bankruptcy

HOA Liens Effective Even In Member Bankruptcy

| Michael Corbett

This month, the California Second District Court of Appeal (“Court”) stopped short of prohibiting a common interest development owners association (“Association”) from recovering a portion of surplus proceeds following a nonjudicial foreclosure sale of an Association member’s townhome (“Unit”) where the Association had a recorded financial interest in the Unit. In Cruz v. Valerio Townhomes Homeowners Association (an appeal from Los Angeles County Super. Ct. No. LS030053)[1], appellant and former Unit owner Cruz defaulted on her mortgage and the property was sold in a nonjudicial foreclosure sale. The sales proceeds exceeded the balance due on the loan, prompting the trustee to give notice of the surplus to all persons with a recorded interest in the Unit. Respondent Association filed a claim with the trustee for a portion of the surplus proceeds. Because Cruz disputed the Association’s claim, the trial court conducted a bench trial on the issue. The trial court entered judgment in favor of the Association and ordered the distribution of $94,873.97 to the Association and the remaining surplus of $20,639.98 to Cruz. At the heart of this dispute was the validity and enforceability of a lien recorded against the Unit for unpaid assessments in late 2014. Cruz contended the Association’s claim was “full of over-billed dues and unearned and bogus fees” and not in compliance with the requirements of the Davis-Stirling Act (“Act”), the body of law governing residential common interest developments in California. In 2015, the Association attempted to foreclose on the lien. However, a few days prior to the noticed foreclosure sale, Cruz filed a Chapter 13 bankruptcy petition, preventing the sale. In the trial court’s tentative statement of decision, it ruled the Association had failed to establish a legally valid lien. Specifically, the Association failed to establish compliance with three (3) parts of the Act: (i) the pre-lien notice; (ii) the notice of recordation of the lien; and (iii) a legally binding vote by the Association board to record the lien. Accordingly, the trial court’s preliminary ruling held that the Association was not entitled to any surplus proceeds from the sale of the Unit. The Association objected, requesting the trial court to recognize and consider relevant documents from Cruz’s bankruptcy case: the Association’s proof of claim for the lien and the Case Summary and Claims Register, which evidenced that Cruz failed to file an objection to the Association’s proof of claim. The Association argued that Cruz’s failure to challenge the validity of the lien by objecting to the proof of claim in her bankruptcy case resulted in the claim being deemed allowed. The Association further contended that an allowed claim is in the nature of a final judgment and thus the principle of res judicata[2] precluded the trial court from considering the lien’s validity. After further consideration of the Association’s argument, the trial court changed course, ruling that under res judicata, the Association’s unchallenged claim was tantamount to a final judgement. Consequently, the trial court determined it did not have the ability to reconsider the validity of the lien. On appeal, Cruz attacked the Association’s arguments on dueling fronts: (i) the Association had waived any res judicata argument as to the validity of the lien because the Association presented independent evidence in support of the lien’s validity apart from its res judicata defense; and (ii) that collateral estoppel or issue preclusion (i.e., res judicata) did not apply in the subject case. Both arguments put forth by Cruz were rejected by the Court, which affirmed the trial court ruling. Waiver of Res Judicata The Court disagreed with Cruz’s waiver position, pointing out, “waiver is the intentional relinquishment of a known right after knowledge of the facts. The burden … is on the party claiming a waiver of a right to prove it by clear and convincing evidence … and doubtful cases will be decided against a waiver. The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right.” Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31. The Court continued, “California courts will find waiver when a party intentionally relinquishes a right or when that party’s acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.” Waller, supra, at pp. 33–34. “The pivotal issue in a claim of waiver is the intention of the party who allegedly relinquished the known legal right.” DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 60. Inapplicability of Res Judicata The Court – correctly – began its analysis by recognizing that even where all three (3) required elements of res judicata (as described in footnote 2) have been satisfied, the Court has repeatedly looked to the public policies underlying the doctrine before concluding whether res judicata should be applied in a particular setting. Lucido v. Superior Court (1990) 51 Cal.3d 335, 342–343. Homing in on the relevant federal bankruptcy statute, the Court cited title 11 of United States Code section 502, subdivision (a), which states a “claim or interest, proof of which is filed under section 501 of this title …, is deemed allowed, unless a party in interest … objects.” (Emphasis added) Further, the allowance or disallowance of “a claim in bankruptcy is binding and conclusive on all parties or their privies, and being in the nature of a final judgment, furnishes a basis for a plea of res judicata.” Siegel v. Fed. Home Loan Mortg. Corp. (1998) 143 F.3d 525, 529. Put simply, California courts must give full faith and credit to a final order or judgment of a federal court. Levy v. Cohen (1977) 19 Cal.3d 165, 172. Conclusion Because Cruz did not object in bankruptcy court to the Association’s proof of claim concerning the subject lien, the claim was deemed allowed. 11 U.S.C. § 502(a). Even if a bankruptcy case were later dismissed – as was the case

Amnesty

Oakland ADU Updates: Legalization Amnesty Program

| Justin A. Zucker

As I previously reported, Oakland is in the process of updating its Planning Code regulations pertaining to accessory dwelling units (“ADUs”). On December 21, 2021, the Oakland City Council heard and passed on first reading legislation amending Oakland’s ADU controls (the, “Legislation”). The proposed amendments encourage ADU production by reducing barriers through the adoption of streamlined approval processes consistent with State law. One of the proposed programs by the Legislation is an amnesty program to legalize unpermitted ADUs established and occupied in Oakland prior to January 1, 2021. The amnesty program consists of two elements that encourage the legalization of existing eligible unpermitted ADUs. First, a property owner may request a waiver from provisions of zoning or development standards, e.g., setbacks, that would preclude the preservation of an eligible unpermitted ADU. Second, a property owner may request a five year delay in enforcement of Building Code requirements if the unpermitted ADU was built prior to the effective date of the Legislation. The ability to request a five year enforcement delay is available until January 1, 2030. Property owners would be allowed to bring their existing, eligible, unpermitted ADU into compliance with current Building Code standards without incurring any enforcement penalties or fines. This amnesty would last up to five years from the date the enforcement delay is granted, meaning the latest the five-year enforcement delay can be in effect for a specific ADU is December 31, 2034. Amnesty  does not apply to structures that pose an immediate risk to public health and safety. In addition to creating an amnesty program for legalizing existing unpermitted ADUs, the Legislation makes several changes to the existing ADU development controls, including: Category Three ADU. The Legislation establishes a new attached ADU category that may combine both converted space within an existing envelope of a multifamily building and a newly built addition to a building footprint. Height Increase. Exceeding State law, the Legislation allows two-story ADUs up to a maximum height of 20 feet, as compared to 16 feet, if an ADU complies with the minimum four-foot side and rear setbacks required for detached ADUs. Envelope Expansion. The Legislation permits additional envelope expansion as part of the conversion or replacement of an existing accessory structure on a small lot to allow construction of one internal conversion ADU. The ADU must have a total structural footprint no greater than 800 square feet, with the height of the addition no more than 16 feet. A “small lot” is defined as those no greater than 3,000 square feet or no greater than 35 feet in lot width mean. Trees. The Legislation calls for project sponsors to plant one new tree on the subject lot or within the public right of way fronting the subject lot per every 500 square feet of detached ADU floor area. ADUs in Front Setback. Consistent with State law, the Legislation permits one ADU of a minimum size of 800 square feet, up to 16 feet in height, in the front setback if the lot’s configuration precludes creation of the ADU anywhere else on the lot. Multifamily Internal Conversion ADUs. The Legislation clarifies that multifamily properties are permitted one internal conversion ADU or up to a number equal to 25% of the existing units per multifamily building (not per lot). This clarification addresses situations where more than one multifamily building is located on a single lot. In which case, each multifamily building on the lot would be allowed to add internal conversion ADUs up to a number equal to 25% of existing units. The Legislation is scheduled to return to the Oakland City Council for the second and final hearing for passage. Having been unanimously passed at the December 2021 Council meeting, it is anticipated that the Legislation will be finally passed by the Council next week. We will continue to monitor the Legislation and keep readers updated.   Authored by Reuben, Junius & Rose, LLP Attorney Justin A. Zucker. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

ADU

Building Department and ADU Update

| Gillian Allen

The Code Advisory Committee of the San Francisco Department of Building Inspection (“Building Department”) held a discussion with the public and with Building Department officials on December 8, 2021 to discuss concerns about the impact of suspending Information Sheet EG-02, which allowed a local equivalency for Emergency Escape and Rescue Openings (EEROs), opening into a yard with a minimum 25-foot depth. While the conversation did not result in an immediate solution, and the Building Department is unable to reinstate the equivalency because it is in direct violation of the building and fire codes, the Building Department stated their priority is to keep working with projects to try and find an alternate design. A recommendation was made that the Building Department work to create a task force to address this issue. Ordinance 208-21: Additional Required Noticing for ADUs Now In Effect On December 12, 2021, Ordinance No. 208-21, amending the Planning Code to clarify the requirements for applications to construct Accessory Dwelling Units (“ADU”) under the City’s local Accessory Dwelling Unit approval process, went into effect. This Ordinance is intended, in part, to clarify the existing rules in the Rent Ordinance as to housing services. The term housing services refers to services provided by the landlord connected with the use or occupancy of a rental unit, including, but not limited to, access to areas such as garages, driveways, storage spaces, laundry rooms, decks, patios, gardens on the same lot, and kitchen facilities or lobbies in single room occupancy (SRO) hotels. This Ordinance clarifies that landlords may not sever, remove, or reduce housing services without just Notification. Prior to submitting an ADU application, an owner must file a declaration with the Rent Board demonstrating the project will comply with the requirements of the Rent Control & Eviction Ordinance. The declaration is to include: (1) a description of housing services supplied in connection with the use or occupancy of any units on the property that are located in the area of the property or building where the ADU would be constructed; (2) whether construction of the ADU would result in the severance, substantial reduction, or removal of any such housing services; and (3) whether any just causes for eviction would apply. An owner must also mail or deliver notice to each unit (including unauthorized units) at the subject property at least 15 calendar days prior to submitting the application. The property owner shall submit proof of these notices to the Planning Department as part of the application to construct an ADU. These notices shall have a format and content determined by the Zoning Administrator, and shall generally describe the project, including the number and location of the proposed ADU(s), and shall include a copy of the written declaration required. Tenants may contest the information in the declaration by petition to the Rent Board within 30 days after notice. The Rent Board will make determination and send to Planning within 90 days of receipt of petition.   Authored by Reuben, Junius & Rose, LLP Manager, Post Entitlement Division 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.

affordable

Supervisor Safai Introduces Competing Fourplex Legislation

| Sabrina Eshaghi

On November 30, 2021, Supervisor Ahsha Safai introduced legislation that would allow up to four units on lots zoned RH-1(D), RH-1, and RH-2 with the addition of affordable housing for moderate-income families. This competes with Supervisor Rafael Mandelman’s fourplex legislation, which would allow up to four units in all RH zones without any affordability requirement. Supervisor Safai’s legislation takes a different approach that would require at least one deed-restricted middle-income housing unit in order to build a fourplex. Safai’s legislation would also allow exceptions to certain Planning Code requirements, provide priority processing, and eliminate 311 notice and discretionary review. Specifically, the legislation would create what it calls the Affordable Housing Incentive Program, which would apply to lots that are (1) located in the RH-1(D), RH-1, or RH-2 districts, (2) within one mile of a major transit stop, and (3) no smaller than 2,500 square feet. In addition, the project cannot be subject to any other density bonus programs and any existing “protected” units, which includes rent controlled or affordable housing units, must be replaced. Under the Program, one affordable housing unit is required to allow up to three units per lot and two affordable units are required to allow up to four units per lot. The affordable housing units must be provided at 110% of the area median income (“AMI”) for rental units, or 140% AMI for owned units. Currently, these income levels for a single person household translate to $102,600 and $130,550, respectively. At the 110% AMI level, base rent for a one-bedroom unit would be limited to $2,713 and $3,010 for a two-bedroom unit. The affordable units are also subject to certain size requirements. In exchange for the affordable housing, the Program allows a variety of Code modifications and shorter processing times. For example, lots in the RH-1(D) and RH-1 zoning districts are currently limited to a height of 35 feet, but the Program would generally allow up to 40 feet. In addition, projects under the Program would be entitled to reduced rear yard, dwelling unit exposure, and open space requirements. The Planning Director may also grant minor exceptions from Code requirements to allow building mass to appropriately shift to respond to surrounding context when the proposed modification would not substantially reduce or increase the overall building envelope. Likewise, the provisions of the Residential Design Guidelines related to “building scale and form” and “building scale at the mid-block open space” would not apply. To provide more certainty in the approval process, the Program requires projects to be approved within 180 days of submittal of a complete project application, unless an environmental impact report is required. It also eliminates 311 neighborhood notification and discretionary review. Instead, the only opportunity to appeal would be through the associated building permit. The legislation is currently in a mandatory 30-day holding period before any Planning Commission or Board Committee hearings can take place. Meanwhile Supervisor Mandelman’s legislation has already advanced from the Planning Commission and is awaiting a Land Use Committee hearing date. It remains to be seen what version of the fourplex legislation will make it to the full Board.   Authored by Reuben, Junius & Rose, LLP Attorney Sabrina Eshaghi. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

State

State Warns San Francisco Concerning Rejected Housing Projects

| Thomas P. Tunny

The Board of Supervisors (“Board”) recently issued two unusual denials of large housing projects – the projects would have provided over 800 dwelling units, over 130 of which were affordable.  In an even more unusual move, last week the California Department of Housing and Community Development (“HCD”) informed San Francisco officials that the City may have violated state housing laws by rejecting the projects.  Without getting into the Board politics behind the project denials, the State’s actions are notable.  The State rarely takes such a public stance concerning local planning and zoning decisions, indicating the high priority the State is placing on the provision of housing and the concern with these decisions. The Two Rejected Housing Projects The two housing projects at issue are located at 469 Stevenson Street and 450-474 O’Farrell Street.  The 469 Stevenson Street project is a mixed-use, 27-story high rise with 495 dwelling units, including 89 affordable units.  The Board of Supervisors denied the project on CEQA grounds, overturning the Planning Commission’s certification of the project’s Final Environmental Impact Report (“FEIR”).  In HCD’s own words, the Board cited “various vague concerns about FEIR deficiencies, including seismic concerns, effects (e.g., shadowing) on historic resources, and gentrification.” The project at 450-474 O’Farrell Street is a modification of an earlier project.  The new project proposes more, smaller units (316 vs. 174) that are “affordable by design”, and included 43 affordable/below market rate units.  The Board overturned the Planning Commission’s approval of a Conditional Use Authorization for the project without yet issuing written findings. HCD Letter HCD made its concerns known to City officials in a letter last week.  The message was pointed.  HCD expressed concern that the Board’s decisions “represent[] a larger trend in the City/County,” noting that “California’s housing production does not meet housing need. In the past ten years, housing production has averaged fewer than 80,000 new homes each year, far fewer than the 180,000 new homes needed…. As a result, the cost of housing has skyrocketed, and San Francisco stands amongst the top two most expensive housing markets in the United States.” HCD raised significant concerns with the City’s compliance with the Housing Accountability Act (“HAA”).  Under the HAA, a local government cannot disapprove or reduce the density of a housing development project that complies with applicable, objective general plan, zoning, and subdivision standards and criteria, including design review standards, in effect at the time that the application was deemed complete, unless it makes written findings supported by a preponderance of the evidence on the record that the project would have a specific, adverse impact upon the public health or safety and there is no feasible way to mitigate that impact.  The Board did not make such findings for either project. HCD also expressed “concern[] about the significant delays in the approval of housing generally and in the City/County in particular.”  As to the O’Farrell project, HCD expressed concern that the City violated the “5 Hearing Rule” set forth in the Housing Crisis Act of 2019 (SB 330).  The Planning Commission had six hearings on the project and the Board appeal was the seventh hearing. Lastly, HCD warned the City about its implementation of and compliance with its existing Housing Element and its upcoming Housing Element update.  The Housing Element update “must … demonstrate local efforts to remove governmental constraints that hinder the locality from meeting its share of the regional housing need and include program actions with metrics and milestones to remove or mitigate identified constraints…. Academic research continues to show that San Francisco’s processing and entitlement timeframes and procedures exceed the norms for other jurisdictions of similar size and complexity and act as a constraint on the development of housing.” HCD concluded by reminding the City that HCD “has both the authority and duty to review any action or failure to act by a city, county, or city and county that it determines is inconsistent with an adopted housing element… or in violation of the HAA.”  HCD’s investigation remains open and they are continuing their review of the City’s practices with respect to housing review and approval generally.   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.

legislation

Supervisor Mandelman’s Fourplex Legislation Clears Planning Commission

| Mark Loper

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.

Auto

Mayor Proposes Increased Density on Auto-Focused Lots

| Chloe Angelis

Mayor London Breed’s “Cars to Casas” ordinance, introduced on October 19, 2021, would eliminate the Conditional Use requirement for the conversion of an Automotive Service Station and would create a new residential density exception for housing projects on sites previously used for auto-oriented uses. The ordinance cites a wide-reaching set of policy goals: “missing middle” housing production, cutting auto emissions, and traffic safety consistent with the City’s Vision Zero policy. By encouraging the elimination of auto-oriented uses and reducing the amount of property in the city dedicated to cars, the ordinance seeks to decrease auto travel. And in increasing density and streamlining the approval process for eligible residential projects, the legislation hopes to chip away at the housing crisis and incentivize the construction of new apartment buildings—with a focus on small and medium sized projects with at least four units. For starters, the legislation eliminates the Conditional Use Authorization requirement to convert an existing Automotive Service Station to some other use. This change applies regardless of whether the Auto Service Station would be converted to residential use or to some other non-residential use. The ordinance zeros in on properties currently used for “Auto-Oriented Uses,” defined as those parcels with an accessory parking lot or garage, or any use defined as an Automotive Use. Planning Code Section 102 defines Automotive Use as follows: “A Commercial Use category that includes Automotive Repair, Ambulance Services, Automobile Sale or Rental, Automotive Service Station, Automotive Wash, Gas Station, Parcel Delivery Service, Private Parking Garage, Private Parking Lot, Public Parking Garage, Public Parking Lot, Vehicle Storage Garage, Vehicle Storage Lot, and Motor Vehicle Tow Service.” The legislation would not change this definition. The Mayor’s proposed density exceptions would apply to all sites with an Auto-Oriented Use where residential use is permitted, except that sites with an existing residential use and those that have had a Legacy Business at any point during the 10 years prior to application submittal would not be eligible. As of today, the Legacy Business Registry lists seven automotive/motorcycle businesses as Legacy Businesses. On eligible sites, the legislation would principally permit up to four dwelling units per lot within RH zoning districts. In other zoning districts, the legislation would eliminate dwelling unit maximums and would instead regulate the size of residential projects based on the applicable form-based controls (i.e., height, bulk, setbacks, exposure, and open space). The legislation also proposes to limit the parking maximums that would apply to residential projects approved under the new density exception. Up to 0.25 spaces per unit would be principally permitted and up to 0.5 spaces per unit would be allowed with Conditional Use Authorization. Parking in excess of 0.5 spaces per unit and parking for non-residential components of projects utilizing the new density exception would be prohibited. Permitted parking varies by zoning district, but in most cases, the parking maximums proposed by the legislation represent a decrease from what is currently allowed. So as to balance the current demand for new housing against the need to retain some of the city’s existing Auto-Oriented Uses—and likely in an effort to temper potential opposition—the legislation includes a sunset provision: once the Planning Department has approved a total of 5,000 units pursuant to the proposed density exception, the exception will expire.   Authored by Reuben, Junius & Rose, LLP Attorney Chloe Angelis. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

laws

Summary of New State Condo Laws

| Jay Drake

The California state legislature recently passed a number of new laws pertaining to California common interest developments and homeowners associations.  Below is a brief summary of a few of the new laws. SB 432 – This is a follow-up to our Update on July 9, 2021, which described proposed SB 432.  This bill has now been approved and will become effective January 1, 2022.  The law makes several changes to HOA election procedures, including HOA director qualifications and term limits, retention of election materials and election notice requirements. AB 1101 – This bill was approved on September 23, 2021, and makes changes aimed at preventing fraud and financial malfeasance in HOAs, and furthers the changes made by AB 2912 in 2018 which implemented basic protections for HOA finances.  This bill requires (i) HOAs’ accounts to be in financial institutions insured by the FDIC, National Credit Union Administration Insurance Fund, or a guaranty corporation, (ii) imposes requirements on HOAs to obtain fidelity bond insurance covering acts by HOA directors, officers and managing agents, (iii) requires written HOA board approval for withdrawals of specified large amounts from HOA accounts, and (iv) prohibits HOA managing agents from comingling funds of the HOA with the managing agent’s own funds. AB 1584 – This is a follow-up to our Update on March 11, 2021 regarding AB 3182 which added new Civil Code 4741 that limits rental restrictions in condo projects.  That bill required HOAs to amend their governing documents to comply with Civil Code 4741 by December 31, 2021.  AB 1584, approved on September 28, 2021, modifies Civil Code 4741 by (i) allowing the HOA board of directors to unilaterally amend the HOA’s governing documents to comply with Civil Code 4741, without the approval of the HOA members, and (ii) gives the board of directors until July 1, 2022, to complete such amendment.   Authored by Reuben, Junius & Rose, LLP Attorney 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.

zoning

California Enacts Bills Aimed to Increase Housing

| Melinda Sarjapur

Last month, Governor Newsom signed three complimentary bills taking aim at the housing crisis in California: SB-8, SB-9, and SB-10. Together, the bills are intended to promote denser housing, streamline housing permitting, and boost housing production in California. The practical effects of the bills, however, are yet to be seen. SB-9 SB-9 requires local agencies to ministerially approve the following in single-family zoning districts: (a) subdivision of existing lots into two parcels; and (b) development of up to two units per lot. Ministerial approvals require no environmental review, discretionary review, or public hearing process. While opponents have painted SB-9 as a death knoll for single-family zoning, in reality the legislation comes with slew of caveats and conditions that limit its practical application. To qualify for ministerial approval of a lot split under SB-9, all of the following must be met: Site is located in a single-family residential zoning district; Site is located in an urbanized area or urban cluster, or within a city that has an urbanized area or urban cluster, as designated by the US Census Bureau (which covers most urban and suburban cities in the state); Subdivision creates no more than two new parcels of approximately equal lot area, provided that one parcel may not be smaller than 40% of the lot area of the original parcel proposed for subdivision; Both newly created parcels must be no smaller than 1,200 square feet, unless the local jurisdiction adopts an ordinance allowing for smaller lot sizes with ministerial approval; Site is not located on property that is prime farmland or farmland of statewide importance; wetlands; in a very high fire hazard severity zone; a hazardous waste site; in a delineated earthquake fault zone; in a special flood hazard area; in a regulatory floodway; identified for conservation in an adopted natural community conservation plan; a habitat for a protected species; or subject to a conservation easement; Subdivision would not require demolition or alteration of housing subject to rent control; designated affordable housing; housing that has been removed from the rental market through Ellis Act eviction in the last 15 years; or housing that has been occupied by a tenant (market rate or affordable) in the past 3 years; Site is not an historic landmark, and is not located within an historic district; Site was not created through a prior SB-9 subdivision; and Neither the owner of the parcel being subdivided or any person acting in concert with the owner has previously used SB-9 to subdivide an adjacent parcel. To qualify for ministerial approval to develop up to 2 units per lot under SB-9, the locational and tenant-history criteria are similar.  In addition, applicants will need to show that the project won’t demolish more than 25% of the existing exterior structural walls, unless either a local agency passes legislation allowing otherwise, or the site has not been occupied by a tenant in the last 3 years. SB-9 also contains an owner-occupancy condition which limits its utility for development entities.  Applicant-owners will be required to sign an affidavit stating their intent to occupy one of the resulting housing units as the owner’s principal residence for at least three years following the lot split.  However, community land trusts and qualified nonprofit corporations are exempt, and local agencies cannot impose any other owner-occupancy requirements. And while SB-9 will allow for ministerial approval of qualifying projects, local agencies can still require all of the following: Lots resulting from ministerial subdivision be limited to residential use; No short term rental of units resulting from ministerial approval; Project compliance with all objective zoning, subdivision, and design review standards applicable to the parcel that do not have the effect of physically precluding construction of two units on either resulting parcel or result in a unit size of less than 800 sf; That new structures provide setbacks of up to 4 feet form side and rear lot lines; For residential units connected to an onsite wastewater treatment system, a percolation test completed within the last 5 years, or, if the percolation test has been recertified, within the last 10 years. Projects provide easements for provision of public services and utilities; All resulting parcels maintain access to or adjoin the public right of way; Projects to provide parking of up to 1 space per resulting unit, unless the site is located within ½ mile of a high-quality transit corridor or major transit stop, or there is a car share vehicle located within 1 block of the site. Finally, on lots that are both created by an SB-9 lot split and developed with two units under SB-9, a local agency is not required to permit ADUs or JADUs. SB-8 SB-8 primarily extends the Housing Crisis Act of 2019 (SB-330) another five years until 2030 and clarifies some of the text of the previous measure.  Among other things, SB-330 expedites the permitting process for housing developments; protects existing housing inventory; allows housing developments to file preliminary applications that provide grandfathering protection against zoning changes enacted during the discretionary review process; and limits the ability of local agencies to downzone areas unless they upzone an equivalent amount elsewhere within their boundaries. SB-10 SB-10 authorizes local governments, at their election, to adopt an ordinance to zone any parcel for up to 10 residential units in transit-rich areas or urban infill sites.  That would apply to most properties located along established bus lines, within half a mile of a major transit stop, or in residential/mixed use areas of most California cities.  Ordinances or resolutions adopted by local agencies under SB-10 are exempt from environmental review, would require a 2/3 vote in favor from the local legislative body to adopt, and could not be used to reduce density otherwise permitted on any parcel subject to the ordinance.  SB-10 would further prohibit a residential or mixed-use project with 10 or more units that is located on a parcel zoned pursuant to an SB-10 ordinance from being approved ministerially or by right, or from being exempt from environmental

Planning Commission

Planning Commission Recommends Big Changes for Large Residence Legislation

| Kaitlin Sheber

On September 23, 2021, the Planning Commission unanimously voted to disapprove Supervisor Mandelman’s updated proposed large residence legislation after a robust conversation on the potential sweeping effects it could have on homeowners throughout San Francisco. As we have discussed in prior updates on July 29th and March 31st of this year, the large residence legislation was originally introduced to discourage large residential homes over 2,500 square feet by generally requiring a conditional use authorization for any such new home, with some exceptions. The Planning Commission, in its disapproval, provided seven recommendations to significantly change the legislation ahead of its move to the Board of Supervisors. The seven recommendations and some of the reasoning discussed by commissioners include: The legislation should focus on Noe Valley only. The legislation was designed with three particular neighborhoods in mind that are disproportionately affected by construction of large homes: Noe Valley, Dolores Heights, and Glen Park. As the legislation stands, the Planning Commission viewed the scope too broad with massive potential unforeseen effects if enacted citywide as proposed. The Planning Commission was supportive of testing modified regulations in Noe Valley before enacting broader legislation. Much more community outreach and input is needed in the particular areas of concern that would be affected by the legislation. Given the potential broad effects of the legislation, the City needs to make sure that it creates opportunities and spaces to hear from affected homeowners or future homeowners. The effective date of the legislation should be changed to the date of enactment with no grandfathering. Though the legislation has yet to take a clear form, the effective date of the current legislation is the date it was introduced, with only people who submitted applications earlier this year grandfathered from the effects. Appropriate limitations for home sizes should be form based rather than formula based. The formulas created to measure whether a home qualifies as a “monster home” seem arbitrary. Commissioners discussed alternatives, such as height limits, that have effectively limited home sizes. Tenant issues should be explored to ensure no tenants will be displaced or negatively affected by the legislation. The legislation should be crafted to ensure that areas within an existing home can be finished without running afoul of the legislation. As the legislation stands, a person could violate the legislation simply by making an area within the home’s existing envelope livable space. Commissioners were concerned with the legislation’s potential unintended effect of discouraging homeowners from making use of unfinished space within homes that are not considered “monster homes.” The legislation should find ways to encourage density. The current legislation discourages large homes through adding process. However, adding provisions to encourage density would help the City achieve more housing. In addition to the seven recommendations, commissioners also noted several additional concerns including: life safety issues, lack of demolition discussion in the legislation, large ADU sizing requirements in the legislation, lack of design standards, and what should qualify as a monster home. Ultimately, some Planning Commissioners expressed hope, that with much more work, the legislation could be a starting point for future housing regulation in the City.   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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