SB35 Vallco

Court Upholds City of Cupertino’s Approval of SB 35 Vallco Project

| Tiffany Kats

Less than two weeks after issuing a decision that required the City of Los Altos to approve a 15-unit SB 35 project, the same Santa Clara County Superior Court judge (“Court”) issued a second favorable decision upholding the City of Cupertino’s (“City”) decision to approve an SB 35 project that would redevelop the former Vallco Fashion Mall site with more than 2.2 million square feet of mixed-use development (“Project”). The approved Project will subdivide the 50-acre site into 11 blocks consisting of 2,402 dwelling units (50% of which are affordable), 1,981,447 square feet of office space, and 485,912 square feet of retail space. After the City determined that the Project qualified for streamlined review under SB 35 and subsequently approved it, Friends of Better Cupertino (“Petitioners”) filed a lawsuit challenging the Project. The Court dismissed the Petitioners’ arguments, affirming for the second time in a matter of weeks that SB 35 is a powerful tool compelling cities to quickly accept much-needed housing development. After unsuccessfully trying to construct a mixed-use project at the site, the developer submitted a revised project to the City under SB 35. Enacted in 2017 to increase housing production in California, SB 35 requires streamlined ministerial approvals for housing projects that meet objective planning standards and provide a certain amount of affordable housing (10% or 50% depending on the city’s failure to meet state housing construction goals). For qualifying projects, SB 35 sets time limits for the City’s review (three to six months depending on the size of the project), limits challenges to relatively narrow technical arguments, and eliminates complicated and drawn out CEQA litigation. In its lawsuit, Petitioners argued that the City had a ministerial duty to determine that the Project did not qualify for SB 35 streamlining based on allegations that the Project: (1) was located on a hazardous waste site; (2) does not provide sufficient residential space; (3) exceeds height limits; (4) lacks sufficient setbacks; (5) does not comply with the City’s requirements for below market rate units; and (6) lacks dedicated park land. However, the Court disagreed with each of these arguments and found that the City correctly determined that the Project was eligible for SB 35 because the Project complied with all object planning criteria. The Court held that SB 35 does not impose a ministerial duty on cities to determine whether a project qualifies for streamlined review, nor to reject the application if the project is ineligible for streamlined review. Rather, SB 35 imposes a presumption that a project qualifies for streamlined review if the city does not reject the project within the applicable time period (60 or 90 days, depending on the size of the project), even if the project does not actually qualify.  While this holding rejected the Petitioners’ central argument, the Court did not stop there.  The Court took the extra step of considering—and rejecting—Petitioners’ arguments as to how the Project did not qualify for streamlined review. The Petitioners claimed that the Project site remained a hazardous waste site based on two leaking underground storage tanks related to tenants of the former mall, despite the passage of more than 20 years since remediation was completed and the State Water Resources Control Board closed its cases related to the leaks. They argued that SB 35 only identified the California Department of Toxic Substances Controls (“DTSC”) as an agency that would clear previously contaminated sites. The Court rejected the Petitioners’ suggestion that a site would remain a hazardous waste site for purposes of SB 35 unless DTSC cleared it, noting that in practice numerous agencies (including the Water Board) cleared sites. It also rejected the argument that the Legislature intended a more restrictive definition of clearance when it adopted SB 35.  The Court further noted the Legislature amended SB 35 in 2019 to acknowledge that other agencies, including the Water Board, could clear sites for residential uses, and determined that this amendment had retroactive effect. The Petitioners also asserted that SB 35’s requirement that mixed-use projects designate two-thirds of the “square footage of development” for residential uses should exclude areas of the project authorized under the Density Bonus Law, and that the “square footage of development” must be defined using the definition of “floor area” in the California Building Standards Code which Petitioners asserted would exclude parking areas.  The Court rejected both arguments.  It held that there was nothing in the law in effect at the time the Project application was submitted that required bonus areas to be excluded from the two-thirds requirement, and noted that the Legislature amended SB 35 in November 2019 to explicitly include bonus areas in the two-thirds calculation. The Court also rejected the idea that “square footage of development” was somehow defined by reference to the Building Standards Code. The Petitioners next argued that the Project was inconsistent with objective standards in the City’s General Plan and Zoning Ordinance, namely height, setbacks, requirements for below market rate units, and parkland. The Court found that, as to each argument, they were not well-reasoned and failed to explain how the City lacked substantial evidence to support its determination. Finally, the Petitioners argued that a public hearing was required to approve the Project and that the Planning Commission, rather than City staff, should have decided whether to approve the Project. The court rejected this argument as well, pointing out that although SB 35 does not prohibit public oversight, it does not require public hearings or approval by local planning commissions. To the contrary, the legislative history of SB 35 shows that “the Legislature clearly intended . . . to drastically reduce the politicization of the planning process and the use of tactics like those Petitioners resort to here.” This decision affirming the sizable mixed-use Vallco project highlights that although there are many requirements that developers must meet to qualify for project streamlining, SB 35 is an effective solution to minimize the opportunities for project opponents to frustrate housing development through litigation.   Authored by Reuben, Junius

California

California Superior Court Reverses Denial of an SB 35 Project

| Sabrina Eshaghi

In a groundbreaking ruling, the Santa Clara County Superior Court found that the city of Los Altos acted in bad faith when it denied a 15-unit density bonus project that was proposed under SB 35 and subject to the Housing Accountability Act (HAA). Instead of sending the project back to the City for further consideration, the Court in this case required the City to reverse the denial and approve the project. Although the ruling does not serve as binding precedent, it provides Los Altos and other cities in California with a clear warning that unsubstantiated project denials will not be upheld in court. After attempting to obtain approval through the standard discretionary review process since 2013, the developer changed course and submitted an application for the project under SB 35 in 2018. SB 35 requires streamlined ministerial approval for projects providing a certain amount of affordable housing in cities that are not meeting their Regional Housing Needs Allocation (RHNA) goals. Under SB 35, a project that meets the affordability requirement can be denied if the city provides written documentation of the project’s inconsistencies with “objective planning standards” within a specified time frame. In response to the application, the City claimed that the developer had submitted two separate applications, one for streamlined review under SB 35 and one for standard discretionary review, one of which would need to be withdrawn. Nevertheless, staff responded to the SB 35 application stating that it was not eligible for streamlined review because it failed to provide the correct amount of affordable housing, which the City later conceded was an error. The letter also noted that the project failed to provide sufficient parking and lacked adequate access to the proposed parking. The City replied to what it characterized as the discretionary review application with a separate incomplete letter. After some additional correspondence, the City informed the developer that an administrative appeal was required despite provisions to the contrary in the Municipal Code, and that the deadline for filing an appeal was that same day. The developer managed to file a timely appeal, but it was ultimately denied. The Court held the City’s response to the application did not comply with SB 35 because the City failed to identify the objective standards it was relying on in denying the application. The project exceeded the amount of parking required under SB 35, and the City had not provided any explanation justifying the need for additional parking. As for access, the Court found that absent any specific requirements in the Code, this was not an objective standard that could be applied to the project under SB 35. The Court also rejected the City’s argument that the incomplete letter relating to what it determined to be a separate discretionary review application included other objective standards that the project failed to meet. The Court stated that the City was required to be held to the reasoning articulated in the SB 35 denial letter. Because the City failed to provide adequate notice of any inconsistencies within the time frame permitted under SB 35, the project was deemed to comply with the objective standards. Any claims of inconsistencies made outside that time frame were not entertained by the Court. The Court also found that the City’s denial violated the Density Bonus Law for a number of reasons. Most notably, the Court rejected the City’s argument that more evidence was required to determine whether the concessions would result in cost reductions. The Court found that the burden was on the City to support their denial by making a finding that the concession would not result in a cost reduction. The onus was not the developer to prove otherwise. Lastly, the Court held that the City failed to show it complied with the Housing Accountability Act, which requires cities to make specific findings before denying certain housing projects that comply with objective zoning standards. Under the HAA, cities must provide a written determination that the project is inconsistent with applicable zoning standards within a certain time period. As noted above, the City did not find the SB 35 application incomplete. Instead, they denied the SB 35 application outright and failed to provide a valid explanation for the alleged inconsistencies with objective zoning standards. As such, the Court found that the City acted in bad faith under the HAA because the denial of the application was “entirely without merit.” By bolstering SB 35 and the Housing Accountability Act, this case serves as a victory for developers and pro-housing advocates, and a cautionary tale for cities. It suggests that denials of SB 35 projects must strictly comply with the letter of the law to be upheld.   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.                

Rent Protections

New/Pending Local and State Rent Protections

| Chloe Angelis

San Francisco Rent Increase Moratorium: Last week, the Board of Supervisors unanimously passed an emergency ordinance that would temporarily prohibit rent increases otherwise permitted by the Rent Ordinance. Initially introduced by Supervisor Peskin, the ordinance is based on a finding that prohibiting rent increases will reduce risk of displacement, “which is essential for public health .  . . and will help ameliorate the broader economic effects of the [COVID-19] emergency.” The legislation is backdated to an effective date of April 7, temporarily suspending a landlord’s right to impose rent increases that are otherwise permissible under Administrative Code Section 37.3(a). This means that for units covered by the Rent Ordinance, landlords will not be able to impose even those rent increases that the Rent Ordinance generally allows—including annual rent increases, banked increases, and capital improvement increases. Once the moratorium on rent increases is lifted, a landlord will be able to reinstate a rent increase that was deferred by the moratorium—i.e. if a landlord sent notice about a permissible annual rent increase that would have taken effect May 1 but is now deferred by the moratorium, that increase could be reinstated when the moratorium is lifted. Reinstating a deferred increase will require tenant notice. Once the moratorium is lifted, rent increases will apply prospectively from the date of the notice, without an allowance for additional amounts that the landlord could have imposed earlier had the moratorium not applied. The ordinance would expire after 60 days, unless re-enacted by the Board. The ordinance can be reviewed here. Proposed Statewide Unlawful Detainer Moratorium – AB 828: Assemblymember Phil Ting’s state proposal goes even further than San Francisco’s ordinance. In addition to prohibiting foreclosure of residential property until 15 days after a state or local COVID-related state of emergency ends, AB 828 would also prohibit rental evictions and allow a court to order a 25% rental reduction for defendants in unlawful detainer actions. The 25% rent reduction could be granted by a court as part of an unlawful detainer action that includes a cause of action for a person continuing in possession without permission of their landlord. More specifically, the bill would allow a defendant to an unlawful detainer action to submit a notice and request for an order pursuant to this provision. Following that notice, if the court determines that a tenant’s inability to pay rent is attributable to COVID-19—and that the rent reduction would not be a material economic hardship on the landlord—the court would be required to issue an order allowing the tenant to remain in the subject property, reducing the subject rent by 25% for the next year, and requiring the tenant to make the reduced rent payments beginning the next calendar month. The tenant would have the burden of showing that the inability to pay rent is the result of increased costs for household necessities or decreased earnings due to COVID-19. However, any such increased costs or decreased earnings that occurred between March 4, 2020 and March 4, 2021 will be presumed to be a result of COVID-19. If the court finds that the tenant’s inability to pay rent is a result of COVID-19, the landlord will have an opportunity to show that a rent reduction would result in “material economic hardship.” The bill defines “material economic hardship” as having “to limit spending on household necessities.” “Reduction in savings, profit margins, discretionary spending, or nonessential assets” would not qualify. For owners of 1-2 rental units, the court will presume such a hardship; but for owners of 10 or more rental units, the court will not presume a hardship. In considering whether an order under this section would constitute a material economic hardship for the landlord, the bill directs the court to keep in mind “that the common economic hardship resulting from the COVID-19 virus is not the fault of any one person or group of people and so must ordinarily be born by both landlords and tenants.” If passed, the unlawful detainer moratorium and rent reduction provisions would remain effective until 15 days after a state or local COVID-related state of emergency ends. The full bill can be reviewed here.   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.      

Municipal Governments

Shelter-in-Place Order Sparks Rapid Transition to Digital

| Michael Verity

As San Francisco meets the broad set of challenges presented by the COVID-19 pandemic, San Francisco’s municipal agencies are implementing new processes to help assure that the measures that have been put in place to keep us safe during this challenging time do not hamper the progress of permitting. Procedures at the Department of Building Inspection Electronic Plan Review (EPR) The new online portal for permit submittals facilitates the much-anticipated introduction of Electronic Plan Review (EPR) for Building permits through Bluebeam. The entire department is working together to meet customer requests and facilitate solutions quickly. Smaller projects with limited review needs will be allowed to will resume in-person Over-the-Counter service once the Department reopens, but through EPR, they may also be submitted into a planned streamlined review in early May. With this dual process in place, timelines for processing should continue to shorten, and the public can anticipate commercial tenant improvement, interior demolition, and residential alteration permits to resume to a pre-Shelter-in-Place issuance timeline. While the procedures for EPR have been in development for several months, the Shelter-in-Place Order necessitated its current, rapid implementation. The Permit Center team and DBI Management provided resources last week that will help applicants become acclimated to Bluebeam and the new EPR process. DBI provides a detailed guideline for the EPR Applicant Procedure on their website: https://sfdbi.org/electronic-plan-review-applicant-procedure. Additionally, the Permit Center and DBI hosted a 2-hour video tutorial which can be accessed here: https://www.youtube.com/watch?v=9-x0_OAtIYg. As can be expected with a change in process that is this large in scale, the corresponding reference materials that outline the new processes are very detailed, and some processes are still being finalized. Throughout the transition, the DBI Management along with the Permit Center team have conducted periodic customer updates and Q&A sessions through virtual sessions. The customer update and Q&A, which primarily addressed the implementation of the online portal can be found here: https://www.youtube.com/watch?v=ce7bGgR0C3c. DBI is projecting that they will be able to take submissions to the online portal for all new non-essential projects by early to mid-May. For projects that are being accepted for submittal through the online portal during this time, fillable PDF’s of addenda cards as well as new construction and alteration permit paperwork are linked for easy submission with project plans, calculations, reports, and support documentation. Another important resource that has been posted to the online portal are the guidelines (found here: https://sf.gov/information/how-create-pdfs-your-plans-or-addenda) for the naming conventions of permit documents submitted digitally as well as the required formatting for plan sets. Following the new guidelines for the formatting of plan sets that are outlined on DBI’s online portal is necessary to more quickly allow DBI staff to set up an EPR session through Bluebeam. If an applicant wants to submit a PDF of a scanned physical set of plans not formatted in Bluebeam, staff recommends using 96 dpi resolution for optimal functionality within the session that plan reviewers will be working from. The Permit Center team has stated that they will ask applicants who submit plan sets that do not substantially conform to these formatting guidelines to revise their submittals before staff will move it forward to intake. The Introduction of EPR and the Bigger Picture EPR will allow concurrent review of plan sets. For intake submittals, a building permit will no longer move from station to station as it previously did in a paper format. The development of concurrent review promises to increase the efficiency and speed of the review process for building permits. The Permit Center team also suggests that the ability for multiple disciplines to review a project concurrently will be broadly applied. However, concurrent plan review will not be implemented where one discipline must complete their review of a permit before other disciplines. Consistent with current practices, concurrent review of permits requiring Planning review cannot begin until Planning approvals are granted. While the City plans to eventually integrate all municipal agencies into the EPR process through Bluebeam, it is currently only being implemented on DBI building permits and by DBI satellite offices of other agencies, such as the Department of Public Works, that directly review building permits. The Permit Center team intends to integrate permits through the Department of Public Works-Bureau of Street Use and Mapping next, but only after the DBI workflow and integration is complete. Relatedly, the Planning Department is using Bluebeam to review building permits but have not yet decided whether to use Bluebeam for review of entitlement applications. Updates to Other DBI Processes DBI pre-application meetings are occurring via conference call. Applicants will have to submit pre-application request letters and PDF’s of plans to Jeffrey Ma (jeffrey.ma@sfogv.org) as well as PPC staff (eddie.m.chan@sfgov.org, mandy.lei@sfgov.org, carrie.pei@sfgov.org) via email. Applicants must include a list of the email addresses of all participants in the pre-application meeting in order to guarantee that all participants receive an invitation with the conference call code. Upon completion of the pre-application meeting and receipt of payment, DBI will provide a digital copy of the signed pre-application letter. During Shelter- in- Place, payments for pre-application meetings and permit issuance can be made to DBI by mailing a check made payable to CCSF-DBI with the project address information. Other payments, such as payment of issuance fees, can be made to DBI by sending funds electronically through the Federal Wire System or ACH. Funds submitted electronically should expect an expedited turnaround time. RJR is available to help your teams navigate these changes and work with DBI to effect approvals expeditiously.   Michael Verity is a Permit Analyst for Reuben, Junius & Rose, LLP 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

ousing

Senator Wiener Takes Aim at Single-Family Zoning

| Sabrina Eshaghi

After SB 50 failed to pass earlier this year, Senator Scott Wiener introduced a new housing bill that aims to increase density across the state and provide cities a streamlined process for upzoning certain areas of their communities. Although more modest than the sweeping overhaul that was proposed under SB 50, this bill would effectively eliminate single-family zoning statewide by allowing two to four units per lot depending on the size of the city. In response to concerns that SB 50 interfered with local decision-making, this bill takes a more tempered approach by reducing obstacles to upzoning transit-oriented and job-rich infill areas to allow up to 10 units without prescriptively requiring cities do so. This is consistent with a larger movement to eliminate single-family zoning across the country. In 2018, Minneapolis became the first major city to vote to eliminate single-family zoning policies citywide. Last year, Oregon approved a bill allowing duplexes in all cities with at least 10,000 people and up to four units in larger cities. Austin has eased restrictions that would allow greater density in single-family zoning districts. Seattle was able to ban single-family zoning, but only in about 6% of the city. Most recently, a bill was introduced in Washington state that would eliminate single-family zoning in most cities. Even the United Nations has warned of the social and environmental impacts of single-family zoning. It’s clearly becoming more and more recognized that there are significant drawbacks to single-family zoning districts that outweigh their justification as “preserving neighborhood character.” SB 902 would extend this movement to California by authorizing multifamily housing “by right” on all properties zoned for residential use, with few exceptions. Ministerial approval under the legislation would exempt such projects from CEQA. The number of units permitted per lot depends on the city’s population, as follows: Two units in unincorporated areas and cities with up to 10,000 people; Three units in cities with between 10,000 and 50,000 people; and Four units in cities with more than 50,000 people. Although the bill would allow for increased density, projects would still need to meet local height and setback limits, which would ensure compatibility with the existing scale of development. Projects would also need to meet local demolition standards. The legislation would not apply in very high fire hazard severity zones or where the project would involve the demolition of affordable housing, rent controlled units, housing that has been rented out in the past seven years, or buildings listed in a national or state historic register. Aside from eliminating single-family zoning statewide, the legislation would also ease some of the difficulties associated with rezoning parcels to allow greater density. The legislation would allow cities to rezone parcels for up to 10 units in transit-rich and jobs-rich areas, as well as on urban infill sites. Such rezoning ordinances would not be subject to CEQA, which would significantly streamline the legislative process. This provides cities with a flexible tool they can use to allow higher density projects where appropriate. SB 902 was originally scheduled for the Senate Housing Committee hearing on March 31st, but it was postponed when the legislative session was suspended due to COVID-19. The Senate is currently set to reconvene on May 4th, although that date is subject to change. The path ahead for SB 902 and other housing bills is unclear, as the legislature will undoubtedly be focused on COVID-19 related legislation once they are back in session. Stay tuned. Notable Upcoming Virtual Events: DBI Bluebeam Applicant Training – Tuesday, April 21, 1-3pm – A two-hour virtual training of the electronic plan review process using Bluebeam Studio Projects and Sessions DBI Customer Update and Q&A – Friday, April 24, 11-12pm – A discussion regarding the transition to digital permitting with Patrick O’Riordan, DBI Interim Director, and Melissa Whitehouse, Permit Center Director in the City Administrator’s Office 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.  

City Agencies

Updated City Agency Operations and Procedures During Shelter in Place

| Thomas Tunny

San Francisco Boards, Commissions, and Departments have begun to adapt their operations and procedures in response to the Shelter in Place restrictions, and for land use practitioners, this means project processing activity is on the rise. By contrast, on March 31 the Department of Public Health issued an Order that further restricted allowed construction to the following: healthcare projects directly related to addressing the COVID-19 pandemic; housing and mixed use projects that include at least 10% affordable housing (the City Attorney has interpreted this to mean on-site affordable housing); projects that provide services to vulnerable populations; projects required to maintain safety, sanitation, and habitability of residences and commercial buildings; and construction necessary to secure an existing construction site that must shut down. The March 31 Order also extended the deadline of the Shelter in Place Order from April 6, 2020 to May 3, 2020. Board and Commission Hearings Board of Supervisors:  The Board of Supervisors and Board Committees continue to hold their regular meetings by videoconference.  Board and Committee agendas are being limited to urgent matters, matters subject to statutory deadlines, and matters related to essential services and COVID-19 policies. Planning Commission:  The Planning Commission held its first hearing by videoconference yesterday, April 9.  Hearings are expected to continue on a regular weekly basis every Thursday.  Agendas for now generally are limited to projects concerning essential services and multi-unit residential projects. Historic Preservation Commission:  The Historic Preservation Commission will begin to hold hearings by videoconference April 15. Variance Hearings:  The Planning Department has indicated that the Zoning Administrator intends to hold the April 22 Variance hearing by videoconference, but this has not been confirmed yet. Board of Appeals:  The Board of Appeals has canceled its April 8 and April 15 hearings.  All briefing deadlines still are in effect even if the hearing has been canceled. Planning Department Noticing Procedures and Reinstatement of Enforcement Actions  Planning Code Section 311 Notices Mailed Prior to the Shelter in Place Order (‘Clock’ starts April 7, 2020) All building permit neighborhood notifications (known as “311s”) that had already been issued were placed on hold, and no new notifications were issued, as of March 17 when the Shelter in Place Order first took effect.  On April 7, the Department will resume the ‘clock’ for all neighborhood notifications that were previously issued.  If a project’s Section 311 notification period began prior to the Shelter in Place Order, the Project Sponsor must put a note on the 311 poster(s), or add an additional poster stating that the 311 notice period will be extended by the number of days such notice fell within the original Shelter in Place Order. For example, if a 311 notice started on March 1 and was set to expire on March 31, that notice would continue for another 15 days once the clock restarts on April 7. Project Sponsors should also communicate this extension to any parties that contact them regarding information about the project. Planning Code Section 311 Notices Mailed After the Shelter in Place Order On April 7, 2020, the Department will begin issuing new Building Permit neighborhood notifications (known as “311s”) for essential projects only. Pre-Application Meetings Noticed Prior to the Shelter in Place Order If a project’s Pre-Application meeting is scheduled to take place during the Shelter in Place Order, the project sponsor must post a notice at the site on the meeting date that says the meeting was canceled, but that anyone who wants to discuss the project can contact the project sponsor, along with accurate contact information during the Shelter in Place Order.  This will still allow interested parties to stay aware of a project and engage with the project sponsor going forward. Pre-Application Meetings for Which Notice is Provided During the Shelter in Place Order Project Sponsors should use the standard form, process, and 14-day notice period.  However, they must also include a copy of the project plans in the mailing. They must also e-mail applicable registered neighborhood organizations.  If there is no email address provided on the Department’s list, standard mail is acceptable.  No in-person meetings should be conducted during the Shelter in Place Order. The notice template should indicate a day and time period during which the Project Sponsor will be available to take phone calls from interested parties or host a video meeting.  The applicant should offer both options on the notice. Planning Code Enforcement Notices Mailed Prior to the Shelter in Place Order If a Notice of Violation or Notice of Penalty was issued prior to the Shelter in Place Order, any deadlines to respond to the Planning Department will be paused during the period of the Shelter in Place Order (i.e., March 17 through May 3). All such enforcement deadlines will be reinstated on May 4 and extended by the number of days that fell within the Order. Planning Code Enforcement Notices Mailed During the Shelter in Place Order A Notice of Violation issued during the Shelter in Place Order will not require action to abate the violation until 1) the Shelter in Place Order expires, and 2) all relevant City agencies are operating at a level necessary to abate the violation. Department of Building Inspection (DBI) Permit Processing For essential projects only, DBI began accepting addenda and revised plans for existing building permit applications electronically on April 1, and started working to convert some previously submitted projects from paper to digital files.  DBI is accepting and processing building permit applications where the construction addresses urgent habitability needs. Starting April 9, applicants can submit online for the following expanded list: Completing the permit process for essential and nonessential previously submitted projects (e.g., send addenda, revisions, and requests to convert previously submitted paper plans to electronic plans) Submitting a new permit for the following: Essential construction projects Accessory Dwelling Units Permits or scope that only need Fire plan/life safety review DBI hopes to expand new project and permit intake to a larger universe of both essential and nonessential projects by the end

Covid-19

COVID-19 Business Assistance and Eviction Moratorium

| Mark Loper and Michael Corbett

Local governments, the State of California, and the federal government have or will soon pass a number of measures meant to protect businesses from the economic effects of the coronavirus. This week, we summarize several business assistance programs and available funding sources, as well as San Francisco’s moratorium on commercial evictions. (San Francisco has also put in place residential eviction protections, which we do not address in this summary.) Commercial Evictions In response to the emerging COVID-19 pandemic, on March 16, California Governor Gavin Newsom took the extraordinary step of issuing Executive Order No. N-28-20, authorizing local governments to, in part, effectively halt monetary evictions for commercial tenants through May 31, 2020 unless extended. Two days later, San Francisco Mayor London Breed issued a Fourth Supplement to Mayoral Proclamation Declaring the Existence of a Local Emergency dated March 18, 2020, implementing a temporary local moratorium on the commercial evictions of qualifying tenants (the “Eviction Moratorium”). The following provides a summary of key terms of the Eviction Moratorium and looks at other avenues of equitable relief that commercial tenants may also consider following its expiration or as a means to reduce rent. Eviction Moratorium Rules and Duration The Eviction Moratorium applies to commercial tenants with $25 million or less in combined worldwide gross receipts for the 2019 tax year (each, a “Qualifying Tenant”). This amount will be prorated for Qualifying Tenants that operated for only part of the year. Commercial landlords may not recover possession of a Qualifying Tenant’s premises for non-payment of rent due on or after March 17 without first providing the Qualifying Tenant with proper notice and an opportunity to cure. This required notice must give Qualifying Tenants at least thirty days to cure from the date of receipt of the notice. During the cure period, Qualifying Tenants may either pay rent or provide documentation of its inability to do so due to the “financial impact” of COVID-19. Financial impact is defined as meaning a substantial decrease in business income due to illness, disruption, reduced hours or consumer demand, or temporary closure. If a Qualifying Tenant provides the required documentation, the cure period is automatically extended by thirty days to allow for the parties to engage in the good faith negotiation of a payment plan. There is no guidance on what qualifies as sufficient documentation, creating what appears to be a low threshold for Qualifying Tenants to satisfy. If the parties are unable to agree on a payment plan, the cure period is extended for another thirty days, provided the Qualifying Tenant submits additional documentation of its inability to pay due to COVID. In total, the cure period may be extended in this manner for up to six months. At the end of a Qualifying Tenant’s cure period, if it has not paid all outstanding rent the landlord may commence eviction proceedings. The Eviction Moratorium also does not relieve Qualifying Tenants of their underlying obligation to pay rent or restrict landlords’ ability to eventually recover rent that is otherwise due. Further, the Eviction Moratorium does not preclude landlords from seeking to recover rent through means “other than eviction for non-payment of rent”, which would seem to leave open the door for landlords to immediately seek monetary damages through civil litigation when rent becomes delinquent. However, due to court closures and delays in processing, this remedy is unlikely to be productive. The Eviction Moratorium is effective until April 17 but may be extended an additional thirty days by Executive Order from Mayor Breed. The above-described cure period requirements survive expiration of the Eviction Moratorium. San Francisco’s Office of Economic and Workforce Development has been tasked with developing implementation guidelines for the Eviction Moratorium and may also grant waivers for landlords who demonstrate that an inability to evict nonpaying Qualifying Tenants “would cause significant financial hardship (e.g. default on debt or similar enforceable obligation).” In negotiating payment plans with Qualifying Tenants, Landlords should anticipate the potential duration of cure periods for Qualifying Tenants they lease to and evaluate their own likelihood of being granted a waiver. The Eviction Moratorium Expired – Now What? As mentioned, the Eviction Moratorium does not mean Qualifying Tenants are now completely off the hook for paying rent while the Eviction Moratorium is in effect, as commercial landlords retain the right to collect all delinquent rent and may still seek non-eviction relief. Considering this eventuality, commercial tenants and landlords alike may wonder what other avenues of relief commercial tenants might seek on the basis of financial hardship from COVID-19. These interested parties should first look to the language of their lease. While uncommon in commercial leases, the presence force majeure clauses should be considered.  Also, the legal theories of frustration of purpose, impossibility or inability to perform clauses in real estate contracts and agreements may be applicable. In eviction or other civil proceedings to recover rent that became due as early as March 2020, commercial tenants (whether Qualifying Tenants or not) should be expected to assert similar equitable defenses, while landlords will posit their own equitable arguments of fairness. It remains to be seen how the courts will handle and evaluate these claims. Finally, given how quickly state and local governments have moved to place a moratorium on monetary evictions, it remains to be seen if similar executive orders or legislation will be enacted with respect to other commercial lease and/or contract provisions, non-monetary or otherwise. Business Assistance Programs Following is a summary of state and local assistance programs to aid business during the coronavirus emergency. The federal stimulus bill is still being drafted but it is expected to pass within days; we have sourced news articles for its business and employee protection measures. SAN FRANCISCO Deferred Business Taxes for Small Businesses: For businesses with up to $10 million or less in gross receipts, the City is deferring payment of quarterly business taxes—gross receipts, payroll, commercial rents, and homelessness gross receipts—by nine months, from April 30, 2020 to February 2021, with no interest or penalties.

City Agencies and Shelter-in-place

City Agencies During Shelter-in-Place

| Tuija Catalano

We hope that everyone is staying healthy and safe.  Pursuant to the San Francisco and Bay Area Shelter-in-Place Orders, our physical offices are currently closed.  However, our attorneys and staff are all working remotely, and are connecting with clients and city staff members via email and phone. In this week’s e-update, we wanted to summarize the status of public hearings for various San Francisco boards and commissions, and provide an update to the way in which public meetings are held by many other local jurisdictions in response to COVID-19. San Francisco Public Meetings and City Departments Board of Supervisors (BOS):  Both the full Board and Committee meetings will continue to be held.  Board President Yee has asked the Supervisors not to schedule non-essential legislation for hearings, instead allowing the Board to focus on matters that have statutory deadlines or are otherwise necessary.  Appeal deadlines and hearings before the BOS are continuing.  The Board members have an option to attend the meetings in person or via telephone, and member of the public are encouraged to submit comments in writing.  BOS Clerk’s Office remains open. Planning Commission (PC):  PC hearings have been cancelled at least until April 9.  Those projects that were scheduled for any of the cancelled dates will need to be rescheduled. Historic Preservation Commission (HPC):  HPC hearings have been cancelled at least until April 9. Planning Department staff:  Most Planning staff members are working at reduced capacity remotely.  This means that project application processing, issuance of PPA (Preliminary Project Application) letters, environmental review, and other processes will continue, with the exception that no in person meetings will be arranged. Planning Department staff are scheduling telephone and videoconferences in lieu of in-person project review and other meetings. Board of Appeals (BOA):  Appeal filing deadlines still apply, and since the Board office is closed any appeal must be filed by phone or email.  The March 18 hearing was cancelled, and the April 1 and April 8 hearings have also been cancelled.  The next regularly scheduled hearings on April 15, May 6 and May 27 are currently scheduled to proceed.  The parties to the appeals have been asked to submit their appeal briefs via email, and the original briefing schedules still apply even to appeals that are being rescheduled to a future date. Zoning Administrator:  The March 25 hearing has been cancelled, and the next regularly scheduled hearing on April 22 is currently scheduled to proceed. Department of Building Inspection (DBI):  DBI offices are closed until April 9.  It is our understanding that some emergency inspections are taking place, and the Mayor’s Office is working on a plan that will provide for continued permit review (by DBI and other applicable plan check agencies) for housing projects, which the Shelter-in-Place order allowed to proceed. Other Bay Area Cities Within the last week, Governor Newsom has issued two executive orders that address local municipalities ability to hold public meetings during the current pandemic.  Tuesday’s Executive Order No. N-29-20 provides further flexibility to Brown Act requirements, allowing cities and other governmental bodies to hold public meetings via teleconferencing without the need to also provide a physical location for the meeting. Many cities around the Bay Area have cancelled various commission and committee meetings, however, most cities and counties must hold city council and county board of supervisors meetings for necessary actions.  Many cities have already held city council meetings via teleconference, and will likely continue to do so.  Pursuant to Gov. Newsom’s Exec. Order, public meetings still require advance noticing per normal requirements (i.e. 72 hours advance notice for regular meetings, and 24 hour notice for special meetings), and members of the public must still be provided an opportunity to provide public comment.  To the extent cities decide to hold public meetings entirely via teleconferencing, each jurisdiction may end up adopting slightly different methods on the way in which project sponsors can present a project that is being considered by the council, to the extent such items are still scheduled for the time being. Many Bay Area jurisdictions have also declared local emergencies (in part in order to be sure that the local jurisdictions have the ability to obtain FEMA and other funding that may become available), and have closed their offices for all but essential services. Looking Beyond – COVID-19’s Impact on Local Ballot Measures COVID-19 is already shaping the November 2020 election, and it is expected to alter the content for the local November ballots.  One such example is the Faster Bay Area measure.  The March 2020 ballot contained two more localized transportation measures (the Sonoma-Marin Rail Transit Measure and Contra Costa Measure J), both of which failed.  The November 2020 ballot was anticipated to contain a regional, 9 county-wide one-cent sales tax measure that would have provided funding for transportation and transit projects for the greater Bay Area.  Per multiple newspaper articles this week, the proponents of the regional “Faster Bay Area” measure have decided to not move forward with the ballot measure in November due to COVID-19. COVID-19 is also impacting the implementation of previously passed measures.  San Francisco’s Office of the Treasurer & Tax Collector announced last week that the estimated quarterly tax payments for the Gross Receipts Tax, Payroll Expense Tax, Commercial Rents Tax, and Homelessness Gross Receipts Tax, which would otherwise be due on April 30, 2020, are deferred for taxpayers that had combined San Francisco gross receipts in calendar year 2019 of $10M or less.  Instead, these quarterly estimated tax liabilities must be paid along with annual tax payments for tax year 2020, which will generally be due by March 1, 2021. We are staying abreast of rapid changes that San Francisco, other cities, and the state continue to implement on an emergency basis. We’ll keep you posted in our weekly updates and will remain available to serve our clients for the duration.   Authored by Reuben, Junius & Rose, LLP Attorney Tuija Catalano The issues discussed in this update are not intended to be legal

Mayor Breed Takes Proposal to Streamline Affordable Housing to the Voters

| Tiffany Kats

Mayor London Breed recently introduced the “Affordable Homes Now Initiative,” which would streamline approvals for both 100% affordable housing projects and market-rate projects that exceed the City’s affordability requirements. The proposed ballot measure needs signatures equivalent to at least 10% of the total number of registered voters to be on the November 2020 ballot. Eligible projects would be ministerially approved if they meet the requirements summarized below. Because ministerially approved projects are not subject to environmental review, the ballot initiative would dramatically shorten approval timelines and mandate that both the Planning and Building Departments approve eligible projects within 180 days of submittal. Eligibility Requirements Affordability 100% affordable housing projects include residential buildings, as well as mixed-use residential developments with ground floor nonresidential uses. For such projects, all of the residential units must be affordable with up to a maximum overall average of 120% area median income (“AMI”) across all units. However, the maximum rent or sales price for these affordable units cannot be higher than 20% below median market rents or sales prices for the neighborhood in which the project is located. The ballot measure would also extend streamlined approvals to increased affordability housing projects (“IAHP”) as follows: Projects with less than 25 units must exceed the on-site affordable housing requirement under the City’s Inclusionary Affordable Housing Program (“Inclusionary Program”). Projects with 25 or more units must comply with the Inclusionary Program and provide additional on-site affordable units equal to 15% of the number of units required under the Inclusionary Program. For example, a 100-unit project with a 24% on-site requirement would be required to provide 24 on-site units under the Inclusionary Program. In order to qualify as an IAHP, an additional 15% of the required 24 units, or 4 units, would need to be provided on-site for a total of 28 below market rate units. For both 100% affordable projects and IAHPs, each on-site unit cannot exceed a maximum purchase price or rent of 140% AMI. For rental projects, the rent cannot exceed 30% of the applicable household income limit; For ownership projects, the annual housing cost cannot exceed 33% of the applicable income limit. Finally, the units must be restricted as affordable for the life of the project, or a minimum of 55 years, through a recorded regulatory agreement. Code Compliant Any eligible housing project must also comply with objective standards of the Planning Code or state law, including height and bulk requirements. Conditional use requirements that might otherwise require Planning Commission approval for height or large lot developments, for example, are waived with the exception of conditional uses for non-residential use, parking, modification of dwelling unit mix requirements, and location of curb cuts. In addition, project sponsors of eligible projects may request certain exceptions as-of-right, and available density bonus programs can be used in conjunction with this streamlining measure. Additional Requirements Finally, eligible affordable housing projects cannot involve the removal of existing residential units, demolition of certain designated historic buildings, or construction on lots under the jurisdiction of the Recreation and Parks Department, and must be in a zoning district that allows dwelling units. Projects with more than 30 units must also pay prevailing wages to construction workers. Streamlined Ministerial Approval Prior to submitting a development application for a streamlined affordable housing project, the project sponsor must place a poster at the property for 30 days, describing the project and stating that the project is expected to be subject to the streamlined review process. After a complete development application is submitted, the Planning Department would have a 60-day period to: (1) determine whether the project is eligible for streamlining and (2) complete design review. Projects that meet these eligibility requirements would be ministerially approved and exempt from any discretionary approvals and review by the City, including by the Planning Commission, Historic Preservation Commission, Arts Commission, Board of Supervisors, and Board of Appeals. Any building permits must also be ministerially approved by the Planning Department and issued by the Department of Building Inspection within 180 days of submittal of a complete development application. The Board of Appeals would still have jurisdiction over appeals of building permits issued to eligible affordable housing projects, but would only narrowly consider whether the permits comply with objective standards in the Building Code. Because these projects would be approved ministerially, environmental review under CEQA would not apply. Project opponents often appeal CEQA determinations to the Board of Supervisors, resulting in both subjective political decision-making and significant delays to entitlement schedules. As a result, the ballot initiative would allow eligible affordable housing projects to be approved much faster than they are currently. We will continue track the progress of Mayor Breed’s proposed ballot measure. Authored by Reuben, Junius & Rose, LLP Attorney Tiffany Kats The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Office Use

Supervisor Ronen Proposes to Remove Most Office Uses in UMU Districts

| Tara Sullivan

On Tuesday, February 11th, Supervisor Ronen introduced legislation that would greatly curtail the amount of office use that can go into buildings in Urban Mixed Use (“UMU”) Zoning Districts.  The legislation, available here, will prohibit all general office and allow “client-oriented” office uses at the ground floor with a Conditional Use Authorization. UMU Districts were created through the Eastern Neighborhoods Area Plan, adopted by the Board of Supervisors in 2009.  The intent of the UMU Districts was to function as a buffer zone between the more restrictive residential and neighborhood commercial districts and the industrial PDR districts.  Uses such as light manufacturing, arts activities, laboratory, business service, and retail are encouraged. Housing is also permitted but is subject to higher affordability requirements.  UMU Districts are primarily located in Eastern Mission, Potrero Hill south of 16th Street, Showplace Square/West SoMa, and the Dogpatch neighborhoods. These areas have historically contained warehouse style buildings that contain a mix of uses interspersed with housing. The intent in UMU Districts is to locate office use on the upper floors, keeping the ground floors available for more “public-facing” uses, such as traditional retail.  Only office uses that have a “client-oriented” business model, such as doctors offices, accountants, real estate brokers, and the like are permitted at the ground floor. General office use, such as an advertising agency and technology offices, are limited to the upper floors. Currently, office uses are regulated in UMU Districts through “vertical controls” based on the height of a building.  A two-to-four story building can have 1 floor of office use; five-to-seven story building can have 2 floors of office use; and 8 or more story buildings can have 3 stories of office use. Under Supervisor Ronen’s proposal office uses would be prohibited on the upper floors throughout UMU Districts.  Exceptions would still exist for qualifying landmark buildings.  The other notable change is that “client-oriented” office uses would be allowed at the ground floor but require a Conditional Use Authorization from the Planning Commission.  As proposed, there are no grandfathering provisions for projects currently under review. Since the legislation was recently introduced, there are no Planning Department or Legislative Analyst reports or recommendations available.  The Planning Commission must review and make a recommendation on the proposed legislation within 90 days, after which it will return to the Board of Supervisors.  We will keep track of this legislation and provide updates when they become available.     Authored by Reuben, Junius & Rose, LLP Attorney Tara Sullivan The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivisions and condominium work.  

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