remove Barriers and Boost Development

| Tiffany Kats

While campaigning for Governor, Gavin Newsom pledged to build 3.5 million new units by 2025 to combat California’s housing crisis. One way to meet this ambitious goal is through the construction of accessory dwelling units (“ADUs”). Since 2017, California lawmakers have passed several bills to streamline the ADU approval process. However, exorbitant fees and strict local requirements in some cities have continued to hinder the development of new ADUs. In response, Governor Newsom recently signed into law five bills that aim to further remove local barriers to ADU development, as well as to incentivize owners of both single-family and multi-family homes to add much-needed additional units to their properties.

AB 68 & AB 881 – Streamlining ADU Approvals

AB 68 and AB 881, introduced by Assemblymembers Philip Ting and Richard Bloom, were consolidated and enacted as one bill because the fundamental goal of the two bills was essentially the same—to streamline and improve the ADU process in order to facilitate the development and construction of ADUs. Effective January 1, 2020 these bills will:

  • Require permits for ADUs and junior ADUs added to existing single-family and multi-family homes to be ministerially approved or denied within 60 days, rather than the 120 days allotted by existing law;
  • Allow the approval of ADUs in proposed housing to be delayed until the new construction is approved, but the ADU permit must still be issued ministerially;
  • Allow cities and counties to establish minimum and maximum ADU size requirements, provided that the maximum floor area is not less than 850 square feet or 1,000 square feet if the ADU has more than one bedroom;
  • Prohibit any lot coverage, floor area ratio, open space, and minimum lot size requirements that would impact or deny ADU production; and
  • Prohibit municipalities from requiring that existing nonconforming zoning conditions be corrected as a condition for ADU permit approval.

Perhaps most importantly, subject to certain requirements, the consolidated bill will require ministerial approval for projects in residential and mixed-use zoning districts that propose to create the following:

  • One ADU (attached or detached) and one junior ADU on a lot with either an existing or proposed single-family home;
  • Multiple ADUs within an existing multi-family building; or
  • Up to two detached ADUs on a lot with an existing multi-family building.

Note that if a garage is converted or demolished to construct a new ADU, the off-street parking spaces do not have to be replaced. Furthermore municipalities will be prohibited from enforcing parking standards for ADUs located within ½ mile of public transit.

SB 13 – Owner Occupancy and Fees

Similar to the consolidated bill made up of AB 68 and AB 881, SB 13 prohibits the enforcement of parking standards for ADUs within ½ mile of public transit, requires ministerial approval of ADU permits within 60 days, and allows the construction of ADUs in garages and detached accessory structures. However, SB 13, introduced by Senator Bob Wieckowski, goes a step further by tackling two key issues: (1) the owner-occupancy requirement and (2) expensive fees.

First, as a condition of approval, local agencies can currently require that an applicant for an ADU permit occupy either the primary residence or the proposed ADU. Until January 1, 2025, SB 13 will exempt all ADUs from such owner-occupancy requirements.

Second, one of the biggest barriers to constructing ADUs in California are the fees associated with getting them approved and developed. To further incentivize owners to construct ADUs, SB 13 will implement a tiered fee structure based on the ADU’s size and location. Specifically, no impact fees can be imposed on ADUs smaller than 750 square feet, and any impact fees assessed for larger ADUs must be proportional to the square footage of the primary residence.

AB 670 & AB 671 – HOA and General Plans

Finally, AB 670 prevents homeowners’ associations from banning or unreasonably restricting the construction of ADUs on single-family residential lots. Meanwhile, AB 671 will require local General Plan housing elements to incentivize and promote the construction of affordable ADUs that can be rented to very low, low, and moderate-income households. The California Department of Housing and Community Development must also draft a list of “existing state grants and financial incentives” for ADU owners and developers by December 31, 2020.

Together, this package of ADU laws hope to ease local restrictions in order to incentivize the development of “affordable by design” ADUs. In the midst of California’s housing shortage, it remains to be seen what impacts these bills will have on ADU construction when they take effect next year.

 

Authored by Reuben, Junius & Rose, LLP Attorney Tiffany Kats

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.

COPA is Here – Now What?

| Tuija Catalano
COPA

The Community Opportunity to Purchase Act (COPA) was approved unanimously earlier this year.  COPA legislation became effective on June 3, 2019, however, the COPA program rules were not published until September 3, 2019 by the Mayor’s Office of Housing and Community Development (MOHCD).  The COPA program applies to the sale of all San Francisco multi-family rental housing developments with three (3) or more units, and all vacant lots that could be constructed with three (3) or more residential units by right.  COPA essentially changes the way in which multi-family rental projects (and certain vacant lots) can be sold by providing certain nonprofit organizations a right of first offer and in some instances a right of first refusal.

Before a multi-family residential building (or vacant lot) with three (3) or more units can be offered for sale, the owner is required to notify certain nonprofit organizations that are on a “Qualified Nonprofit” list maintained by the City.  The Qualified Nonprofit list at this time contains six (6) nonprofits.  The initial “Notice of Sale” must be made via email, and should be sent to all Qualified Nonprofits at the same time.  The Notice of Sale must include statements indicating: (a) seller’s intent to sell the building, (b) the number of residential rental units, (c) the address for each rental unit, and (d) the rental rate for each unit.  Qualified Nonprofits then have five (5) days to notify the owner if they are interested in making an offer.  If a Qualified Nonprofit expresses interest in buying the building, the owner must provide further disclosures to the interested nonprofit, including the name and contact info for each tenant, which triggers an additional 25-day period during which the Qualified Nonprofit may submit an actual offer.  If none of the Qualified Nonprofits expresses an interest in making an offer within the initial 5-day period, the owner may proceed in offering the building for sale and may solicit officers for purchase.

If a Qualified Nonprofit expresses interest during the initial 5-day period, and thereafter during the 25-day period makes an offer, an owner is not required to accept an offer, however, any Qualified Nonprofit that made an offer that was rejected maintains a Right of First Refusal.  Under the Right of First Refusal, the owner is required to provide notice to the Qualified Nonprofit(s) that includes the same terms and conditions that were received from the 3rd party purchase offer.

Similarly, in the event the owner fails to provide the initial 5-day Notice of Sale before offering the building for sale, the Qualified Nonprofits are entitled to receive notification of their Right of First Refusal, followed by a 30-day offer submittal period.

If a building is purchased by a Qualified Nonprofit, the existing tenants are entitled to displacement protection and the building would be restricted as rent-restricted affordable housing in perpetuity, at 80% AMI level.  A sale to a Qualified Nonprofit is also subject to a partial transfer-tax exemption.

Under COPA, all multi-family building (and vacant lot) sellers are required to provide a signed declaration to the City, under penalty of perjury, within 15 days after the sale, affirming that the seller complied with the COPA requirements.  Seller’s failure to comply with COPA could result in damages in an amount sufficient to remedy the harm to the Qualified Nonprofits and e.g. in penalties in the amount of 10% of the sales price for the first willful or knowing violation, 20% for the second willful or knowing violation, and 30% for any subsequent willful or knowing violation.

 

Authored by Reuben, Junius & Rose, LLP Attorney Tuija Catalano.

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

 

The Land Use Week in Review: Starts and Stops and Starts

| Thomas Tunny

SB 50 Advances Out of Committee

Two weeks ago, we wrote about State Sen. Scott Wiener’s SB 50, a new version of last year’s SB 827 that aims to boost housing density near public transit.  It’s one of the more ambitious initiatives to address California’s housing crisis – and one of the most controversial.  This week, the Senate Transportation and Housing Committee voted to advance the bill in a 9-1 vote.  There already is more progress than SB 827 made, which never made it out of committee.  The legislation still faces a long process, with the next step being consideration by the Senate Governance and Finance Committee in late April.

San Francisco Supervisor Gordon Mar has introduced a resolution opposing SB 50, claiming that the legislation would “entitle real estate developers to increase both residential and mixed use development with significantly less public review.”  Supervisors Mandelman, Ronen, Peskin, Walton, Fewer, and Board President Yee all support Mar’s resolution.  Mayor Breed and the Mayors of Oakland and San Jose support SB 50.

Residential Demolition/Expansion Legislation

Another measure we have reported on previously and continue to track is Supervisor Peskin’s residential demolition and expansion legislation.  Originally introduced in December 2018, the legislation proposed changes to what constitutes a demolition, thereby dramatically increasing the number of projects needing a Conditional Use approval of the demolition.  In addition, the legislation required Conditional Use approval for many more residential additions, with heightened criteria making them almost impossible to get approved.

Following its initial introduction, facing significant opposition, Supervisor Peskin has been reworking the legislation.  A new version is expected any day now, but as of now, this writing has not been released.  The Planning Commission is scheduled to consider the revised version in a joint hearing with the Building Inspection Commission on April 18.

Central Subway Possibly Delayed

The Central Subway, originally scheduled to be substantially complete by February 2018, and then pushed to December 2019, appears to be encountering new delays.  Opening is now targeted for May 2020.  Among the reasons for the delay are cost overruns, water leaks, contractor disputes, and worker shortages.  Worker shortages also troubled the opening of the Transit Center.  As of the beginning of this year, the project was 80% complete.

Transit Center Woes

The Transit Center also faces construction issues, as has been well-documented.  Unsurprisingly, the parties involved are disputing the cause of the cracked steel girders that have kept the transit hub, retail center, and rooftop park closed since last September.  Previously, an independent review board of engineers attributed the fractures to “a perfect storm” of factors, including the strength of the steel, which met industry standards; the fabrication, including the cutting of holes in the girders; and the design of the girders.  Following that review, officials of the Transbay Joint Powers Authority claimed a different cause.  They concluded that three teams of quality-control inspectors working for the center’s structural steel contractors didn’t discover a critical construction flaw, and that the Authority’s own spot inspections also missed the oversight.  The contractors dispute this, and point to the process used to cut holes in the girders.  In the meantime, work to re-open the Center continues, which is expected by mid-June.

Streamlining Construction Permits

| Gillian Allen

Meeting the needs of commercial projects after entitlement can be difficult when City agencies are tasked with solving a housing crisis. The Small Business Permit Streamlining Ordinance seeks to update several areas of code that affect various agency processes and may contribute to an elegant solution for commercial property owners exploring options with tenants for shared space.

The ordinance proposes to align regulation of restaurant enclosures for outdoor food service and restroom requirements with state standards; amend the Planning Code to clarify that a Type 23 liquor license may be used in conjunction with a Bar or Restaurant use;  amend the definition of a Bar to provide for consistent treatment of Type 64 liquor licenses; to reduce the distance measured for Retail Sales and Services uses in Neighborhood Commercial zoning districts to any neighborhood commercial district; to reduce the distance measured for nonconforming uses in RH (Residential, House), RM (Residential, Mixed), and RTO (Residential, Transit-Oriented) districts to any neighborhood commercial district; and importantly, to allow Limited Restaurant use as an Accessory Use which would enable more flex use spaces in neighborhoods who want to encourage and maximize a thriving local scene. For more information on this, read the legislation here:  File No. 181211.

These are times that keep the City focused on a healthy socio-economic future requiring balance between housing and the associated commercial infrastructure needed to sustain the inhabitants, pursue cultural growth and allow neighborhood flavor to emerge in partnership with neighborhood community groups questing to influence use of their local spaces.

Commercial property owners may also be interested in following the crafting of recently proposed legislation which would amend the Building Code to require the assessment of a fee within the first 30 days of vacancy for any storefront that is not tenanted regardless of whether it is offered for rent or lease; and require annual safety inspections within sixty days of the annual registration renewal and the issuance of a Notice of Violation with a penalty of four times the registration fee for failure to register within thirty days. If passed without reform, this legislation has the potential to over-burden the property owner and require them to navigate substantively bureaucratic code enforcement issues especially if their potential tenants meet with delay working through after entitlement permitting for their tenant improvements. For more information on this, read the legislation here: File No. 181213.

The Small Business Permit Streamlining Ordinance may offer some relief, but it does not provide additional staff to assist with the increased review times for commercial projects due to ADU and housing being given priority. In a City that lacks housing, prioritizing these projects without increasing staff or allocating paid overtime for in-house review can critically impact commercial alteration projects and contribute to costly and seemingly ever moving targets for start of construction.

San Francisco entitlement and permitting processes offer unique challenges to estimating project timelines. Stakeholders need to more carefully assess what to include in the initial permit set being supplied for Planning review when construction timelines, which are dependent on the after entitlement issuance of building permits, are a factor. The Planning Department can review an architectural set – best known as a “Site” permit set for entitlement; however that same permit set does not and cannot be converted to a “Full” building permit set automatically after planning review.  Filing with a design plan as a Site permit locks the project sponsor into a two-phase review process and may contribute to a property owner realizing excessive, financial impact, if the afore-mentioned vacant storefront legislation does not include a provision giving deferral for fees, enforcement and penalties while a tenant improvement is under permit review. The Land Use Committee should be encouraged to expand the vacant storefront legislation to include alternative paths for property owners who can demonstrate that a potential tenant is in process of entitlement and subsequent permitting.

While projects requiring more than an hour of review, do not qualify for over the counter processing at the building department, in house review of a full permit can cut permitting time in half and is one way design professionals and property owners can help guide a prospective tenant toward a more rapid occupancy of their buildings.

 

Authored by Reuben, Junius & Rose, LLP  Permit Consulting Manager Gillian Allen

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.