​On August 21, 2015, we introduced the Planning Department’s Affordable Housing Bonus Program implementing the State’s density bonus law. [Density Bonus Program Unveiled]. The Program was formally introduced on September 29, 2015, and could be adopted before the end of 2015. The Local Affordable Housing Bonus Program would provide an incentive for project sponsors to set aside a total of 30% of residential units for onsite below-market-rate units to low- and moderate-income households. The most appealing benefit of the program is that it would allow projects to add an additional two stories above current height limits and remove density constraints. The City hopes that this will increase the number of affordable housing units, allow development of underutilized sites, and expand affordable housing for the middle income families that are increasingly squeezed out of the San Francisco housing market.  The program would apply to projects with 3 or more non-density bonus residential units in the following zoning districts:   Zoning District List To be eligible for the Local Affordable Housing Bonus Program, project sponsors must set aside a total of 30% of units onsite for low to moderate-income and middle-income households. For a project with 9 or fewer units, 30% of units must be affordable to middle-income households, defined as 120% of AMI for rental housing and 140% of AMI for ownership housing. For a project with 10 or more units, 18% of units must be affordable to middle-income households and 12% must be affordable to very low, low, and moderate income households as currently required under the City’s Inclusionary Affordable Housing Program. In addition, the overall project must provide at least 40% of all units as two bedroom units or larger, or any unit mix such that 50% of all bedrooms are provided in units with more than one bedroom. A project sponsor that qualifies may receive any or all of the following benefits: Form-based density. The density of an eligible project shall not be limited by lot area. Height.  An eligible project may be built up to 20 feet above existing height limits. Ground Floor Ceiling Height. An eligible project may receive up to an additional 5 feet in height at the ground floor to provide at least a 14-foot ground floor ceiling height. Zoning Modifications. An eligible project may use up to 3 of the following: Rear yard- reduction to 20% of lot depth or 15 feet, whichever is greater, with corner properties permitted to provide 20% of the lot area at the interior corner of the property as rear yard. Dwelling Unit Exposure- may be satisfied with windows facing an open area is at least 25 feet by 25 feet. Off-Street Loading – not required. Parking- up to a 75% reduction in residential and commercial parking requirements. Open Space- up to a 5% reduction in common open space. Additional Open Space – up to an additional 5% reduction in common open space beyond the first 5% reduction. Also included in the pending legislation is the 100 Percent Affordable Housing Bonus Program (which provides for up to three additional stories of development). In addition, projects not in the zoning districts covered by the Local Affordable Housing Bonus Program can still take advantage of the State Density Bonus Program, as described in our August 21 update. However, that program would subject them to a complicated scheme providing for a maximum density bonus of 35% and an additional two stories of height only where needed to achieve the density. It remains to be seen how much the Local Affordable Housing Bonus Program will impact projects in San Francisco, which are constrained not only by other provisions such as historic review and limitation on new shadows, but also political considerations in a city that in most areas has yet to embrace significant increases in building height, despite the ongoing housing crises.  The program is expected to be heard by the Planning Commission on November 5, after which it will be heard by the Land Use and Transportation Committee and then the full Board of Supervisors.  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.

​Last week, the Board of Supervisors Land Use Committee continued to hear the proposed Transportation Sustainability Fee (“TSF”). As we have covered in the past months, the TSF would replace the current Transit Impact Development Fee (TIDF) and would apply to both residential and non-residential projects. The TSF as proposed would establish a rate of $7.74/sf for residential uses, $18.04/sf for non-residential uses, and $7.61 for PDR uses. The TSF would apply to residential projects that result in more than 20 dwelling units, group housing facilities with more than 800 square feet, or the new construction or addition of a non-residential or PDR use greater than 800 gross square feet. After two prior hearings, the Committee members voted on amendments to the proposed TSF at this week’s meeting. The approved amendments include the following: – Eliminate the credit for projects located in area plans; – Increase the threshold area at which PDR uses would be subject to TSF from 800 sf to 1,500 sf; – Remove hospitals from the non-profit exemption to TSF; – Exempt non-profit, post-secondary educational institutions from TSF; – Increase TSF for residential and non-residential projects based on project size; residential projects of 1-99 units would continue to be subject to a rate of $7.74/sf, whereas for projects involving 100 units or greater, $7.74/sf would apply for first 99 units and $8.74/sf would apply for any units over the first 99; commercial projects under 100,000 square feet would continue to be subject to $18.04/sf, whereas commercial projects 100,000 square feet or greater would be subject to a rate of $19.04/sf – Provide that grandfathering would not apply for residential or non-residential projects for which development applications were submitted after July 21, 2015 The TSF was continued to the October 19th Land Use Committee meeting.   Changes to Requirements for the Off-Site Alternative to Inclusionary Affordable Housing Program Proposed changes to the off-site alternative to the Inclusionary Affordable Housing Fee were introduced in mid-September that are intended to encourage more projects to choose the off-site affordable housing option.  First, geography. Under the ordinance, off-site units may be built within 1-¼ mile from the primary project site or within the same neighborhood, as illustrated on the Planning Department’s neighborhood map. Currently, off-site units must be within 1 mile of the primary project site. Second, the “dialing up” option. The proposal includes the option to increase income requirements in exchange for providing more affordable units. Currently and in most situations, projects sponsors of new market-rate residential units are required to pay a fee, provide 12% of the total units for on-site affordable units, or 20% of the units as off-site affordable units. On-site rental units must be affordable to households earning 55% of AMI, and on-site ownership units must be affordable to households earning up to 90% of AMI. Whereas, off-site rental units must be affordable to up to 55% of AMI, and off-site ownership units must be affordable up to 70% of AMI. Under the ordinance, On-site units could be made available to households earning up to the following income amounts, so long as the accompanying percentage of units is made affordable: – On-site Rental units: 55% of AMI: 12% of units, 70% of AMI: 13% of units, or 90% of AMI: 16% of units – On-site Ownership units: 90% of AMI: 12% of units, or 120% of AMI: 15% of units For units offered off-site, the options would be the following: – Off-site Rentals units:  55% of AMI: 20% of units, 70% of AMI: 23% of units, or 90% of AMI: 30% of units – Off-site Ownership units: 90% of AMI: 20% of units, or 120% of AMI: 31% of units Lastly, timing. The legislation also increases the amount of time in which the off-site units could be constructed. Under the proposed ordinance, off-site units may be completed within one year of the primary project’s completion. Currently, the requirement is that the off-site units be completed concurrently or before the primary project receives its First Certificate of Occupancy. This update was prepared with significant research and writing from RJR’s associate Louis Sarmiento. 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, the Board of Supervisors Land Use Committee continued to hear the proposed Transportation Sustainability Fee (“TSF”). As we have covered in the past months, the TSF would replace the current Transit Impact Development Fee (TIDF) and would apply to both residential and non-residential projects. The TSF as proposed would establish a rate of $7.74/sf for residential uses, $18.04/sf for non-residential uses, and $7.61 for PDR uses. The TSF would apply to residential projects that result in more than 20 dwelling units, group housing facilities with more than 800 square feet, or the new construction or addition of a non-residential or PDR use greater than 800 gross square feet. After two prior hearings, the Committee members voted on amendments to the proposed TSF at this week’s meeting. The approved amendments include the following: – Eliminate the credit for projects located in area plans; – Increase the threshold area at which PDR uses would be subject to TSF from 800 sf to 1,500 sf; – Remove hospitals from the non-profit exemption to TSF; – Exempt non-profit, post-secondary educational institutions from TSF; – Increase TSF for residential and non-residential projects based on project size; residential projects of 1-99 units would continue to be subject to a rate of $7.74/sf, whereas for projects involving 100 units or greater, $7.74/sf would apply for first 99 units and $8.74/sf would apply for any units over the first 99; commercial projects under 100,000 square feet would continue to be subject to $18.04/sf, whereas commercial projects 100,000 square feet or greater would be subject to a rate of $19.04/sf – Provide that grandfathering would not apply for residential or non-residential projects for which development applications were submitted after July 21, 2015 The TSF was continued to the October 19th Land Use Committee meeting.   Changes to Requirements for the Off-Site Alternative to Inclusionary Affordable Housing Program Proposed changes to the off-site alternative to the Inclusionary Affordable Housing Fee were introduced in mid-September that are intended to encourage more projects to choose the off-site affordable housing option.  First, geography. Under the ordinance, off-site units may be built within 1-¼ mile from the primary project site or within the same neighborhood, as illustrated on the Planning Department’s neighborhood map. Currently, off-site units must be within 1 mile of the primary project site. Second, the “dialing up” option. The proposal includes the option to increase income requirements in exchange for more required affordable units. Currently and in most situations, projects sponsors of new market-rate residential units are required to pay a fee, provide 12% of the total units for on-site affordable units, or 20% of the units as off-site affordable units. On-site rental units must be affordable to households earning 55% of AMI, and on-site ownership units must be affordable to households earning up to 90% of AMI. Whereas, off-site rental units must be affordable to up to 55% of AMI, and off-site ownership units must be affordable up to 70% of AMI. The proposed changes would allow project sponsors increase income requirements, which would require an increase in affordable units. On-site units could be made available to households earning up to the following income amounts, so long as the accompanying percentage of units is made affordable: – On-site Rental units: 55% of AMI: 12% of units, 70% of AMI: 13% of units, or 90% of AMI: 16% of units – On-site Ownership units: 90% of AMI: 12% of units, or 120% of AMI: 15% of units For units offered off-site, the options would be the following: – Off-site Rentals units:  55% of AMI: 20% of units, 70% of AMI: 23% of units, or 90% of AMI: 30% of units – Off-site Ownership units: 90% of AMI: 20% of units, or 120% of AMI: 31% of units Lastly, timing. The legislation also increases the amount of time in which the off-site units could be constructed. Under the proposed ordinance, off-site units may be completed within one year of the primary project’s completion. Currently, the requirement is that the off-site units be completed concurrently or before the primary project receives its First Certificate of Occupancy. The proposed ordinance was introduced on September 15th. 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.

​With the issue of government regulation of short-term rentals such as Airbnb and VRBO in San Francisco coming up in the November election as Proposition F, we are revisiting a recent California court decision that affirms the ability of a condominium homeowners association (“HOA”) to regulate short-term rentals.  The right of an HOA board of directors (“Board”) to impose rules and regulations regarding short-term rentals and charge fees for short-term rental activities without member approval was affirmed in the case of Watts v. Oak Shores Community Association (2015) 235 Cal.App.4th. 466.  The Oak Shores community is a common interest development governed by Covenants, Conditions and Restrictions (“CC&Rs”) which provide like most CC&Rs that the HOA Board may adopt rules and regulations concerning the use, occupancy and maintenance of the project; for the general health, welfare, comfort, and safety of members; and to interpret and implement the CC&Rs, and establish penalties for violation of such rules. The HOA Board determined that short-term rentals imposed a greater burden on the HOA and its members than long-term rentals or owner-occupied units, including problems with parking, lack of awareness of HOA rules, noise and abuse of common facilities.  The HOA Board imposed certain rules and fees on owners who rent their homes on a short-term basis, as well as restrictions on short-term renters’ activities.   Absentee owners who rent their homes on a short-term basis challenged the HOA rules and fees on the basis that the Board exceeded its authority in adopting such rules and fees, and that the fees exceed the amount necessary to offset the actual costs incurred by the HOA related to short-term rentals, thereby violating California Civil Code Section 1366.1 (now Section 5600(b)) which prohibits an association from imposing or collecting an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied. The court applied judicial deference to the decisions of the HOA Board, stating that courts will generally uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with the public policy.  After the HOA produced experts and evidence establishing that short-term rentals cost the HOA more than long-term rentals or owner-occupied units, including costs associated with using the common facilities more intensely, taking more HOA staff time, and being less careful in using the common facilities, the court found that the Civil Code Section 1366.1 standard was met, as the fees imposed on short-term rentals were reasonably related to the costs incurred by the HOA in connection with these impacts.  Moreover, the HOA fees did not have to exactly match the costs incurred by the HOA, but only be reasonably close to the costs such fees were intended to offset. The plaintiff owners also challenged the HOA’s authority to establish rules setting minimum leasing periods for tenants (which had been set by the HOA at 7 days).  While the court did not expressly discuss the minimum leasing period rule, it did throw out plaintiff’s case, suggesting HOAs do in fact have the ability to restrict or prohibit short-term rentals. The Watts case generally affirms the right of an HOA to impose rules, regulations and fees on short-term rentals intended to offset impacts of short-term rentals on the community, so long as such rules and fees are reasonably related to the burdens imposed on the HOA. 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 case just decided in the Court of Appeal analyzed an important issue regarding the Right to Repair Act (SB800) (“Act”).  In McMillin Albany LLC v. Superior Court (“McMillin”), the Court asked whether homeowners of certain new residences are required to engage in non-adversarial pre-litigation procedures and accommodate a builder’s right to attempt repairs even if the construction defect cause of action is not based upon a violation of the Act.  The Court of Appeal in McMillin held that yes, there is an absolute right to repair for the builder (subject to certain exceptions and terms of the Act) even if the cause of action for construction defects does not specifically rest on violations codified under the Act.  (Cal.Rptr.3d (2015) (Filed August 26, 2015)).  The Act sets forth a mandatory process to be followed if construction defects are discovered in a new residence sold on or after January 1, 2003.  The Act was passed by the legislature to try and reduce the amount of litigation involving builders and homeowners by providing a framework for resolving disputes outside of the courtroom.  Chapter 4 of the Act proscribes the measures which are required before a homeowner may bring a civil action against a builder for construction defects.  They include giving the builder written notice of the claim, time for the builder to inspect the defects, and allowing the builder to either make an offer to repair the defects or compensate the homeowner in lieu of a repair.  If the builder declines to attempt the repairs or misses any deadlines, the homeowner is released from the requirements of Chapter 4 and may proceed with a civil action against the builder. In McMillin, the homeowners brought various actions against the builder (McMillin), including claims for strict products liability, negligence and breach of warranty, as a result of defects in the construction of the homes.  McMillin moved to stay the litigation until the homeowners engaged in the statutory non-adversarial pre-litigation procedures required by the Act.   The homeowners opposed the motion on the basis that they had disposed of the only cause of action which supposed a violation of the Act and therefore they were no longer required to engage in the procedures required by the Act prior to initiating litigation.   The Court in McMillin discussed the California case Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (“Liberty Mutual”), which held that the requirements of the Act only apply when a plaintiff expressly alleges a violation of the Act and do not apply if the plaintiff alleges a common law cause of action for damages caused by a construction defect in residential housing.  McMillin ultimately rejects that finding in Liberty Mutual and holds that the text of the Act proscribes that the Act applies broadly to “any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction”, subject to certain specific exceptions including condominium conversions.  Therefore, the Act and its requirements apply to common law tort causes of action where the construction defect has caused property damage, subject to certain express exceptions.  For example, if a component of a home is not covered by the Act but a defect in such component causes damages to the home, a homeowner must first follow the pre-litigation non-adversarial procedures required by the Act before it can bring a common law action for negligence or strict liability.   In discussing their analysis, the Court in McMillin reasoned that the legislature must have intended that most construction defect claims in affected new residences would be covered by the Act.  Otherwise, the Act would not be that helpful in trying to limit litigation if the homeowner could simply allege common law causes of action and bypass the requirements of the Act.  Builders and homeowners of new residences sold on or after January 1, 2003 should be aware of this groundbreaking case to ensure that, unless the issue is excluded by the Act, both parties comply with Chapter 4 of the Act before bringing a construction defect claim, regardless of whether the claim’s basis is pursuant to the Act or common law. 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.

​With Labor Day weekend approaching and the Planning Commission and Board of Supervisors both on hiatus for the remainder of August, things have quieted down.  But, here’s a summary of some recent items to keep on your radar for early fall. Code Clean Up On August 13th the Planning Commission adopted a recommendation to approve various Planning Code text amendments suggested by staff to correct a number of errors, oversights, and outdated language, many of which are associated with the recent re-organization of Article 2.  As the staff report explains, the existing Code contains “various errors, improper and outdated cross-references, lack of clarity, grammar mistakes, and incorrect illustrations.”  The clean-up legislation is necessary as even minor or clerical revisions to the Code require a legislative amendment to revise.  Something as small as forgetting to dot an “i” or cross a “t” could take years to correct. While the proposed Code revisions are generally minor and not intended to make substantive changes, there are some noteworthy items.  For example: (a) replacing a table containing FAR limits for several districts that was mistakenly removed earlier this year; (b) specifying a conditional use requirement for private parking lots in RC and RTO districts, where the existing Code incorrectly prohibits such use; (c) returning the prohibition against massage establishments in RC Districts that was mistakenly eliminated; (d) amending residential parking controls for C-3 Districts in Table 210.2 so that  it is consistent with Section 151.1; (e) revising the zoning control tale for C-3 Districts to prohibit public and private parking lots in C-3-S Districts; and (f) replacing the criteria for large lot developments in RTO and RTO-M Districts that was inadvertently deleted, among many others.  The Commission recommended approval of the amendment to the Board, which is anticipated to consider the legislation later this year. Until then – read with caution. The Ever-Expanding Definition of Formula Retail Late this summer, Supervisors Mar, Breed, and Avalos proposed new legislation that would once again expand the definition of formula retail uses.  The ordinance, which trails last year’s more expansive formula retail control amendments, would revise the definition of formula retailers to include subsidiaries or affiliate of qualified formula retailers that meet certain criteria.  The Planning Code currently defines formula retail as a type of retail sales or service activity that has 11 or more other retail sales establishments in operation, or with local land use or permit entitlements approved for operation, worldwide. In addition, formula retailers must maintain two or more standardized features, including array of merchandise, façade, décor and color scheme, uniform apparel, signage, trademark or servicemark. The proposed ordinance would expand this definition to include all subsidiaries or affiliates of qualified formula retailers that meet all of the following criteria: (a)  fifty percent (50%) or more of the stock, shares, or any similar ownership interest of such establishment is owned by an existing formula retail use, or a subsidiary, affiliate, or parent of an existing formula retail use; (B) there are 3 or more other retail sales establishments already in operation anywhere in the world; and (C) the retail establishment maintains two or more of the required standardized features for a formula retail use.  We’ll be interested to see how this proposal is received by the Land Use Committee and Board, as the Planning Department recommended against expanding the definition to include subsidiaries in connection with last year’s more expansive formula retail control amendments.  Land Use Committee calendars for September have not yet been posted, but this legislation was referred to the Committee in July, and is likely to be heard in the fall.  2015 Planning Department Fee Schedule Effective August 31st It’s that time of year again.  Planning has updated its fee schedule for each class of application, permit, filing request or activity undertaken by the Department.  Each year, the City Controller adjust the fee amounts in this schedule by the 2-year average consumer price index (CPI) change for the San Francisco/San Jose Primary Metropolitan Statistical Area (PMSA).   A copy of the 2015-2016 Planning Fee schedule, which takes effect on August 31st, is available on the Department’s web site. 

​Last week, the Planning Department unveiled its long-awaited program density bonus program, called the “Affordable Housing Bonus Program.” Details are still being worked out within the City and various stakeholders—including the development community. But a basic framework has been formulated. The new program will allow projects in RM, RC, RH-3, and NCD zoning districts (“Program Area”) to choose from two different streamlined and codified approaches to receiving development incentives—including a possible two-story height bonus—in exchange for providing more on-site affordable units than the existing 12% baseline. In other districts – a large portion of the City that includes the Eastern Neighborhoods, Market Octavia, Central SoMa and downtown – development incentives will not be codified. Instead, they will be scrutinized in a case-by-case negotiation. For background, San Francisco has effectively ignored California’s mandatory statewide density bonus requirements, a state law since the 1970s. Until recently, the City took the position that required affordable units under the inclusionary housing program did not qualify a project for a density bonus.  In 2013, the California Court of Appeals in Latinos Unidos del Valle de Napa y Solano v. County of Napa ruled decisively against Napa County, which took the same position. The current Affordable Housing Bonus Program is a direct response to bring the City into compliance with Latinos Unidos. Projects within the Program Area will now have two options: the somewhat complicated state rules, or San Francisco’s own approach. Under state law, a maximum density bonus of up to 35% can be achieved, based on a graduated scale depending on factors like percentage of affordable units, the affordability level of those units, and if the units are rentals or owner-occupied. Some projects will be able to receive a height increase up to a maximum of two stories, but only where needed to achieve the permitted density or the bonus units.  Projects electing to use the state law will also be eligible to select between 1-3 “concessions” allowing relief from other aspects of the Planning Code. Possible options include a 20% rear yard; no graduated 5-foot expansion under Section 140 for interior-facing units’ exposure requirements; 50% reduction in required parking (yes, there are still areas of the city with minimum parking requirements); 5% reduction in common open space; and relief from off-street loading. San Francisco’s program is more straightforward, and also appears to be more enticing. It would eliminate residential density limits altogether, with density indirectly controlled by a unit mix requirement (i.e. 40% two bedroom or 30% three bedroom), bulk, height and other building envelope limits. Projects could pick three of the development concessions summarized above. Most importantly, up to two additional stories would be permitted if needed to accommodate the permitted base density and bonus units. In exchange, projects would need to provide 18% “middle income” units (120% AMI for rentals and 140% AMI for owner occupied) in addition to offering 12% of the units as low income under the current Section 415 inclusionary requirement. It also appears projects participating in either form of the density bonus program that would otherwise qualify for a Class 32 exemption under the California Environmental Quality Act (“CEQA”) will be considered “code compliant” under CEQA. As a result, they would not end up triggering heightened review just by virtue of getting the density bonus, development concessions, or height increase. This is not a guarantee that participating projects will always be able to receive streamlined review: other site-specific CEQA factors such as historic status, shadow, traffic impacts and the like can still draw a project into negative declaration or EIR territory. As the proposal stands, projects that are not inside the Program Area must negotiate directly with the City on a site-by-site basis, and can only use the state approach to density bonus. They will be required to present two projects for entitlement processing and environmental review, a “base” and a “density bonus” variant. A full site-specific feasibility analysis will be required to justify a density bonus or concession, and they may not be able to tier off of an existing EIR—meaning there is a risk for heightened environmental review, making the entitlement process longer, more expensive, and more uncertain. It remains to be seen how many project sponsors will decide to strike out on their own, given the lack of straightforward procedures and the potential for delays.  Planning Staff hope to have legislation implementing the program introduced at the end of September, with Board of Supervisors approval before 2016. We will continue to track this program as it is finalized. 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.

​Stop me if you’ve heard this one before.  A public agency issues a permit authorizing a particular use, but later refuses to recognize the validity of the permit and the authorized use.   Recently, this issue has been a common one in San Francisco concerning building permits issued for office use.  The property owner applies for a building permit declaring that the existing and proposed use at the property is office, and the City’s Department of Building Inspection approves the permit.  The property owner then operates an office use, sometimes for decades.  Later, when the property owner seeks to show that office uses were approved by the City, the City does not recognize the validity of the permit as to the office use.  Many property owners are tempted to try to enforce the validity of an approved permit pursuant to the legal doctrine known as equitable estoppel.  In short, under the equitable estoppel doctrine, a city may be barred, or “estopped,” from failing to recognize the validity of the permit where the property owner has relied on the issuance of the permit to the property owner’s detriment.  Over the years, however, California courts have become more and more restrictive in their application of equitable estoppel against the government, to the point now where it is rarely, if ever, applied.  A recent decision by the California Second District Court of Appeal has made the application of equitable estoppel against the government even more difficult.  (Schafer v. City of Los Angeles, No. B253935 (2nd App. Dist., May 20, 2015).   In the Schafer case, a property owner operated its property in Los Angeles as a parking lot for over fifty years.  During this period, the City repeatedly recognized the parking lot as an existing use, largely through the issuance of permits noting the use as “parking lot.”  No certificate of occupancy was issued at any time, however, and at one point the zoning was amended to remove parking lots as a permitted use.  Ultimately, two residents of the nearby neighborhood challenged the use of the lots for parking. The Zoning Administrator found that the parking lot was not allowed and was not a legal nonconforming use because no certificate of occupancy was issued.  The Planning Commission reversed this decision, concluding that the Zoning Administrator was equitably estopped from failing to recognize the parking lot use due to the City’s recognition of the use over the years.  The neighbors filed suit. Both the Trial Court and the Court of Appeal disagreed with the Planning Commission.  The Court of Appeal found that even though the elements of equitable estoppel were met, the adverse effect on public interest outweighed any injustice to the property owner caused by failing to uphold the estoppel claims.  The Court concluded that particularly in the land use context, the public’s interest in maintaining the character of an area through established zoning plans and processes is dispositive. The lesson for property owners is dispositive as well:  Be wary of relying on implied representations made by public agencies in the issuance of a permit. City of Oakland Sued Over Public Art Fee Like the equitable estoppel case, this one may sound familiar.  A City experiences strong real estate development growth.  The City imposes exactions on development to address public needs and interests.  The Developers claim exactions go too far, and sue city.   In this case, the city is Oakland and the exaction is a public art fee.  In February 2015 Oakland adopted the new ordinance which requires developers either to install public art at the site of new projects or pay a fee equal to 1/2 percent of the value of residential projects or 1 percent of the value of commercial projects.  This public art requirement is similar to the public art requirements in San Francisco and other California cities. In response, the Building Industry Association of the Bay Area (BIA) and Pacific Legal Foundation (PLF) have filed a lawsuit claiming the ordinance violates the U.S. Constitution.  The plaintiffs argue that the public art requirement violates the Fifth Amendment’s prohibition against “uncompensated takings” because funding art has no connection to the effects of the development, and that it violates the First Amendment by requiring developers to pay for art that is created by artists endorsed by the City. The BIA/PLF lawsuit appears also to be a strategic first move.  Oakland is in the process of studying more impact fees for developers amid a growing wave of new project proposals.  This raises concerns among developers that the City may go too far in its imposition of impact fees.  We will continue to track this lawsuit and the City’s impact fee process.  

​Last week, legislation that would replace the Transit Impact Development Fee (“TIDF”) with a new Transportation Sustainability Fee (“TSF”) was introduced at the Board of Supervisors.  As we wrote several months ago [San Francisco Approaches New Transportation Fee, Reduced Transportation Analysis], the broader Transportation Sustainability Program would do several things, including (1) replace the TIDF with the TSF, which will apply to residential development and increase the former fee rate on non-residential development, (2) eliminate the requirement of a transportation study for most projects, and (3) establish standardized transportation demand management measures that will apply to new development projects.   The TSF ordinance would eliminate the existing TIDF and establish a TSF fee rate of $7.74/sf for residential uses, $18.04/sf for non-residential uses, and $7.61/sf for PDR uses.  The TSF would apply to all new non-residential and PDR development of more than 800 square feet, but would only apply to residential developments of more than 20 dwelling units.  New group housing projects would be subject to the full fee. Certain fee reductions would apply.  Changes of use within existing buildings will receive a credit for existing uses.  Residential projects located only in certain plan areas (including Eastern Neighborhoods, Market/Octavia, Balboa Park) will get a reduction equal to the amount of the area plan fee that is dedicated towards transit expenditures.   Projects that have a development application (building/site permit, conditional use, variance, Large Project Authorization, Downtown Authorization) approved prior to the enactment of the TSF are fully grandfathered (although non-residential projects would still be subject to the TIDF).  Projects with development applications filed by the time the TSF is enacted will be eligible for a 50% reduction in the residential TSF and will be subject to the existing non-residential TIDF.   Therefore it is important for projects to get a development application on file prior to the enactment of the TSF ordinance.  The Planning Department expects passage before the end of 2015, and likely the earliest it could be passed is in late October.  An informational hearing will be held at the Planning Commission tomorrow. In-Law Units Expanded to Supervisorial Districts 3 and 8 Last week, the Board of Supervisors passed on first reading two pieces of legislation that would allow new in-law units to be constructed (above the otherwise-applicable density limit) in Supervisorial Districts 3 (North Beach/Northeast Waterfront/Downtown/Chinatown) and 8 (Castro/Upper Market/Noe Valley/Twin Peaks/Glen Park).  In District 3, the legislation allows one new in-law unit (even if the building is already above the density limit) in an existing building with four or less units and removes all density limits for existing buildings with more than four units.  In District 8, the legislation allows one new in-law unit (even if above density) in existing buildings with up to 10 units and allows two new in-law units in existing buildings with more than 10 units.  In-law units must be constructed within the existing envelope of a building and may not take space from any existing dwelling unit.  In-law units are not permitted in RH-1(D) zoning districts. There was some debate at the Board about creating units to be used as Airbnb rentals.  The final legislation requires that a building owner disclose whether the unit is intended to be used for short term rentals.   New Planning Application Fee Schedule Goes Into Effect August 31 Planning’s annual update to its application fee schedule has been released, and is set to go into effect on August 31.  You can find the fee schedule here:  http://www.sf-planning.org/Modules/ShowDocument.aspx?documentid=9381. Get your applications on file now to avoid the increased fees. 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 appellate court case clarified an important issue related to trespassers and subsequent court created easement rights.  In Shoen v. Zacarias, the Court of Appeal held that although a court does have the right to establish an equitable easement on behalf of a trespasser, it did not in this case because the hardship to the trespasser in ceasing the trespass was not greatly disproportionate to the hardship to the owner in the continuance of the encroachment. (237 Cal.App.4th 16 (2015)). In Shoen, Shoen’s neighbor Zacarias had been using a plot of Shoen’s land for several years innocently believing it to be part of Zacarias’ property.  Zacarias had placed temporary patio furniture on the area for his own personal use. Shoen did not use that part of her land because certain physical attributes made it difficult for Shoen to access.  Eventually, Shoen brought suit for trespassing against Zacarias related to his use of that portion of Shoen’s land as a patio area.  The Superior Court granted Zacarias an equitable easement as to that part of Shoen’s land and Shoen appealed. Equitable easements are implied easements created by equity and are decided by courts under the doctrine of relative hardships.  Essentially, a court can deny a landowner’s request to eject a trespasser and instead force the landowner to accept damages as compensation for the judicial creation of an easement over the trespassed-upon property in the trespasser’s favor.  Courts are reticent to issue equitable easements since it essentially gives the trespasser a right of eminent domain by permitting them to occupy property owned by another.  However, if certain requirements are fulfilled a court can establish an equitable easement in favor of a trespasser instead of ejecting them from the owner’s property.  The equitable easement doctrine is intended to prevent a situation where a property owner, who is minorly inconvenienced by a trespass, extorts an innocent trespasser by threatening to sue the trespasser unless they pay the property owner a very large sum of money. This situation often arises in urban environments, where buildings, driveways and uses are located very close to property lines. The following criteria must be fulfilled in order to warrant the granting of an equitable easement in favor of the trespasser:  (1) the trespass was innocent rather than willful or negligent,  (2) the public or property owner will not be irreparably injured by the easement, and  (3) the hardship to the trespasser from having to cease the trespass is greatly disproportionate to the hardship caused to the owner by the continuance of the encroachment.   Unless all three prerequisites are established, a court lacks the discretion to grant an equitable easement.  Further, it is not enough if the hardship simply favors the trespasser, it must tip disproportionately in favor of the trespasser.  In Shoen, the Court of Appeal found that the third criteria was not fulfilled in that the hardship to the trespasser in removing his temporary patio furniture and not using the land was not disproportionately more difficult than the hardship that Shoen would suffer in losing the land that she owns. This case is important for property owners to be aware of because it evidences that even trespassers can acquire property rights in another’s land, as long as it is done innocently and the balance of hardships tips proportionately in the trespasser’s favor.  Of course, there is a very high standard to meet for the courts to grant such a right, but property owners should be aware of their property boundaries and the use of any portion of their land without their permission. 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.