This Week – Waiving Waiver Provisions (!?#); Census Breakdown; Farrell Victory

Court Finds that a “No Waiver” Clause is Waivable

Sometimes (but admittedly rarely), the law makes you chuckle. In a recent case where it was clearly looking to find the “fair” result, the California Court of Appeal for the Second District found that a provision prohibiting a waiver of rights could itself be waived by the parties’ conduct. Since most contracts contain a “no waiver, except in writing” clause, this ruling is a reminder that parties’ conduct will always be considered.

The facts involved a lease with a termination right that could be exercised upon payment of a fee. The landlord accepted $256,000 of the total termination fee of $273,000. The tenant tried to apply the security deposit to the balance of the termination fee. The landlord refused to do so, citing a provision in the lease that prohibited the application of the security deposit to rent, and demanded full payment. However, the landlord also retained tenant’s payment and claimed that tenant and breached the lease and was also obligated to pay all of the remaining rent for the balance of the term. Landlord claimed that the lease explicitly stated that acceptance of a payment less than the amount due did not waive landlord’s right to recover the balance and enforce its legal remedies.

The court refused to follow this argument. Despite the anti-waiver language, the court found that the definition of rent did not include the termination fee. Furthermore, the court noted that the provision prohibiting a waiver of rights by acceptance of a partial payment could be waived by conduct. The court went on to state that the plaintiff’s argument defied common sense, and was essentially a “Gotcha,” to which the tenant was entitled to state “No Yadon’t.” Gould v. Corinthian Colleges, Inc., 192 Cal. App. 4th 1176 (2011).

While not breaking any new legal ground, we found the case to be a good lesson that despite the language in a contract, the courts will also look to common sense and good faith conduct. One cannot rely on strict language that is inconsistent with these concepts or that unfairly penalizes a party. This is something to keep in mind in any business transaction.

Census 2010 Numbers Arrive

The numbers are starting to pour out of the 2010 Census website and we are getting our first look at the state of San Francisco’s population and housing in 2010 compared to 2000. San Francisco’s population grew from 776,733 in 2000 to 805,235 in 2010. While a “largest cities” list has yet to be released by the Census Bureau, we do know that San Francisco population has now passed Detroit (which suffered a catastrophic drop in population of 25%, with a current population of 713,777).

In terms of housing, San Francisco has added 30,415 housing units in the past decade, for a total of 376,942 units. 31,131 of those units are currently sitting vacant for a 91.7% vacancy rate (as compared to 95.1% in 2000).

Citywide, the housing stock grew by 9%. Early numbers are showing above average gains in census tracts in the Northeast Waterfront, the Financial District, Civic Center, Hayes Valley, the Mission, Upper Market, the Central Waterfront, the Bayview, Oceanview-Merced-Ingleside, and Visitacion Valley. The area with the largest housing gains, unsurprisingly, has been South of Market and Mission Bay. Several SoMa census tracks doubled and tripled in housing units in the past decade, and one census tract covering Mission Bay and areas of SoMa and Showplace Square saw a 900% increase – going from 470 to 4,281 units.

While the City has made gains over the past decade in housing stock, there is still more to do. The Association of Bay Area Governments has estimated that San Francisco needs to build over 31,000 new housing units between 2007 and 2014 just to keep up with its share of housing for the Bay Area. The Planning Commission is set to adopt a new Housing Element of the General Plan today, which is intended to put the City on the path of meeting its regional housing demand.

Supervisor Farrell’s Legislation Easing Controls on Restaurants on Upper Fillmore Passes

On Tuesday, the Board of Supervisors passed 10-0 an amendment to the City’s Planning Code that will permit new restaurants (and new bars associated with restaurants) along Fillmore Street roughly between Bush and Jackson Streets with approval from the Planning Commission. Previously, all new bars and restaurants had been prohibited in this area. “Chain” restaurants and bars will still be prohibited. The relaxing of controls on restaurants is intended to help fill a number of vacant storefronts in the area.

Supervisor Farrell sponsored the legislation, and its passage has been hailed as an early success for the new supervisor. The legislation is also a significant success for the Board as a whole, indicating that it is moving past the ideological fights of the past decade by building consensus and reaching practical solutions for the City. The San Francisco Business Times reported this week that Farrell has also predicted success for a more significant – and controversial – measure, the Mid-Market payroll tax exemption, saying, “That [Supervisors Chiu and Kim] sponsored it pretty much guarantees it will get through.” Historians may not mark 2011 as the beginning of another Era of Good Feelings, but to many San Franciscans, the cessation of partisan tension at the Board of Supervisors has been a welcome development.

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

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