​Controller’s Office Releases Inclusionary Housing Final Report In June 2016, San Francisco voters passed Proposition C, a Charter Amendment which made significant changes to the City’s established Inclusionary Housing program. Proposition C made a number of changes to the program, including raising the affordable housing required for on-site affordable housing, off-site affordable housing, and the in-lieu fee.  Following the passage of the Charter Amendment, the Board of Supervisors charged the Controller’s Office with preparing a report on the economic feasibility of increased inclusionary housing requirements. The Controller’s Office convened a Technical Advisory Committee (TAC), with representatives appointed by the Mayor and Board of Supervisors, to assist with the report.  The report was issued this week.  The general thrust of the report’s recommendations is to treat rental and for-sale housing differently, and to reduce the affordable housing requirements.  The report recognizes that increased inclusionary housing requirements result in reductions in the supply of market rate housing, and increases in housing prices.  A summary of the report’s recommendations is as follows: The City should impose different inclusionary housing requirements on rental and for-sale (ownership) properties. The City should set the initial onsite requirements from 14%-18% for rental projects and 17%-20% for ownership projects. The City should set the inclusionary fee option at 18-23% for rental and 25-28% for ownership to maintain equivalence with previous on-site recommendations. The City should commit to a 15-year schedule of increases to the inclusionary housing rate of 0.5% per year. The City should impose additional affordability requirements for any 80/20 project financed through the City’s financing approval process. Consistent with current practice for any project to which inclusionary requirements apply, the City should allow projects that are utilizing the State Density Bonus to combine provision of on-site units for the base portion of the project with payment of the fee for bonus portion of the project. The Controller and TAC should reconvene in 3 years to reconsider feasibility, density bonus, and other issues, and produce an updated report. Two members of the TAC submitted a dissent to the report’s recommendations.  A copy of the report, including the dissent, is available here:  Final Inclusionary Housing Report February 2017 Prohibition of gym and massage uses in PDR Districts City policy makers are considering yet another restriction on uses in Production, Distribution and Repair (PDR) zoning districts.  The Mayor and Supervisor Ronen have introduced legislation amending the Planning Code to prohibit gym and massage uses in the PDR districts.  Existing law allows gym and massage (foot/chair) uses in these districts, and permits with a conditional use authorization massage establishment uses. Planning Code Section 210.3C currently allows the Planning Commission to permit certain otherwise prohibited uses (specifically office and institutional uses) within the PDR-1-D (Design) and PDR-1-G (General) zoning districts, if the proposed project also includes new PDR uses, covering at least 1/3 of the total gross floor area developed.  The proposed legislation would allow new gym uses within the PDR districts as provided in Planning Code Section 210.3C. Residential Expansions Planning Code Section 317 controls the loss of residential units through merger, conversion and demolition.  The demolition provisions of Section 317 have been problematic.  If a residential unit is being demolished, a conditional use authorization from the Planning Commission is required (with certain exceptions in the RH-1 Districts), even if the unit is being replaced with one or more dwelling units.  Trying to avoid this conditional use requirement has led to problems determining whether a dwelling unit is actually being demolished, or is “tantamount” to demolition. To address this problem, the Planning Department is considering doing away with the tantamount to demolition standards, and instead linking the conditional use requirement to the floor area of the proposed dwelling unit.  The Department originally had set the floor area requirement at 3,000 square feet, but that proved to be problematic City-wide, with the varying sizes of residences and properties.  Now, the Planning Department is considering an FAR-based standard.  A new standard such as this should be helpful in simplifying the Section 317 conditional use requirements and, hopefully, helping avoid unnecessary conditional use hearings. The Planning Department is targeting this summer for adoption of the new controls.  We will continue to monitor the proposals, and keep readers apprised of developments. 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 Law Making ADUs Easier Takes Effect This week’s update summarizes a new law requiring cities and counties to approve some accessory dwelling units (“ADUs”) in residential districts without requiring public hearings. The new law mandates “ministerial” approval so long as the ADUs meet a number of standards; grants relief from numerical density limits for qualifying ADUs; and also attempts to lower the costs of construction. Sponsors and advocates hope the bill, which took effect on January 1, 2017, can help ease California’s housing shortage by incentivizing this important type of housing. In San Francisco, Supervisor Peskin has wasted little time trying to use this new tool to add smart housing, already proposing an ordinance implementing the law. California Eases Restrictions on Infill ADUs One of the more celebrated pieces of legislation passed by the California legislature last year in pro-housing circles was SB 1069, which among other provisions is aimed at easing restrictions on the costs and uncertainty of adding ADUs on infill sites. It includes a number of common sense approaches to removing barriers on production of ADUs. At the same time, its standards attempt to limit impacts on surrounding homes and ensure that the ADUs are not added in incompatible locations SB 1069 requires all local agencies to “ministerially” approve qualifying ADUs that comply with a host of standards. The location for the ADU must be on a property zoned for single-family or multifamily use that already contains an existing single-family home. The ADU unit cannot be sold separately, but it can be rented. The size of the new unit cannot exceed 50% of the existing single-family home or 1,200 square feet, whichever is larger. But it can be located within the “living area” of the existing dwelling, within an attached secondary structure, or in an existing or new detached structure. In denser residential parts of the state, the most challenging standard is complying with all requirements relating to height, setback, lot coverage, “and other zoning requirements” generally applicable to residential construction. Setback and lot coverage requirements often combine to significantly limit the buildable area in residentially-zoned districts, so it might be challenging for many lots with single family homes to find a location where a detached ADU structure would meet all existing Planning Code or Zoning Code requirements. A few other notable aspects of SB 1069 include exempting qualifying ADU from density restrictions, waiving separate parking requirements for ADUs within ½ mile of public transit, and waiving utility connection fees in most situations. Tackling Implementation: Supervisor Peskin’s Ordinance Supervisor Aaron Peskin, who since returning to the Board of Supervisors has been very active on ADU-related legislation, just last week introduced an ordinance implementing SB 1069 in San Francisco. Supervisor Peskin’s ordinance contains a few fairly important implementations, taking advantage of SB 1069’s invitation for cities to adopt less restrictive requirements than the state law’s standards. Most important is a requirement that the Planning Department approve a qualifying ADU pursuant to SB 1069 within 120 days from receipt of the application without modification or disapproval, cutting down on an approval process that due to low staffing levels and a (still) unprecedented workload can take far longer in some cases. It reiterates that no additional parking would be required for a qualifying ADU, and that if an existing parking space is eliminated a replacement space can be located anywhere on the lot, including uncovered and tandem spaces. It exempts garages converted into ADUs from otherwise-applicable setback requirements. It also prohibits the use of these ADUs as short-term rentals, not at all surprising considering one overarching purpose of SB 1069 is to add rental housing. The ordinance does appear to have a few ambiguities and potential inconsistencies with SB 1069, at least in its initial version, which can be easily clarified. For example, SB 1069 applies in all single-family and multifamily residential districts, but the proposed ordinance only applies in single-family zoning districts (RH-1). It would seem the ordinance should also be extended to RH-2, RH-3, RM, and RTO districts, and that Subsection (4) of San Francisco Planning Code § 207 should either be amended accordingly or refined to provide the same relief that the ordinance would extend to single-family districts. In addition, SB 1069 allows ADUs in new detached structures to be placed on a lot, but the proposed legislation only contemplates ADUs constructed entirely within the built envelopes of existing structures. We will continue to track this ordinance as it makes its way through City Hall. 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.

​This week’s email provides a bit of color on two land use related topics that have made their way to City Hall in the past few weeks. We analyze if the Board of Supervisors actually “overturned” the approvals for 1515 South Van Ness or just kicked the can down the road a few months, and discuss the Transportation Demand Management program’s second hearing at the Board’s Land Use Committee. 1515 S. Van Ness One of the more under-reported angles of the Board of Supervisors’ action on the project at 1515 South Van Ness is what exactly the Board voted to do. Some articles implied that the Board rejected the 1515 South Van Ness project outright, tossing out its CEQA review and sending that sponsor back to square one. While undoubtedly a surprising blow to the project, the Board’s decision was actually a bit more nuanced. This project received a Community Plan Exemption under CEQA, which entails a detailed analysis comparing the project against the Eastern Neighborhoods EIR, and usually includes a number of project-specific background technical environmental studies. It is a common misconception that projects which receive a “CPE” did not undergo any environmental review; that couldn’t be further from the truth, as many sponsors know all too well. In fact, this project’s environmental review began in late 2014, more than a year and a half before its CPE was issued. In any event, the Planning Department’s determination was appealed to the Board of Supervisors, which initially adopted a motion reversing the Planning Department’s CPE determination. But crucially, the Board clarified in a subsequent motion adopted three weeks later that it did not intend to overturn the CPE itself, but instead to direct that further study be undertaken to determine if the project would result in social or economic change that could lead to physical impacts on the environment “with regard to traffic or air quality” within the Calle 24 Latino Cultural District. The Board formally rescinded its initial motion, and directed Planning Department staff to provide additional information and analysis on this topic before the Board would render a final decision. So the project is still pending and requires one more study before it can get back to the Board. Traffic and air quality are both topics that needed to be studied in the project’s original CPE, so it will be interesting to track what kind of new information and analysis is prepared on this issue. A pro-mixed income housing optimist would point to the significant negotiations that went on before the Project’s initial approvals which led to a robust affordable housing component, and unfortunately heated public comment language on the heels of a profoundly disappointing election, and conclude that the project should move forward—pending, of course, the results of the study. The TDM Program Stalls at Land Use This past Monday marked the second hearing for the Transportation Demand Management (“TDM”) Program at the Board of Supervisors’ Land Use Committee, and for a second time Land Use did not forward it on to the full Board for final authorization. A little background: the Planning Department has been working on the TDM Program for a few years, and the Planning Commission recommended approval to the Board in early August. Supervisor John Avalos became the ordinance’s sponsor late in the fall, presumably intending to get the ordinance passed before he is termed out in January. As we detailed in our email alert last week, the TDM Program is ambitious in its scope and fairly complicated in its implementation. There was agreement among the Land Use Committee members that the ultimate policy goals of the Program—weaning San Francisco’s residents and people working in the city from dependence on private cars—were commendable. And to Planning Department staff’s credit, it has worked very diligently in the last few weeks to refine the program and engage with all interested parties, including updating methodology leading to increased neighborhood parking rates and phasing in implementation of the Program for projects in the pipeline. But the feedback from a wide range of interest groups, including non-profits and community housing organizations as well as the development community, gave the Supervisors pause. Ultimately, the Committee directed Planning Department staff to continue the hard work of refining the Program to make sure it addressed a few different categories of concerns, and to come back in late January with a refined program. Areas for further study included application to smaller residential projects; the proportional impact on very large projects; refining some of the existing Program measures; and considering adopting new measures to increase the utility of the Program and feasibility of compliance. The most interesting aspect of the TDM Program is its flexibility, and ultimately that may have been one reason it is still at Land Use. The Planning Commission will have discretion to change the details of the Program by motion without returning to the Board of Supervisors as it sees fit. On the one hand, providing flexibility to ensure that the Program can be successfully implemented by the wide range of projects that will be subject to it is vital to its ongoing utility over time. But Supervisors heard testimony that compliance may indirectly hinder a diverse range of projects from moving forward, or at least create an uncomfortable degree of uncertainty. Despite staff’s assurances that it could incorporate changes addressing these concerns after the Board approved the Program, the Land Use Committee members ultimately decided they wanted to see as close to a final product as possible before passing it on. We’ll provide an update on TDM in late January. 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

In our last update, we reported on two of the ballot measures presented to the voters on the November 8 ballot.  An additional measure was Proposition W, which was approved by the voters and authorized an increase in the Real Property Transfer Tax on properties sold for at least $5 million. The Real Property Transfer Tax is imposed on any transaction that results in a “transfer” of real property in the City. The definition of a “transfer” is broad and includes certain transfers of corporate stock, partnership shares, or limited liability company interests, if the transfer would constitute a “change of ownership” under California law. Proposition W increased the Real Property Transfer Tax rate from 2% to 2.25% on properties with a value of at least $5 million and less than $10 million; from 2.5% to 2.75% on properties with a value of at least $10 million to less than $25 million; and 2.5% to 3% on properties with a value of at least $25 million. Measure W did not include an effective date for the Transfer Tax increase, and thus the increase will become effective 10 days after the election results are certified, which likely will correspond with an effective date in early December. TDM Update On August 4, 2016 the Planning Commission approved the proposed Planning Code Amendment for the City’s new Transportation Demand Management (TDM) Ordinance.  The Ordinance is now scheduled to be heard at the Board of Supervisor’s Land Use and Transportation Committee on Monday, November 28.  If approved, it will then go to a hearing before the full Board of Supervisors for adoption. TDM is a transportation policy measure that seeks to reduce automobile use.  The new TDM Ordinance will apply to most new development projects as well as some changes of use to existing property.  Smaller residential projects – those with nine units or less – would not be subject to the legislation.  Residential projects that are 100 percent affordable housing would be exempt. Project sponsors will be required to submit a TDM Plan with their first development application. The TDM Plan is required to document the project’s compliance with the TDM Program Standards.  Some projects will be able to meet the Program Standards by complying with TDM measures already required by the Planning Code.  Those projects that need to go beyond Code requirements to meet their targets will choose from a menu of TDM options. These TDM options include: subsidize transit passes; subsidize bike share and/or car share membership; increased on-site car share supply; increased bicycle parking; reducing on-site parking supply; real-time transportation information displays; and family-specific benefits like round-the-clock access to car seats for car share vehicles. The proposed TDM Program has raised some concerns in the development community.  Although the goal of reducing automobile use is laudable, the TDM Program will impose yet another significant cost on development, including projects providing much-needed housing.  In addition, the Program may require some projects to reduce the amount of parking in order to satisfy the assigned TDM measure value, which will be based primarily on the number of parking spaces provided by the project regardless of its location or overall parking efficiency.  Some of the TDM measures are relatively easy to incorporate into a project, however, certain larger projects with an overall higher parking count may be required to make significant adjustments, which may also include reduction of overall parking count to not exceed existing neighborhood parking rates. We will continue to monitor the TDM Ordinance as it proceeds through the legislative process. 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.

​As we wait for the dust to settle from the elections and for the official results to be published, what we do know is that City Hall in San Francisco will welcome three new Supervisors in January for Districts 1, 9 and 11, with current Supervisors Peskin, Breed and Yee expected to retain their seats for Districts 3, 5 and 7, respectively.  Pending the final and official results for the State Senate race for District 11, one other San Francisco supervisorial district will get a new supervisor after the Mayor appoints an interim supervisor to serve the remaining term for either Supervisor Wiener or Supervisor Kim.  The ballot in San Francisco contained a number of land use measures, including Measure E that appears to have passed overwhelmingly and will result in the transfer of the responsibility for street tree maintenance to the City instead of the abutting property owners.  Pending confirmation via the official results, few other land use measures appear to be heading for passage including those discussed below. Measure O – Candlestick/Hunters Point Exemption from Prop. M Office Allocation Requirements Since the approval of Prop. M in 1986, new office developments in excess of 25,000 sf have required an allocation of office space to be granted as part of their project approvals.  The Prop. M office allocation pool is divided into a large pool (for projects with more than 49,999 sf of office space) and a small pool (for projects with 25,000-49,999 sf of office space), with an additional 875,000 sf and 75,000 sf of new allocation added to the large and small pool, respectively, every year on October 17th.  As of today, both office allocation pools have an existing amount of square footage available for future allocation.  However, if the pending and pipeline projects (i.e. those projects that have submitted an entitlement, environmental or other application to the Planning Department) were deducted from the current amounts (i.e. if all of them were approved), the large office allocation pool would be almost 7 million square feet in the negative based on today’s figures.  Measure O proposed to exclude any office development in the Candlestick and Hunters Point project areas, which per previously approved redevelopment plans include approx. 5 million sf of office development, of which 800,000 sf was approved with a priority status over most other office developments that require Prop. M office allocation.  Pending final results, Measure O appears to be passing with approx. 5-point margin, which means that the Planning Code will be amended to include an exemption from Prop. M requirements for office development in the Candlestick and Hunters Point project areas.  None of the approx. 5 million sf of office development for the Candlestick and Hunters Point areas has been included in the pending or pipeline calculations that already add up to a deficit of approx. 7 million sf, and thus while Measure O impacts directly only a certain area of the City, the passage of Measure O means that Candlestick and Hunters Point office development will not be competing with other pending, pipeline or future office developments for the Prop. M allocation. Measure X – PDR Preservation and Replacement Requirements Measure X was placed on the ballot by Supervisors Avalos, Breed, Campos, Kim, Mar, Peskin and Yee, and proposed certain preservation and replacement requirements for PDR uses in the Mission, Eastern SoMa, Western SoMa and the future Central SoMa plan areas.  Pending the final results, the measure appears to be passing with an approx. 19-point margin.  The measure will result in an amendment to the Planning Code whereby conversion of existing uses that contain either ≥ 5,000 sf of PDR use, ≥ 2,500 sf of Institutional Community use, or any amount of Arts Activities use, will be required to include replacement of the said uses up to a ratio of 1 for 1 depending on the zoning designation.  Several grandfathering provisions are included in the measure, including exemptions for projects approved by the Planning Department prior to June 14, 2016, and projects proposing conversion of less than 15,000 sf of PDR, Institutional Community or Arts Activities use for which an environmental evaluation application was submitted prior to June 14, 2016.  Measure X authorizes (but does not require) the Board of Supervisors to enact an in lieu fee and/or off-site replacement options as alternative methods for compliance. Proposed Reduction to Short-Term Residential Rental Limits Beyond the election into currently pending legislation, the short-term rental of a residential unit for less than a 30-day period is currently governed by the Residential Unit Conversion Ordinance and such rentals are allowed only for units that are registered with the City’s Office of Short Term Rentals.  As of today, unhosted rentals (i.e. those without the presence of the permanent resident) are subject to an annual limit of 90 days and hosted rentals (i.e those during the presence of the permanent resident) are unlimited in terms of the annual rental dates.  Pending legislation would change these time limits for new rental units (i.e. those that were not registered prior to October 11, 2016) so that both unhosted and hosted rentals would be subject to an annual limit of 90 days.  The legislation is currently pending at the BOS’ Land Use and Transportation Committee and could be heard in mid-November or anytime thereafter. Proposed TDM Program – Legislation Update The proposal to adopt a Transportation Demand Management (TDM) program is anticipated to be heard by the BOS’ Land Use and Transportation Committee in the near future.  The TDM program, as currently drafted, would apply to most new construction projects with more than 10 dwelling units or more than 10,000 sf of non-residential area, and to change of use projects with more than 25,000 sf of existing area.  The current version of the legislation does not include any grandfathering provisions for pending projects that have not yet been approved.  Projects that will be subject to the TDM program are assigned a certain “point” value based primarily on the amount of

​With the housing crunch in San Francisco, there has been a push to allow new residential units to be legalized in areas such as basements, storage areas and garages.  After extended political wrangling between Supervisors Peskin and Farrell earlier this year regarding the nature of an expanded program to legalize Accessory Dwelling Units (ADU’s), compromise was reached, and new legislation went into effect on September 4, 2016. Previous legislation allowed legalization of ADU’s in District 8 (including the Castro and Noe Valley), and then in District 3 (including Chinatown and North Beach), but the program was not available in other Districts.  Under the new legislation, legalization is available City-wide in Zoning Districts permitting residential use, with the exception of RH1-(D) Districts, which are subject to separate State Law requirements. What is Allowed ADU’s, also known as in-law units, are defined as new dwelling units constructed entirely within the built envelope of an existing building in areas that allow residential use, or within the existing built envelope of an authorized auxiliary structure on the same lot, as it existed three years prior to application. In buildings with four or fewer existing units, one ADU may be added.  In buildings with five or more existing units, there is no limit to adding ADUs as long as Planning and Building Code requirements are met.  Requirements for rear yard, parking, open space, and density may be waived by the Zoning Administrator, and exposure requirements may be reduced. ADU’s requiring minor expansions in the building envelope are permitted where they are under cantilevered or column supported rooms, under decks that are no more than 10 feet in height above grade, or require infill into light wells if not visible from off-site and are against a blank neighboring wall. However, these expansions cannot encroach into the rear yard and do require neighborhood notification under Section 311 or 312, and, therefore, are subject to discretionary review by the Planning Commission. An ADU is not to be constructed using space from an existing dwelling unit, and ADU’s in Neighborhood Commercial Districts and the Chinatown Community Business or Visitor Retail Districts may not reduce ground floor commercial space.  Moreover, buildings with recent evictions are excluded.  Therefore, individual properties should be evaluated for eligibility before owners dive in to the application process. Rent Control and Sale ADU’s added to rent control buildings are subject to rent control pursuant to a Costa Hawkins agreement with the City.  In addition, ADU’s are not eligible for short term rentals such as through Airbnb. An ADU may be sold where it is added to a building, without an existing rental unit, that was already a condominium three years prior to July 11, 2016, and has had no evictions within the 10 years prior to July 11, 2016.  ADU’s added in buildings undergoing seismic retrofitting maintain eligibility to enter the condo-conversion program if one becomes available in the future. Permitting ADU permits require an intake through the Planning Department and an application fee.  However, they do not require neighborhood notification unless an expansion of the envelope is requested, as discussed above.  Childcare fees and any impact fees for the plan area will apply, and are due when the permit is issued. With the significant increase in scope of the ADU program, the City has received numerous applications, and is likely to receive many more this fall and winter.   The City anticipates that processing will take four to six months, but delays in processing should be anticipated (additional applications such as neighborhood notifications, variances and conditional use permits will add more processing time).  If adding an ADU to a historic building presents challenges for your project, having a pre-application meeting with DBI can help you work through Code-compliant solutions prior to submittal. 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.

​A few weeks ago, the Planning Department staff released the new draft Urban Design Guidelines. This was a pretty comprehensive draft, and it’s not quite clear when the final version will be adopted. But it does seem to be a relatively significant effort and gives us an opportunity to talk about the state of design review in San Francisco from our perspective. On the department website for the new guidelines, under the heading “Current Challenges,” the Department states that “at this time, the location, application, and relationship between existing design guidelines are not readily apparent to planners, the public, or project representatives. Some can be found in area plans in the urban design element of the general plan but they may be relatively unknown and inconsistently or rarely applied. A lack of organizational consistency in their regulatory role or authority maybe unclear, and they span the range from extremely strict to indirect, vague, or simply outdated.”  The staff goes on to explain that over the last couple of decades, at least one set of design guidelines, the Residential Design Guidelines, have been somewhat consistently applied.  Other various guideline documents and attempts at clarifying and reforming the process or providing clear design review guidance have not been so successful. The 70 page draft currently circulating for public review is filled with details and new approaches, illustrations and examples, a new glossary of terms so that we can all be talking the same language.  It is organized into three general areas (Site Design, Architecture and Public Realm), there’s no question that serious effort went into this document.  Whether it will make any difference at all in how things work in San Francisco is another story because (1) it doesn’t appear to try and consolidate all of the other competing design guidelines staff has created over the years, and (2) doesn’t address what we believe is a serious procedural problem – that ultimate decision-makers (the Planning Commission) are rarely involved in design review at all.  With the exception of mega projects that get the occasional “informational hearing” to keep the Commission informed of design progress, the vast majority of projects are seen by the Commission only once: at the very end when they are asked to approve it. To their credit, staff is clearly trying to create an “overarching document for design review throughout the City.”  But we need to keep in mind that there are already many different design guidelines that have been developed by Planning staff over the years: guidelines for formula retail design, guidelines for ground floor residential design, guidelines for industrial area design, guidelines for storefront transparency, guidelines for western SOMA design standards, guidelines for window replacement, guide to San Francisco green landscaping ordinance, standards for storefront transparency, guidelines for awnings canopies and marquise, design guide standards for bird safe buildings, and other neighborhood specific guidelines and zoning controls.  The point I am making as that while staff would like this to be an “overarching” and controlling document, it really cannot be because of all these other documents that are out there that still must be consulted.  Our concern is that this process will not result in consolidation or simplification: In one part of the document, staff confirms that “other specific plan area design guidelines or residential design guidelines may also apply depending on the zoning, location, building type, and scale of the project.” From our perspective, the one big thing missing from this new effort is it does nothing to clarify or improve on the actual process of design review.  There is some reference to explaining how internal Planning Department staff design decisions get made.  The urban design advisory team (the infamous UDAT) is discussed a bit and their role in commenting on and participating in the design review process. But critically, the Planning Commission is nowhere to be found. The guidelines do make the statement that ultimately the Planning Commission must start adopting findings related to design review issues.  But the Planning Commission is still the final stop in the process (i.e. the approval), but has no role up until the moment that the project is placed in front of them for an up or down vote. This problem is on regular display at the Planning Commission. You don’t have to attend too many planning commission meetings to see what we are talking about: an architect and project team have worked with Planning staff, possibly for years, and come up with a detailed nuanced design, supported by the staff and the developer team.  They arrive with pride on hearing day, only to find that upon presenting the project to the Planning Commission, the Commission doesn’t agree. And so then the mad scramble begins, to try to adjust the project to fit Planning Commission input that is coming in at the 11th hour. This can add weeks and months to a project and, considered objectively, doesn’t seem like the best way to go about things. No matter how hard planning staff tries to give advice and guidance that results in well-designed projects, ultimately there are two tensions at play. First of course, is the subjectivity of all of this. Architecture is like art, everybody has a different opinion. I often times wonder how difficult it is to be an architect in the city, when every aesthetic or architectural decision you make is questioned by the planning department or the commission.  The other tension is the desire of the city to have the highest quality projects be produced, balanced against the developers need for an economically feasible project. The City is worried about value engineering, and the developer is worried about getting a loan. These new guidelines give us an opportunity to discuss this important process issue. It seems the most obvious way to improve the system is to do what other jurisdictions do – include the Planning Commission in early decision making points. Many cities have a design review committee made up of a portion of the

​Last month, Governor Brown signed into law legislation creating a temporary density bonus program for commercial developments (“Commercial Bonus Law”) that includes an affordable housing component.   Sponsored by Assembly member Santiago (D-Los Angeles), the new law will remain in effect until January 1, 2022. For qualifying projects, development bonuses must be mutually agreed upon by the local government and developer.  The bonuses available include: * Up to a 20% increase in maximum floor area ratio, general plan intensity, and height; * Up to a 20% reduction in minimum parking requirements; * Use of limited-use/limited application elevators for upper floor accessibility; and * Other exceptions to a zoning ordinance or other land use regulation. To qualify under the Commercial Bonus Law, a commercial developer would have to enter into an “agreement for partnered housing” with a housing developer, identifying how the commercial developer will contribute to affordable housing.  The housing component of a commercial bonus project would not have to be 100 percent affordable.  Rather, a minimum of 15 percent of total units would have to be set aside for very low-income households or 30 percent for low-income households. The Commercial Bonus Law allows for flexibility in the manner and location in which the affordable housing is provided.  A commercial developer may directly build the units, donate a portion of the site for housing, donate property elsewhere, or make a cash payment to fund the cost of an affordable housing project.  The affordable housing must either be on the site of the commercial project or within the boundaries of the local government of the commercial project, in “close proximity to public amenities including schools and employment centers,” and within one-half mile of a “major transit stop.”  Most of San Francisco is within one-half mile of a major transit stop. The Commercial Bonus Law does not specify that some minimum number of housing units must be created to qualify for the bonus.  Presumably, that amount of housing produced would be the subject of negotiation between the developers and the local government. This highlights an important–and unfortunate–distinction between the new Commercial Bonus law and the longstanding density bonus laws for residential projects (“Residential Bonus Law”).  The Residential Bonus Law contains clear, mandatory standards requiring local governments to give density bonuses and waive development standards that preclude construction of bonus units.  As well, developers are not required to seek changes in zoning laws or special approvals for the density bonus units and related waivers and concessions. They are simply entitled to them as a matter of law. In contrast, the Commercial Bonus Law lacks straightforward, mandatory directives.  For example, though it states that localities “shall grant” bonuses to qualifying projects, implying a mandate, it then goes on to say that bonuses need to be “mutually agreed upon by the developer and the jurisdiction.”  It also does not specifically provide that zoning changes or other special approvals are not required to achieve the Commercial Bonus.  This means that individual projects trying to use the law may need to enter into development agreements or seek other special approvals.  This could, unfortunately, limit the utility of the new law in jurisdictions where development bonuses are controversial. 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.  

​A recent California case illustrates the importance of clear indemnity clauses in leases to ensure proper apportionment of liability between landlord and tenant.  In Morlin Asset Management LP v. Murachanian, the Court of Appeal held that if a matter is not expressly and specifically covered in a lease indemnity, then there is likely no claim by the indemnified party in reliance on such indemnity, whether under equitable principles or under the lease itself (2 Cal.App.5th 184 (2016)). In Morlin Asset Management LP, a carpet cleaner fell and injured himself on the stairs in the common area of a building.  He was at the building because he had been hired by the tenant (“Tenant”) to clean the carpets within the leased premises.  The carpet cleaner brought an action against the landlord (“Landlord”), as the owner of the building, for negligence and premises liability.  Landlord filed cross-complaints against Tenant for equitable indemnity (alleging any injuries to the carpet cleaner were caused by the tenant), apportionment of fault and express indemnity pursuant to the lease.  The lease required Tenant to indemnify Landlord for any matter “arising out of, involving or in connection with the use and/or occupancy of the Premises by lessee”. Landlord argued that this accident was within the scope of the broad indemnity language and Tenant should reimburse Landlord for any damages that Landlord had to pay to the carpet cleaner.  Tenant contended that this accident occurred outside the premises and thus was not covered by the terms of the indemnity.  The Superior Court agreed with Tenant and granted its motion for summary judgment. Landlord appealed. On appeal, Landlord argued that the accident “arose from the tenant’s use of the suite” since it would not have occurred but for Tenant hiring the carpet cleaner to clean the carpets in the premises.  Landlord also pointed to a lease provision which exempted Landlord from liability for injury or damage to person or property “in or about the Premises”, as well as the rules and regulations of the lease which provided Tenant could not employ a contractor for work in the building without Landlord approval, which Tenant had not done in this case.  Though those lease provisions supported Landlord’s claim that Tenant had culpability in this case, the Court of Appeal noted that the lease contained a provision which gave the Landlord exclusive control and management of the common areas of the building (like the stairs), including the responsibility to keep the same in good condition and repair.  Therefore, Tenant had no control over the condition of the stairs, which were arguably in an unsafe condition.     Regardless of the other lease provisions, Landlord stated that the Court should construe the indemnity language liberally in favor of Landlord as the promisee.  Landlord cited to case-law where California courts gave a broader interpretation to the language “arising out of” in various kinds of insurance provisions.  The Court of Appeal distinguished this argument and explained that in non-insurance agreements (like a lease), indemnity language must be clear, explicit and construed strictly against the promisee.  Therefore, when reviewing the language strictly, the Court of Appeal found that the connection between Tenant’s use of the suite and the accident in the stairwell over which Tenant had no control was too remote and not within the parties contemplation when they entered into the lease. The Court of Appeal also reviewed Landlord’s claim for recovery under the premise of equitable indemnity.  A claim for equitable indemnity arises when one party has been ordered to pay damages to another party as a result of a third party’s wrongful acts.  The party ordered to pay damages then seeks recovery from the wrongful third party under principles of equity or fairness, rather than contract.  The Court of Appeal ultimately denied this claim citing to case-law which held that if there is an express contractual provision establishing a duty in one party to indemnify another, the extent of the duty must be determined from the contract and not from the independent duty of equitable indemnity.  Therefore, the indemnity language in the lease controls and governs the scope of what is covered, regardless of any fairness argument. This case is an important reminder to ensure indemnity clauses in leases are clear, specific and cover all aspects of intended liability between landlord and tenant.  Otherwise, a party may believe they are being indemnified for certain matters in a lease due to broader language and find out they are not in fact covered when a third party makes a claim. 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.