HOAs

New Law Requires HOAs to Repair Utilities

| Jay Drake

California Senate Bill 900 (SB 900), effective January 1, 2025, introduces significant changes to the responsibilities of homeowners associations (HOAs) in common interest developments, particularly condominiums.  The legislation mandates that HOAs take immediate action to repair utility service interruptions originating in the project’s common area, such as gas, heat, water or electrical service, even if the issue extends into individual units.  Repairs must commence within 14 days of the disruption. Key Provisions Impacting Condo Owners and HOAs Expanded Repair Responsibilities.  SB 900 amends Civil Code Section 4775, part of the Davis-Stirling Common Interest Development Act, to require HOAs to repair or replace utility services that begin in the common area of the project, even if the issue extends into individual units – unless otherwise provided in the project’s declaration, or unless the utility service that failed is required to be maintained, repaired, or replaced by a public, private, or other utility service provider.  This includes utilities like gas, heat, water or electrical service.  The HOA must commence repairs within 14 days of the service interruption. Emergency Assessments and Loans.  If an HOA lacks sufficient funds in its reserve account to cover these repairs, SB 900 allows the HOA board of directors to levy emergency assessments without a vote of the HOA members.  Additionally, HOAs can secure loans for necessary repairs without member approval. Reserve Study Requirements.  SB 900 also amends Civil Code Section 5550 to require that utility lines be explicitly listed as line-item components in future HOA reserve studies.  This requirement ensures proper financial planning for maintenance and replacement of utility infrastructure. Controversial Aspects of SB 900 One concern with the new law is the potential financial burden on homeowners.  The ability of HOA boards to levy emergency assessments without a membership vote means that individual homeowners could face significant costs for repairs.  The legislation grants HOA boards the authority to declare an emergency and initiate repairs without a membership vote, raising concerns about the concentration of decision-making power and the potential for misuse. Steps HOAs Can Take in Response to SB 900 HOAs should examine their governing documents to determine the extent of their responsibility for utility repairs.  If the documents are silent on this matter, SB 900’s provisions will apply.  HOAs must ensure that utility lines are included as line-item components in their reserve studies.  This will facilitate proper financial planning for maintenance and replacement of utility infrastructure.  HOAs should develop clear protocols for responding to utility service interruptions, including timelines for initiating repairs and procedures for levying emergency assessments or securing loans if needed. SB 900 represents a shift in the responsibilities of homeowners associations in California, particularly concerning the maintenance and repair of utility services.  While the intent is to ensure timely repairs and minimize disruptions for residents, the law has introduced concerns regarding financial burdens on homeowners and the authority of HOA boards.  Condominium owners and HOAs should closely examine the implications of SB 900 to understand how it affects their rights and obligations.   Authored by Reuben, Junius & Rose, LLP Partner, Jay Drake. 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.

voting

2025 Brings New HOA Election and Voting Rules

| Michael Corbett

The Davis-Stirling Common Interest Development Act (California Civil Code Section 4000 et seq.) (“Act”) is the primary body of law governing residential common interest developments (“CIDs”) and homeowners associations (“HOAs”) in California.  Several bills – such as those relating to HOA elections, the permissibility of electronic voting, maintenance responsibilities for public utilities serving CIDs, and dispute resolution procedures for construction defect claims – were recently enacted by the state legislature and signed into law by Governor Newsom.  These modifications to the Act have since been codified in the California Civil Code and became effective January 1, 2025. The following is a brief summary of the 2025 changes to the Act, which HOAs and boards of directors should take into consideration, and where appropriate, update the governing documents applicable to the CID which they oversee. New Electronic Voting Rights and Procedures Assembly Bill No. 2159 authorized and established several new procedures and protocols enabling electronic voting for HOAs and its members.  These changes now permit HOAs to adopt electronic secret ballot voting under specific conditions while maintaining transparency and security.  To effectuate these modifications, amendments have been made to California Civil Code §§ 5105, 5110, 5120, 5125, 5200, and 5260. Civil Code Section 5105 – Election Rules.  Rules relating to electronic voting have been added, including requirements for both inspectors of elections and member options to switch between the use of electronic and written ballots.  Additionally, floor nominations are prohibited when using electronic ballots, though they remain allowed with paper ballots. Civil Code Section 5110 – Inspectors of Election.  Updates have been made to address and clarify the role and responsibilities of inspectors of elections in electronic voting.  Specifically, Civil Code § 5110 was amended to allow HOAs to conduct all votes by electronic voting – including those by secret ballot – except those relating to the approvals of proposed increases to regular and/or special assessments.  For elections by electronic secret ballot, § 5110 further provides technical requirements aimed at bolstering the security of the voting system, including those relating to the authentication of the identity of HOA members, and the separation of voter identity from the vote cast. Civil Code Section 5120 – Association Records and Enhanced Records.  Provisions have been added to help ensure the integrity and security of electronic ballots.  Specifically, § 5120(c) was modified to mandate that a person, including a member of the HOA or an employee of its management company, be prohibited from opening or otherwise reviewing any tally sheet of votes cast by electronic secret ballots before the time and place at which the ballots are counted and tabulated. Civil Code Section 5125 – Custody of Election Materials.  To account for the new 2025 electronic voting rights described herein, § 5125 was updated to incorporate any “tally sheet of votes cast by electronic secret ballot” into the procedures governing the existing custodial requirements of election inspectors in maintaining election materials. Civil Code Section 5200 – Association Records and Enhanced Records.  The definition of “Association election materials” under § 5200(c) was expanded to include electronic voting records; specifically, the tally sheet of votes cast by electronic secret ballot. Civil Code Section 5260 – Requests That Must be in Writing.  To account for the aforementioned changes to electronic voting procedures, subsection (g) was added to § 5260 to require any “request to opt out of or opt into electronically voting by electronic secret ballot” be delivered in writing to the HOA.  Guidelines were also added addressing notification requirements for HOA members related to electronic voting. Quorum Adjustments for Elections Assembly Bill No. 2460 made several clarifications and updates to Civil Code § 5115 relating to HOA elections and quorum requirements, while also accounting for and being in harmony with the new electronic voting rules and procedures, including those for secret ballots, as described above. Civil Code Section 5115 – Voting Procedures.  § 5115 of the Act (and Corporations Code § 7512) have been amended to provide that, the absence of a quorum for purposes of member elections, an HOA would be authorized to adjourn the meeting to a date at least twenty (20) days after the adjourned meeting, at which time the quorum required for purposes of a reconvened meeting would be twenty percent (20%) of the members, whether voting in person, by proxy, or by secret ballot.  These amendments further require HOAs to provide general notice of such reconvened meetings no later than fifteen (15) days prior to the date of the reconvened meeting.  Further, an HOA whose governing documents require a quorum for election of directors, are to provide general notice of a statement that the association may call a reconvened meeting to be held at least twenty (20) days after a scheduled election if the quorum is not reached, as specified.  Finally, in the absence of a quorum, an HOA is now authorized to adjourn a meeting to a date at least twenty (20) days after the adjourned meeting, at which time the quorum required for purposes of a reconvened meeting would be twenty percent (20%) of the members, whether voting in person, by proxy, or by secret ballot.   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.

housing element

Major Builder’s Remedy/Housing Litigation Win

| Thomas P. Tunny

In a litigation result that will have a number of positive consequences for developers and housing advocates, the City of La Canada Flintridge (“City”) last week moved to dismiss its appeal of a closely-watched “Builder’s Remedy” case. After the appeals court ordered the City to post a $14 million bond on appeal, the City chose not to do so and will now comply with the trial court decision and process a housing application to build an 80-unit apartment project (“Project”). Readers may recall us reporting on this litigation previously. (California Housing Defense Fund v. City of La Cañada Flintridge (L.A. Sup.Ct. No. 23STCP02614 and 2DCA No. B338985).) In May 2023, the City Council determined the Project did not qualify for the Builder’s Remedy, in part because the SB 330 Preliminary Application was filed after the date that the City Council (retroactively) self-certified its Housing Element update. Later that month, the City informed the Project developer that its SB 330 Preliminary Application was complete, but maintained its position that the Builder’s Remedy did not apply to the Project. The developer petitioned the Los Angeles Superior Court for a writ of mandate, alleging that the City violated the HAA, State Housing Element Law, and other state laws. The Superior Court granted the writ, making four key rulings: the City cannot “self-certify” its housing element; the Builder’s Remedy is “vested” on the date a complete SB 330 preliminary application is submitted; the Builder’s Remedy is available until any required rezoning is completed; and the City unlawfully “disapproved” the Builder’s Remedy Project. The Court’s ruling in effect means a City can’t back-date its Housing Element compliance to avoid approving a Builder’s Remedy project. The Court of Appeal’s decision to require such a substantial bond (the City’s entire budget is $42 million) not only reinforces the pro-housing intentions of the Builder’s Remedy, Housing Element, and HAA rules, but also puts cities and counties on notice with respect to processing housing projects. In this case, not only did the City lose the litigation, but it likely will have to pay the petitioners’ attorney’s fees, and the developer may recover millions in losses incurred due to the appeal. Local jurisdictions seeking to continue old strategies of baselessly denying housing projects will have to think twice going forward about the potential costs.   Authored by Reuben, Junius & Rose, LLP Partner, 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.

policy

The Basics: A Title Insurance Primer

| Corie A. Edwards

Most sophisticated real estate professionals understand that before real property is acquired, a review of the condition of title is an essential part of the due diligence process. But the nuances of title insurance coverage are often not understood. In most cases, a prospective buyer of real estate will receive a preliminary title report or title commitment from a title insurer affiliated with the escrow agent for the transaction. That document typically includes the legal description for the property, a statement about the proposed form of title insurance policy, the exceptions to the title insurance coverage that the title insurer offers, a statement of the conditions that must be met before policy issuance, as well as boilerplate exclusions and limitations on covered risks. Many buyers do not understand that there are different forms of title insurance policies or that the insurance coverage may vary widely between them. For example, a 2021 ALTA Owner’s Policy of Title Insurance, a form developed by the American Land Title Association (“ALTA Policy”), is frequently used to insure title to commercial property. The ALTA Policy includes a list of 10 “insuring clauses” which may protect the buyer – the insured – against loss or damage that occur as a result of title problems that exist as of the date when the policy is issued (typically the date when escrow closes). Briefly explained, the insuring clauses allow for coverage when, for example: Title is vested other than as stated in the policy, i.e., someone other than the buyer actually owns the property, or the buyer’s interest in the property is different than what is insured; The title is defective for reasons that include a forged deed, seller incapacity or incompetency, an improperly recorded conveyance, or a lien encumbers the property; Title is unmarketable; There is no right of access to/from the property; There is a violation or enforcement of law – including building and zoning violations – if an “Enforcement Notice” relates to the use or occupancy of the property, the character or location of improvements on the land, subdivision, or environmental remediation/protection; A jurisdiction enforces its police power against the property (e.g., forfeiture or eminent domain), to the extent described in an Enforcement Notice; There are other defects in title or vesting, including those which result from the seller’s title being acquired through a fraudulent conveyance or preferential transfer in violation of bankruptcy or other law; and Other covered title defects occur between the date when the policy is issued and the date when the document that conveys the property is recorded. When an ALTA Policy is selected, the buyer has the option to purchase a variety of extended coverage endorsements. Some commonly requested endorsements provide coverage for zoning matters, environmental protection liens, access and/or utility access, contiguity (where the property consists of multiple parcels), subdivision, and encroachments. If the buyer’s acquisition of the property is financed, the lender typically requires the buyer to fund the cost of policy of title insurance to protect the lender’s security interest in the property. A lender’s policy covers similar risks to an owner’s policy, and may contain its own set of extended coverage endorsements. The 2021 ALTA Homeowner’s Policy of Title Insurance is generally available to individuals (i.e., “natural persons”) who purchase a residential property, and includes coverage that is considerably more broad than that of the ALTA Owner’s Policy. The CLTA Standard Coverage Policy of Title Insurance, a form developed by the California Land Title Association, in contrast, offers less coverage than that offered by the ALTA Owner’s Policy. In all cases, the language of the insuring clauses dictates the specifics about what the policy does and does not insure as do the conditions and exclusions from coverage. For example, title insurance policies do not cover matters that are “created, suffered, assumed, or agreed to” by the insured, or which are known to the insured and not disclosed to the title insurer prior to policy issuance. A key point of misunderstanding about title insurance is that the list of exceptions that are identified in a preliminary title report or title insurance policy is not a representation about the condition of title. The preliminary title report is simply an offer to insure property, and the terms and conditions on which the title insurer is willing to do so. Cal. Ins. Code § 12340.11. When a party seeks complete information about the condition of title, it should inquire about obtaining a Condition of Title Report from a title insurer. It should also investigate other sources of information that may impact title to a property, such as court records for the jurisdiction where the property is located. A prospective buyer of real property should carefully consider what form of title insurance policy will fit its needs and the kinds of title risks for which it requires insurance. Each policy form offers different kinds of coverage, as do the various optional endorsements. A qualified real estate attorney may be of assistance to a buyer completing a pre-acquisition title review and selecting the most appropriate form of title policy.   Authored by Reuben, Junius & Rose, LLP Partner, Corie A. Edwards. 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.

QCT

Impacts of Commercial Tenant Protection Act

| Lindsay Petrone

The Commercial Tenant Protection Act, which was passed by the California legislature in 2024 and took effect as of January 1, 2025, expanded certain protections which already may benefit residential tenants to include certain classes of commercial tenants. Specifically, tenants who are (i) microenterprises (those businesses with 5 employees or less and have limited access to capital or loans), (ii) restaurants with less than 10 employees, and (iii) nonprofit entities with less than 20 employees, all collectively known as “Qualified Commercial Tenants” (“QCT”). In order to qualify as a QCT, a tenant must annually represent to its landlord that it is one and attest to its number of employees as within the threshold. If a tenant is deemed a “Qualified Commercial Tenant,” then it can be afforded several statutory rights which other commercial tenants do not enjoy. First, a landlord cannot raise the rent of a QCT without first providing a statutorily required written notice to the QCT and waiting a certain period after delivery of that notice. If the rent is being raised less than 10% above the lowest rental amount in the last twelve months, then the notice period is 30 days. However, if the rent is being increased by 10% or more from the lowest rental amount in the last 12 months, then the QCT must be given at least 90 days before the rental increase can take effect. We advise commercial landlords timely serve their QCTs with rental increase notices in advance of any stated changes in the lease, otherwise the rental increase might not be enforceable until the notice and time period has expired. Additionally, month to month leases with a QCT shall automatically renew for an additional month term, unless the landlord delivers a specific written notice to such tenant – 60 days in advance of the termination date if the tenant has been there at least one year, and at least 30 days if the tenant has been there less than one year. Alternatively, a QCT is only required to give that same landlord 30 days advance written notice of termination in either instance. The California legislature also wanted to make the operating expense reimbursement process more transparent for QCT leases. As such, a new statute requires landlords to disclose the operating expense process to their QCTs and ensure that the method of cost allocation to them is fair. Further, certain costs cannot be recovered like those reimbursed to landlord by a third party and those which were not incurred in the prior 12 months or reasonably to be incurred in the ensuing 18 months. Finally, the Legislature clarified that any QCT negotiating their lease in Chinese, Spanish, Tagalog, Vietnamese or Korean shall have their lease translated and signed in that negotiated language. If it is not translated, then that lease could be rescinded by the affected tenant. Please note that the above is a general overview and there are additional conditions and requirements for compliance with the above laws which cannot be stated here due to breadth. As such, we recommend these new laws be reviewed prior to sending any documentation to a QCT. As a result of the Commercial Tenant Protection Act, commercial landlords should be aware of these rights afforded to QCTs and ensure they comply with any notice, disclosure and timeline obligations. There are penalties for failing to comply with these laws, including the prospect of punitive damages in certain cases if found to be a willful violation. Landlords would be best served by doing their due diligence in understanding if a tenant is a QCT and these restrictions apply. On the other side of the coin, tenants should be aware of these laws and ensure they timely notify landlords of their status to take advantage of these additional protections.   Authored by Reuben, Junius & Rose, LLP Partner, 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.

tax

Supervisors Consider Suspension of Empty Homes Tax

| Kaitlin Sheber

Legislation has been introduced in San Francisco that would suspend the imposition of the “Empty Homes Tax” until a final decision is reached in litigation against the tax, promising certainty for taxpayers as the courts decide the legality of the tax. Aimed at bringing residential housing stock back into the local rental market, the Empty Homes Tax was adopted by San Francisco voters with the passage of Measure M in November 2022 and imposes a tax on vacant residential units beginning in the 2024 tax year, with payments generally due beginning in April 2025. As we previously reported on November 7, 2024, a handful of property owners in the City affected by the Empty Homes Tax, in addition to various interested real estate organizations, filed a complaint in San Francisco Superior Court challenging the Empty Homes Tax. On November 26, 2024, the Court issued an order prohibiting the City from enforcing or administering the Empty Homes Tax as it granted judgment in favor of Plaintiffs based on the tax’s violation of both the California and the US Constitution. Following the Court’s decision, an appeal was filed by the City on December 6, 2024. To provide certainty for both taxpayers and the City and avoid placing an undue burden on property owners, the City’s proposed legislation would suspend the imposition of the Empty Homes Tax, retroactive to the 2024 calendar year. The Empty Homes Tax would be set to be reinstated to first apply in the tax year immediately following the calendar year of a final decision in the ongoing litigation. The proposed ordinance requires a supermajority vote of two-thirds of the Board of Supervisors for approval. If the tax is not suspended, it would place an undue burden on property owners that may have residential vacancies from several years prior, may be administratively difficult and financially burdensome for the City to collect, and would add significant uncertainty for both the City and property owners throughout the appeal. If passed and once effective, the proposed ordinance would be retroactive to January 1, 2024. We certainly hope the City will pass this commonsense ordinance quickly.   Authored by Reuben, Junius & Rose, LLP Attorney, Kaitlin Sheber. 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.

housing

Objective Standards for Housing Projects – The Next Battleground?

| Andrew J. Junius

In November of last year, to little fanfare, the San Francisco Planning Department presented to the Planning Commission its new Citywide Objective Design Standards. San Francisco, like cities across the state, are grappling with the brave new world of objective standards as required by recent housing legislation out of Sacramento. As the dust settles around the new and improved Housing Element process, the next battleground will be over individual projects, and each jurisdiction’s take on how to implement “objective standards.” The need for objective standards is straightforward: as the state took dramatic action to jumpstart housing production by removing local zoning barriers, the focus was on eliminating local discretion for qualifying housing projects. In other words, planning commissions and city councils could no longer determine that a proposed housing project, while compliant with all local zoning, density and height controls, simply did not fit into the neighborhood character, was too big, blocked views, and generally displeased existing residents. That discretion – used by cities across the state – is why California doesn’t have enough housing. For decades, local residents have been leaning on their city officials to stop these projects. And in many cities they have succeeded. No longer able to defer to local discretion, planning departments were charged with making sure that housing projects would only be evaluated with respect to objective standards. What is an objective standard? The California Housing Accountability Act (amended in 2017) defines objective standards as those that “involve no personal or subjective judgment by a public official and are uniformly verifiable by reference to an external and uniform benchmark or criteria available and knowable by both the developer, applicant or proponent and the public official before submittal.” This created an immediate challenge to planning departments across the state. While all city planning and zoning codes do have objective standards (i.e., numbers like height limits, floor area ratios, and the like), they also included a significant number of discretionary standards and processes. One would think that removing these discretionary provisions from planning codes and simply leaving the objective numbers would be a straightforward process. In other words, if a housing project in a certain zoning district required a conditional use authorization previously (a conditional use approval requires a Planning Commission to make very subjective findings regarding whether the project will be necessary and desirable and otherwise good for the neighborhood…) it should be a simple matter to remove that requirement and get on with it. In many instances, that has simply not been the case. Discretionary and objective standards and procedures for many cities have been woven tightly together and cannot be easily untangled. At times there is even a debate over what is objective and what is subjective. And of course, such changes in local planning codes require legislative action by city councils. Some California jurisdictions have attempted to comply with relatively minor changes to their code, claiming that these are in fact, “objective”. However, careful review of these minor changes reveals that there are still portions of their code purporting to protect views, “harmonize” the development with surrounding character, etc., etc. The subjective criteria that remain are not objective and would not pass muster if challenged. Other jurisdictions, including San Francisco and Marin County, have taken a very different approach. In these cases, the Planners have gone to extraordinary lengths to provide an objective standard for virtually every aspect of a development, from site design, height limits, building modulation, etc., down to the more nuanced details for lobby and building entrance design and location, window location and design, façade treatment, building articulation, blind walls, and more. Marin County’s form-based code clocks in at a formidable 323 pages of objective standards. It’s hard to predict how this will all work out in the months and years ahead. Now that the Housing Element battles are for the most part over (or at least not at full boil), the project-by-project housing battles have begun. We commend the state legislature’s efforts to prioritize housing production the only way it can: by removing the ability of cities to say no to qualifying housing projects. We hope that cities across the state will see the need for housing as critical and will work to implement these state laws as quickly and efficiently as possible.   Authored by Reuben, Junius & Rose, LLP Partner, Andrew J. Junius. 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.

neighborhood

City Extends Entertainment Zone to Outer Neighborhoods

| Tara Sullivan

On December 10th Mayor Breed and Supervisor Mandelman introduced BOS File No. 241197, an ordinance that would create the Cole Valley Entertainment Zone. Buoyed by the success of the Entertainment Zones that occurred downtown, this is an acknowledgment that there are other parts of San Francisco that have yet to recover from the pandemic-related downturn. As a refresher, entertainment zones enable restaurants and bars in designated areas to sell alcoholic beverages to go for outdoor consumption during events and activations. The establishment of entertainment zones stems from the Mayor’s Roadmap to San Francisco’s Future, which has supported a series of entertainment initiatives designed to bolster Downtown’s economic recovery. Sanctioned under SB 76, authored by Senator Scott Wiener, entertainment zones are designed to support the sustainability of local bars and restaurants and boost neighborhood economic activity by permitting restaurants and bars to sell alcoholic beverages to go for outdoor consumption during special, permitted events. So far, there have been three events (in two Entertainment Zone areas) that have taken advantage of this legislation: Oktoberfest on Front (Street) on September 20th and Nightmare on Front Street on October 31st, along with the recent Winter Wonderland Tree Lighting Ceremony on November 30th at Thrive City (Chase Center). All of these have been deemed a success, bringing in thousands of people and increasing sales by anywhere from 700-1,500%. The proposed legislation makes a tweak to the definition of an “Entertainment Zone Event” by removing the requirement of an ABC license or permit to allow the sale and consumption of alcohol to be served outdoors. Moving forward, only local authorization is needed to hold an “Entertainment Zone Event,” with only licensed establishments that hold an ABC permit allowed to sell alcohol. This will greatly reduce the amount of paperwork needed to put on an Entertainment Zone Event. Cole Valley is a small neighborhood district that spans three blocks from Frederick Street to Parnassus Avenue. Intimate in nature, it does feature several bars and restaurants, and the neighborhood has undertaken several street-specific events, like the Cole Valley Night Fair on December 5th. It is not a neighborhood that draws many nighttime patrons, largely due to its location and family-oriented population. However, it is located along a Muni line and sits between the Haight and Inner Sunset neighborhoods, so it is a good case study for this type of economic initiative. It is anticipated that the proposed entertainment zone will be effective as early as March 2025, allowing for nighttime and weekend events along Cole Street in the spring. The entertainment zone program has so far proved to be a success in larger, more commercially-oriented areas. Cole Valley is an interesting choice for the first of this expanded concept, but if successful, can demonstrate how other neighborhoods in the city such as the Inner Sunset, which has held several night markets in 2024, can utilize the concept to help attract patrons during times that are otherwise pretty quiet. Cole Valley’s businesses all support the proposed Entertainment Zone and, if successful, will be great to see how this concept is utilized in other neighborhoods throughout San Francsico.   Authored by Reuben, Junius & Rose, LLP Partner, 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.

CEQA

Court Broadens Applicability of CEQA Infill Exemption

| Thomas P. Tunny

Readers no doubt are aware of the CEQA Infill Exemption, one of the most common CEQA exemptions used for projects in San Francisco and the Bay Area. In an important opinion published on November 18, the Sixth District Court of Appeal interpreted key terms in the Infill Exemption (CEQA Guidelines Class 32 categorical exemption) to broaden its application, in particular “in-fill development” projects that meet specified criteria, including being “substantially surrounded by urban uses.” In doing so, the Court upheld a lower-population city’s use (King City) of the exemption for a Grocery Outlet project near Highway 101. (Working Families of Monterey County, et al. v. King City Planning Commission (Best Development Group, LLC, Real Party in Interest) (2024) ___ Cal.App.5th ___.) The project at issue was a Grocery Outlet store in a single-story building with surface parking on a 1.6-acre lot located within 1,000 feet of Highway 101. The parcel’s General Plan land use designation was Highway Service Commercial (HSC) and its zoning designation was Highway Service District (H-S). It was surrounded on two sides by commercial buildings, on the third side by sheriff’s department buildings, and on the fourth side by a cemetery. An environmental assessment submitted by the project developer in support of the project’s permit applications (for a CUP, architectural review, monument sign permit, and landscaping permit) concluded the project would not result in any significant environmental impacts relating to traffic, noise, air quality, water quality, or otherwise, and that it qualified for the CEQA Guidelines Class 32 exemption for in-fill development. The City’s Planning Commission agreed on all counts, and its decision approving the project entitlements and exemption was upheld by the City Council, which did the same on administrative appeal. The Petitioners, a union, sought to have the court narrow the infill exemption by arguing the project was not located in an “urbanized area,” as defined in CEQA Section 21071(a) (population 100,000 or more) or CEQA Guidelines Section 15387 (population 50,000 or more). Petitioners also alleged the project did not meet the definition of an “infill site,” as defined in CEQA Section 21061.3, since the project site was not previously developed for “qualified urban uses.” The court refused to take the bait and turned to traditional rules of statutory construction to discern the meaning of these key terms. Finding the language of the exemption arguably ambiguous, the court looked to the findings of the Natural Resources Agency and the Office of Planning and Research (“OPR”) in establishing the exemption. Their statements of regulatory intent showed no indication that the regulators intended to limit the Class 32 categorical exemption for infill development to projects that meet the criteria set forth in the statutory definitions of “infill site,” “urbanized area,” and “qualified urban uses”. Citing OPR directly, the court concluded, with a flourish, “The term ‘infill development’ refers to building within unused and underutilized lands within existing development patterns, typically but not exclusively in urban areas. Infill development is critical to accommodating growth and redesigning our cities to be environmentally- and socially-sustainable.” This broad definition will allow the Infill Exemption to be used in areas that may not meet specific definitions of “urban”, but as a matter of common sense are clearly “urbanized”. This decision is important because it reinforces and even broadens the applicability of the Infill Exemption in both typical urban areas and smaller cities.   Authored by Reuben, Junius & Rose, LLP Partner, 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.

Preliminary Election Results: Correction on Measures L & M

| Kaitlin Sheber

Measure L: Additional Business Tax on Transportation Network Companies and Autonomous Vehicle Businesses to Fund Public Transportation – Failed* With preliminary election results showing 56.88% voter approval, it would seem voters passed Measure L, but the Measure has failed due to a provision in Measure M discussed below. Measure L would have placed a permanent additional tax on transportation network companies and autonomous vehicle businesses to support Muni transportation services and fare discount programs, titled the “Ride-Hail Platform Gross Receipts Tax.” The Measure would impose the tax specifically on businesses that provide passenger service for compensation and receive more than $500,000 in gross receipts. The tax rates range between 1% and 4.5% of gross receipts. The Controller estimates annual revenue from the measure at approximately $25 million. Measure M: Changes to Business Taxes – Passed Measure M proposed to modify several existing taxes in the City, including the Gross Receipts Tax, Homelessness Gross Receipts Tax, Overpaid Executive Gross Receipts Tax, Business Registration Fee, and the Administrative Office Tax on Payroll Expenses. In general, the Measure is expected to cut taxes for many small businesses and shift more tax burden onto medium, large, and wealthier businesses through a variety of changes. Preliminary election results show that Measure M was approved by 69.73% of voters so far. As discussed above, Measure M contained a provision to render Measure L null and void in the event it obtained more votes. With preliminary results showing Measure L with 201,074 votes in favor and Measure M with 228,038 votes in favor, Measure L is expected to fail. *Corrected from original publication on November 13, 2024.   Authored by Reuben, Junius & Rose, LLP Attorney, Kaitlin Sheber. 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.

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