Courts Draw New Boundaries in Property Line Cases

Two recent California court decisions, involving all-too-common neighbor disputes, have provided new guidance concerning easements and property ownership. In Romero v. Shih (S275023 [2024]), the California Supreme Court ruled that a neighbor (Sierra Madre, L.A. County) can acquire an exclusive right to a driveway easement by implication even where all of the elements of adverse possession are not met, namely, where the party claiming an easement has not paid taxes on the land in question.  The Court reversed the Court of Appeal, which had held that as a matter of law, such an easement could have been created only by a written instrument.  According to the Court of Appeal, the key fact was that the easement was “exclusive”.  Because it was used as a driveway, no other use of the property was possible.  Given the significance of this property right, such an easement could be created only by a written instrument. The California Supreme Court disagreed.  The driveway had existed and been used by the neighbor for at least 30 years.  The two properties had been bought and sold over the years, but the respective deeds made no mention of the driveway.  Nevertheless, the Supreme Court found that a writing evidencing the easement wasn’t necessary, nor was it necessary that all of the elements of adverse possession be met.  The Court concluded that an easement by implication can be created where any reasonable person observing the two properties and an existing driveway would have assumed the neighbor using the driveway retained at least some continuing interest in the disputed strip of land. The key facts were that for over 30 years, between the original separation of the properties and the discovery that the user of the driveway didn’t actually own the property, every successive owner of either property had allowed for and/or behaved as if the easement owner had the right to encroach upon the disputed strip of land with the driveway, which had remained unchanged in its use and function since at least the initial property separation.  This was enough to establish an implied easement. The case of Goodhart, et al v. Honeybadger Acquisitions (A165781 [2023]) concerned the creation of an “equitable easement” in Tiburon.  For over ten years, the Goodharts improved and maintained approximately 950 square feet of land, believing the area was part of their front and rear yards.  The defendant discovered the area was his property when he commissioned a survey in connection with his plan to build a perimeter fence.  After defendant commenced construction of the fence, the Goodharts brought suit, seeking injunctive relief and a declaration that they are entitled to an equitable easement to use the disputed area. The court’s decision was not a final judgment but rather granted a preliminary injunction, finding that the easement claimant (Goodhart) was “likely to prevail on the merits”.  The court explained that an [equitable] easement over the trespassed-upon property in the trespasser’s favor is created if the trespasser shows that (1) her trespass was ‘ “innocent” ’ rather than ‘ “willful or negligent,” ’ (2) the public or the property owner will not be ‘ “ ‘irreparabl[y] injur[ed]’ ” ’ by the easement, and (3) the hardship to the trespasser from having to cease the trespass is ‘ “ ‘greatly disproportionate to the hardship caused [the owner] by the continuance of the encroachment.’ ” ’ ”  (Shoen v. Zacarias (2015) 237 Cal.App.4th 16, 19.) The court found that the Goodharts’ trespass was innocent because they thought the property was theirs.  As to potential injury to the defendant property owner and the balancing of harms, the court found this favored the Goodharts.  If the defendants built a fence on the true property lines as planned, it would come within two feet of the Goodharts’ driveway and front steps and the back of their house, and the Goodharts would lose approximately 950 square feet of their yards.  In comparison, the disputed areas constituted less than 1% of the defendants’ property and was located downhill from their residence on undeveloped hillside that was largely unusable to them.  Under these circumstances, the Goodharts were entitled to an equitable easement over the subject area of defendant’s property. Authored by Reuben, Junius & Rose, LLP Attorney Thomas Tunny. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.      

Expanding Housing Choice: SF Finalizes Draft Rezoning Proposal

The San Francisco Planning Department has released more details on its Expanding Housing Choice Program, a citywide rezoning that will primarily target the city’s westside. The rezoning proposal originates in the city’s 2022 Housing Element Update, which was adopted last January, and requires the city to rezone to allow for approximately 36,000 housing units in order to meet its regional housing need allocation (RHNA) goal. Much like last year’s Constraint’s Reduction Ordinance legislation, the Expanding Housing Choice Program proposes sweeping changes to the Planning Code that are meant to spur housing development. These changes include upzoning along various transit and commercial corridors, relaxing of development standards and density controls, adoption of objective design standards, and the creation of a local “housing program” to rival the state’s density bonus law. The most visible–and perhaps most controversial–aspect of the Expanding Housing Choice Program is the proposed upzoning along commercial and transit corridors in the city’s “well-resourced neighborhoods”.  At the end of January, the Planning Department released its final draft proposal map, which would see height limits of 65-85 feet (or 6-8 stories) on most major streets on the westside, where near uniform 40-foot (4 stories) height limits have reigned for decades. Although the proposal may look simple at first glance, it should also be noted that the draft map shows “final heights” that are intended to be the maximum height after the application of any density bonuses, and the actual base height limits will be lower than those shown on the draft map. On February 1, 2024, the Department gave an informational presentation on the rezoning to the Planning Commission, and it was met with several hours of public comment. Many residents expressed disagreement over the upzoning, including concerns about the loss of quieter neighborhoods, impacts to traffic and infrastructure, and displacement of longtime residents and commercial uses. The comments were well received by the Planning Commission, who asked Department staff to consider altering the proposal to address the comments. If last year’s Constraints Reduction Ordinance is any indication, it is likely that the upzoning proposal will be modified several times and go through several heated hearings at the city’s Board of Supervisors, Land Use committee, and Planning Commission. A less controversial aspect of the Expanding Housing Choice Program includes the creation of a new “local housing program” that will provide an alternative to the state density bonus law that has risen in popularity in recent years. The new local housing program will offer housing projects various development benefits, such as density bonuses and streamlined processing, in exchange for providing affordable housing units. Unlike the state density bonus, however, which gives developers the ability to override development standards, the local housing program will give the city more control over these projects’ physical aspects and design character. In addition to these major changes, the city will also adopt objective design standards to streamline project review and give projects more certainty from the initial design phase. Other changes include “density decontrol” along transit and commercial corridors, which will remove hard density limits (i.e. 2 units per lot) and allows projects to construct as many units as would reasonably fit within the envelope of a code-complying project. The proposal would also provide an alternative way to comply with the city’s inclusionary housing requirements by allowing small developments (less than 25 units) to provide units as rent-controlled units rather than BMR units. While the Planning Department has finalized its Expanding Housing Choice proposal after almost a year of outreach and public engagement, the legislation still needs to be introduced, reviewed, and adopted by the city’s legislative body. Due to the wide-reaching changes and controversial reaction to the proposal so far, we expect it will continue to evolve over the coming months.

The Basics: Are you really covered as an additional insured?

Leases, construction contracts, easement agreements, and other contracts often require one party to name the other as an “additional insured” under its liability insurance policy.  The insuring party often provides its counterpart with a “certificate of insurance.”  The receiving party may believe that the insuring party complied with its obligations.  But unless an additional insured endorsement is issued, the negotiated risk transfer to the insuring party’s insurance carrier was not accomplished. A certificate of insurance is nothing more than evidence of insurance.  It typically identifies the insurance carrier, states the kinds of coverage that are maintained, and outlines the insured’s policy limit(s).  A certificate does not provide additional insured status to the certificate holder. Additional insured status may be conferred by a “scheduled” or “blanket” additional insured endorsement.  A “scheduled” endorsement is specific to the additional insured, includes its name on the endorsement, and amends the insurance policy: Section II—Who Is an Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule. . . . (Insurance Services Office, Inc. (“ISO”) endorsement CG 20 10).  When an insured who is frequently required to provide additional insured coverage to other parties (e.g., a subcontractor), its insurance carrier may simply include a “blanket” additional insured endorsement in the policy.  Such endorsements may identify the “Name of Additional Insured Person(s) Or Organizations(s)” as follows: Any person whom you have agreed in a written and executed contract, prior to an “occurrence”, that such person or organization be added as an additional insured on your policy. (ISO CG 20 10 12 19).  But the coverage is typically limited by the endorsement.  For instance: If coverage provided to the additional insured is required by a contract or agreement, the insurance afforded to such additional insured will not be broader than that which you are required by the contract or agreement to provide for such additional insured. Additional limitations often appear, including: If coverage provided to the additional insured is required by a contract or agreement, the most we will pay on behalf of the additional insured is the amount of insurance: Required by the contract or agreement; or Available under the applicable limits of insurance; Whichever is less. (ISO CG 20 10 12 19 (2018)).  The limitations outlined in additional insured endorsements are important because the additional insured may receive less coverage than it might otherwise expect, or none at all. An example highlights the issues: A construction contract requires a contractor to procure and maintain a minimum of $5,000,000 in liability insurance coverage.  The contractor assumes indemnity obligations and agrees to provide $5,000,000 in additional insured coverage for the benefit of the property owner.  The parties agree that the contractor will cause its subcontractors to indemnify and provide additional insured status to the owner and contractor, and that any subcontractor that performs excavation will insure against subsidence risks.  The owner’s objective is to assure that if damage results from the excavation, the excavation subcontractor’s insurance company will defend the owner and pay the loss.  The owner intends to transfer the risk to the subcontractor’s insurance carrier. But when the contractor enters into its subcontracts, the excavation subcontractor is only required to carry $2,000,000 in liability insurance coverage, agrees to provide additional insured status to the contractor only, and is not explicitly required to carry subsidence coverage.  The contractor provides a certificate of insurance to the owner that (a) shows the owner as the certificate holder on a $10,000,000 liability insurance policy, and (b) attaches a blanket additional insured endorsement. During construction, the excavation subcontractor is negligent, and a neighboring property is damaged.  The owner asks the subcontractor’s insurance carrier to defend the claim.  But the insurance carrier will likely not defend or indemnify the owner, because the subcontractor did not agree to provide the owner with additional insured status.  If the carrier does provide coverage, it is likely that only $2,000,000 of the subcontractor’s $10,000,000 insurance coverage will be available.  Worse yet, the carrier may deny the claim entirely because the loss was caused by land subsidence, and the excavation subcontractor did not agree to provide that coverage (even if the subcontractor’s policy actually insures against that risk).  The insurance carrier will rely on the language of the blanket additional insured endorsement to support its positions. When parties negotiate risk transfer provisions, they intend that losses will be allocated between them (and their insurance carriers) in a particular way.  But the risk transfer is not typically complete when the contract is signed.  Business owners and property owners will be well-served by paying attention to the details of insurance coverage – before there is a problem – to assure that their objectives are achieved. Authored by Reuben, Junius & Rose, LLP Attorney Corie A. Edwards. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

court cases

Leases V. Licenses and Eviction Rights

The question has been previously raised – is a lease the same as a license – in that does the underlying occupant/user acquire tenancy rights by such occupation regardless of whether you define an agreement as a license or a lease.  A recent case – Castaic Studios, LLC vs. Wonderland Studios (97 Cal.App.5th 209) – discusses an important aspect of this issue.  In Castaic, Wonderland, as licensee, defaulted under a license agreement and the licensor, Castaic, elected to seek an unlawful detainer action to remove the licensee, only to be told by the lower court that it was not an available remedy under the license.  Here, Castaic granted Wonderland the “exclusive” but “non-possessory” right for the use of the property.  The license stated it was “not a lease or any other interest in real property but a contractual arrangement that creates a revocable license”.  The licensor waived the right to an unlawful detainer under the license agreement and the license provided it would be governed by “contract laws and not by the landlord tenant laws”.  It further stated, that upon a default, the licensee agrees that licensor may cease to provide access to the licensee’s area of use without notice or the need to initiate legal process. The Courts of Appeal analyzed the contract to determine if the remedy of unlawful detainer applied here.  They stated that the fundamental goal of contract interpretation is to give effect to the mutual intention of the parties as it existed at the time they entered into the contract.  Further, in interpreting the contract, the court gives the words their ordinary and popular meaning, unless the parties have given the words a specialized or technical meaning.  Here, the Court stated that even if the license contains some elements of a lease, its express terms show the parties’ intent to waive any rights afforded by the landlord tenant laws, including a landlord’s remedy of unlawful detainer. Castaic argued that the waiver should not be enforced.  The Court disagreed based on two principles: (1) the parties have the power to determine the terms of their contractual relationships and (2) other than a law established for a public reason, any person may waive the advantage of a law intended for its benefit.  Here, Castaic waived the right to bring an action for unlawful detainer and the Court saw no public reason that would prohibit a landowner from agreeing to waive the unlawful detainer remedy.  Finally, the Court stated that the existence of a landlord tenant relationship was essential to an unlawful detainer action. Castaic highlights that if an agreement is clear that it is a license and not a lease, the courts will review on the plain terms of the language of that license and the parties’ intent.  In this case, the Court found that the parties were explicit that an unlawful detainer remedy was unavailable to the licensor and nothing outside the language of the license would allow it to be implied otherwise.

New State Condo Law Allows Reduced HOA Assessments for Designated Affordable Units

We are following up on a previous update where we discussed Assembly Bill 572.  After undergoing a few amendments in the State legislature, the Bill passed and became effective January 1, 2024.  AB 572 amended Section 5605 of the California Civil Code, which is part of the Davis-Stirling Common Interest Development Act. The amended law, with certain exceptions, prohibits a homeowners association (HOA) that records its original declaration (CC&Rs) on or after January 1, 2025, from imposing an increase of a regular assessment on the owner of a deed-restricted affordable housing unit that is more than 5% plus the percentage change in the cost of living, not to exceed 10% greater than the preceding regular assessment for the HOA’s preceding fiscal year. In a significant break from previous State law and regulations, a qualifying HOA may impose an assessment against an owner of a deed-restricted affordable housing unit that is lower than the assessment imposed against other unit owners according to the proportional ownership of total subdivision interests subject to assessments.  This change would appear to allow an HOA to require market-rate unit owners to subsidize affordable unit owners with respect to payment of certain HOA assessments. The new law is not all encompassing.  As stated above, it only applies to new common interest developments that record their original CC&Rs on or after January 1, 2025.  It also does not apply to any of the following: A development of 20 units or fewer. A development where the percentage of the units that are deed-restricted affordable housing units exceeds the percentage required by an applicable zoning ordinance in effect at the time the development received final approval. A development that is located within a city, county, or city and county that does not have an applicable zoning ordinance requiring a percentage of deed-restricted affordable housing units and meets either of the following conditions: The percentage of the units that are deed-restricted affordable housing exceeds 10 percent of the total number of units in the development at the time the development received final approval. For certain other developments that were approved for streamlined processing pursuant to Section 65912.124 of the Government Code, the percentage of the units that are deed-restricted affordable housing exceeds 15 percent of the total number of units in the development at the time the development received final approval. The well-intentioned law is designed to protect owners of designated affordable housing units from large increases in HOA assessments.  Owners of affordable housing units are typically low or moderate income and large increases in HOA assessments can be a financial burden, and can jeopardize their ability to afford the HOA assessments along with the monthly mortgage and other costs of home ownership. Critics of the new law argue that it could lead to disproportionate financial burdens on homeowners who cannot afford to subsidize others as well as create inequities and divisions within the community by identification of a class of affordable housing or low-income owners, which could lead to resentment among other owners. Critics also point out that the law may undermine the ability of HOAs to raise the necessary funds to maintain the community by limiting assessment increases for all owners in the HOAs effort to avoid unequal assessments, resulting in artificially low budgets, and/or deferred maintenance and repair obligations.  Artificially low assessments could eventually require multiple special assessments to fund HOA budget shortfalls. Authored by Reuben, Junius & Rose, LLP Attorney Jay Drake. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Ninth Circuit Overturns Natural Gas Ban

Can cities and states really ban natural gas hookups? On January 2, 2024, the Ninth Circuit handed down a decision in California Restaurant Association v. City of Berkeley finding that Berkeley’s natural gas ban was preempted by federal legislation and struck the ordinance down. In 2019, the City of Berkeley adopted first-of-its-kind legislation amending the city’s building code to prohibit the use of natural gas in virtually all newly constructed buildings, with some limited exceptions. Berkeley’s ordinance was originally enacted with the goal of curbing greenhouse gas emissions and encouraging all-electric infrastructure in the city. Soon after its enactment, however, the California Restaurant Association sued, arguing that the ordinance was preempted by the federal Energy Policy and Conservation Act (EPCA). The EPCA, enacted by Congress in 1975, provides a comprehensive scheme for federal energy regulation. For the purposes of this lawsuit, however, the statute also governs federal regulation of consumer goods using natural gas. Under the EPCA, these consumer goods are referred to as “covered products.” Under the EPCA, once a federal energy conservation standard is adopted for a covered product, state and local governments are prohibited from further regulating the product with some minor exceptions. The district court, which first heard the case back in 2019, was largely favorable to Berkeley’s arguments that the ordinance was not preempted by federal law. After rejecting the city’s motion to dismiss the California Restaurant Association’s suit, the district court interpreted the EPCA narrowly so that the Act would not “sweep into areas that are historically the province of state and local regulation.” [i] The district court concluded that the EPCA was not preempted because the ordinance did not explicitly regulate or mandate the installation of any particular product or appliance, and because the ordinance’s effect on consumer products was “at best indirect.” [ii] The majority for the Ninth Circuit disagreed with the lower court, explicitly abandoning the district court’s limited reading of the EPCA’s preemption statue. As the majority at the Ninth Circuit observed, following the plain language of the EPCA, once the federal government adopts an energy conservation standard for consumer products covered by the EPCA, state and local governments are limited in their ability to further regulate those products. At the appeals court, Berkeley had argued that the EPCA’s concern with covered products should be understood narrowly to exclude the distribution of natural gas. But the court was unpersuaded. An inherent aspect of regulating covered consumer products under the EPCA, the majority observed, is whether those products can access natural gas at all. Therefore, the EPCA must preempt local and state regulations like Berkeley’s natural gas ban affecting natural gas supply to those covered products. But, as the court opined, the EPCA’s scope is not infinite and the statute may not preempt state or local regulation of a utility’s distribution of natural gas. At the appeals court, Berkely had also argued that a finding that the city’s natural gas ban was preempted by the EPCA would necessarily repeal the Natural Gas Act, a comprehensive ban and federal regulatory scheme for the sale of natural gas. The Court, however, did not find any implied preemption because the Natural Gas Act only restricts the Federal Energy Regulatory Commission’s ability to regulate local distribution of natural gas, and therefore did not implicate the EPCA. This ruling leaves other California jurisdictions with similar natural gas bans, such as San Francisco, San Jose, and Los Angeles, in an awkward position and will likely temper efforts by other jurisdictions to adopt similar bans. The case, though, is widely expected to be appealed to the Supreme Court, which may address the extent of the EPCA’s preemption of local gas regulation in the years to come. [i] Cal. Rest. Ass’n v. City of Berkeley, 547 F. Supp. 3d 878,891 (N.D. Cal. 2021). [ii] Id.

rezoning

Palo Alto Adopts Bold Upzoning

Palo Alto recently reached a new housing milestone. On November 13, Palo Alto’s City Council adopted a legislative package implementing rezonings originally proposed in the City’s still uncertified sixth cycle Housing Element. In addition to increasing density and height limits on specific parcels across Palo Alto, this rezoning effort will unlock multi-family residential development on certain properties zoned for industrial or commercial uses. The City Council’s action comes after a year marked by Palo Alto’s inability to adopt a compliant Housing Element. After missing its state mandated January 2023 deadline, Palo Alto adopted a Housing Element in March. But HCD, the state agency tasked with ensuring local compliance with Housing Element Law, rejected the City’s March Housing Element forcing City planners to go back to the drawing board. A second round of Housing Element legislation passed in May but to little avail. During its review process, HCD again refused to certify Palo Alto’s Housing Element. In a letter sent to the City’s Planning Department in early August, HCD requested Palo Alto make various modifications before it would certify the City’s Housing Element, citing concerns that the City’s site inventory was insufficient. Consequently, as of the time of this publication, Palo Alto’s Housing Element is out of compliance with state law and the City may be vulnerable to further Builder’s Remedy projects. With the adoption of this legislative package, the Palo Alto City Council seeks to appease HCD in the hope that the agency will finally certify the City’s Housing Element. In addition to modest upzoning across the city, the enacted legislation focuses on rezoning parcels identified as housing opportunity sites in the City’s Housing Element. These identified opportunity sites are primarily clustered around a handful of the City’s major transit corridors, including properties along the west side of El Camino Real between Page Mill and Matadero Avenue (the “El Camino Real Focus Area”), commercial and industrial properties near San Antonio Road and Fabian Way (the “GM/ROLM Focus Area”), and certain sites owned by Stanford University along El Camino Real and Pasteur Drive. These changes come as affected property owners and lessees along El Camino Real have expressed increasing interest in redeveloping their properties to accommodate new housing. Under the adopted rezoning package, opportunity sites identified in the City’s Housing Element will be rezoned to allow multi-family housing as a permitted use and will enjoy higher density and height limits compared to base zoning. The upshot is that industrially zoned properties located in the GM/ROLM Focus Area will allow multi-family housing as a permitted use, maximum height increases, and FAR maximum increases from 0.5 to 2.5 within the focus area and 1.5 on other opportunity sites. Because these densities would represent the “base” density, developers could leverage the rezoning and use the State Density Bonus Law to construct even taller and denser buildings. Properties located in the GM/ROLM Focus Area will also enjoy modified development standards, including a relaxed landscape coverage standard, reduced parking requirements, and taller height limits further easing constraints on development and leading to more housing in Palo Alto. Sites identified as part of the City’s El Camino Real Focus Area will also enjoy higher densities, height limits, and lot coverage maximums. But, in response to local concerns, these projects will also face new headwinds. Residential development on these properties will be subject to architectural review to meet either objective design standards or context-based design criteria and would be required to provide 20% below-market rate housing at 80% AMI, an increase from the City’s typical requirement of 15%. Finally, responding to demands from Stanford University, Palo Alto’s City Council also adopted higher density zoning regulations for university owned properties along El Camino Real and Sand Hill Road. Even though Palo Alto will count housing built on Stanford campus toward its RHNA, the university intends to develop these parcels with subsidized housing for graduate students, faculty, and other Stanford employees. Beyond the focus areas identified as part of the Housing Element update, however, the rezoning also relaxes design and development standards for certain exclusively residential projects intended to accommodate lower income households across the City. Palo Alto’s recent rezoning legislation presents opportunities across Palo Alto to develop more residential housing in one of the most expensive communities in the Bay Area.   Authored by Reuben, Junius & Rose, LLP Attorney Alex Klein. 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.

sale

Local Governments Given Broad Power to Authorize ADU Sales

As recently as last month, existing state law prohibited the sale of accessory dwelling units (“ADU”) from being sold or conveyed separately from the primary residence, except under specific circumstances where the ADU was built or developed by a qualified nonprofit corporation and held pursuant to a recorded tenancy-in-common agreement meeting certain requirements. Thanks to new state legislation – and depending on the city – the right of property owners to sell ADUs separate from primary residences has been considerably broadened. Drafted by Assemblyman Phil Ting (D-San Francisco) and signed into law on October 11, Assembly Bill 1033 provides a path forward for participating cities to adopt legislation authorizing the purchase and sale of ADUs as condominiums, regardless of whether the contractor was a qualified nonprofit or the manner in which the property is owned. The following summarizes the requirements of AB 1033 and provides guidance for homeowners in utilizing this change in law. With respect to the construction of ADUs, Government Code § 65852.2 allows local agencies, by ordinance, to provide for the creation of ADUs in areas zoned for single-family or multifamily dwelling residential use. Among other requirements, any such ordinance must (i) designate areas within the jurisdiction of the local agency where accessory dwelling units may be permitted, (ii) impose certain objective standards on ADUs (such as parking, height, setback, landscape, architectural review, and maximum size), (iii) provide that ADUs do not exceed the allowable density for the lot upon which the ADU is located, and (iv) require ADUs be for residential use consistent with the existing general plan and zoning designation for its lot. AB 1033 now allows cities to adopt ordinances that authorize the sale of ADUs – constructed in compliance with Gov. Code § 65852.2 – as condominiums, provided such ordinances meet the following requirements: (1) The condominiums are created pursuant to the Davis-Stirling Common Interest Development Act, the state’s statutory scheme governing residential condominiums. (2) The condominiums are created in conformance with all applicable objective requirements of the Subdivision Map Act, which governs subdivision mapping, and all objective requirements of applicable local subdivision ordinances. (3) Before recordation of the condominium plan, a safety inspection of the ADU must be conducted, evidenced either through (i) a certificate of occupancy from the local agency or (ii) a housing quality standards report from a building inspector certified by the United States Department of Housing and Urban Development. (4) Each lienholder of the applicable property must consent to the recording of a subdivision map and condominium plan before either of those documents may be recorded. With respect to lienholder consent, a lienholder may (i) refuse to give consent, or (ii) give consent provided that any terms and conditions required by the lienholder are satisfied. (5) Prior to recordation of the condominium plan (or any amendments thereto), written evidence of the lienholder’s consent must be provided to the county recorder along with the following signed statement from each lienholder: “(Name of lienholder) hereby consents to the recording of this condominium plan in their sole and absolute discretion and the borrower has or will satisfy any additional terms and conditions the lienholder may have.” (6) The lienholder’s consent must be included on the condominium plan or a separate form attached to the condominium plan (and include certain information required by statute), and must be recorded in the office of the applicable county recorder. (7) The local agency must also include a statutory notice to consumers on any ADU submittal checklist or public information issued describing requirements and permitting for accessory dwelling units.[1] (8) If an accessory dwelling unit is established as a condominium, the local government must require the homeowner to notify utility providers of the condominium creation and separate conveyance. (9) For owners of a property or a separate interest within an existing planned development with an existing association, as defined in Section 4080 of the Civil Code, such owners may not record a condominium plan without the written authorization by the association. Under AB 1033, an ADU may be sold or otherwise conveyed separate from the primary residence where the above conditions are satisfied. While this is certainly an encouraging development in the fight to overcome the state housing crisis, many questions remain. AB 1033 will only be as effective as the cities that choose to adopt the necessary legislation providing for the separate conveyance of ADUs as condominiums. As of this writing, the City of Santa Monica has passed a resolution directing staff to draft a conforming ordinance for consideration. No city has yet enacted an AB 1033-compliant ordinance. Beyond the issue of city participation, the appetite of lienholders to consent to the mapping and sale of ADUs as condominiums is unclear. If the condominiumization of ADUs were to reduce the value of the principal residences acting as a secured asset, lenders may decline consent or grant consent while imposing onerous conditions on property owners. Further, the market for the sale of ADUs as condominiums is an unknown quantity. It may prove difficult for property owners to sell ADUs as a condominium separate from a primary residence, and vice versa. Purchasing either interest would also subject owners to the rules and regulations applicable to homeowners’ associations, which can prove tricky for small, two-member associations, particularly when disputes arise. Homeowners looking to sell ADUs should contact their local city officials and request information regarding the prospects for local adoption of an ordinance now authorized pursuant to California Government Code § 65852.2. If you have any questions or would like to discuss the mechanics and implications of AB 1033, please contact Michael Corbett from Reuben, Junius & Rose, LLP, at 415.567.9000 or mcorbett@reubenlaw.com. [1] See Gov. Code § 65852.2(a)(1)(10)(E) for the required notice.   Authored by Reuben, Junius & Rose, LLP Attorney Michael Corbett. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP

Increased State Density Bonus Available Next Year

As we’ve previously covered, Governor Gavin Newsom signed a substantial amount of housing bills into law this year. Two of the most notable pieces of legislation will significantly increase the state density bonus permitted under state law and will make noteworthy changes to SB 35. Below is a more in-depth look at the amendments to the State Density Bonus Law as well as an overview of the potential impacts of the amendments to SB 35 in San Francisco. AB 1287 – State Density Bonus Law Beginning on January 1, 2024, AB 1287 will allow an additional 20% to 50% density bonus on top of the existing maximum bonus for projects that provide additional affordable housing units. Currently, the maximum density bonus allowed under the State Density Bonus Law is 50%, which can be accomplished by providing 15% very low income, 24% low income, or 44% moderate income units. The new amendments will allow projects that qualify for a 50% bonus under the current law to provide additional very low income or moderate income affordable housing units in exchange for an additional density bonus based on the sliding scale shown below. For example, a project that provides an additional 5% very low income units, for a total of 20% very low income units, would be subject to an additional 20% bonus, for a total bonus of 70%. The only limit placed on projects that utilize this additional density bonus is that no more than 50% of the total units can be restricted as affordable. The amendments also allow up to four concessions for projects that include a total of at least 16% of the units for very low-income households or at least 45% for moderate income households in for sale developments. The bill also makes some tweaks to the requirements for 100% affordable housing projects that are proposed under the State Density Bonus law. SB 35’s Future in San Francisco SB 35 is a state law that offers streamlined ministerial approval for projects in cities that haven’t met their Regional Housing Need Allocation (RHNA) goals in exchange for providing affordable housing and agreeing to certain labor requirements. SB 423, which will take effect on January 1, 2024, includes a number of amendments to SB 35, as discussed in detail here. San Francisco is currently falling short of meeting its RHNA goals for low income housing, but not above moderate income housing. So, in order to qualify for SB 35, a project in San Francisco must provide at least 50% of its units (not including units granted via a density bonus) to low-income households. However, due to the increase in the state’s housing production goals allocated to San Francisco for the current RHNA cycle (2023-2031), it is anticipated that the City will not meet its goals for above-moderate housing in the next reporting period. If the California Department of Housing and Community Development makes that determination next summer, then a rental project will qualify for SB 35 streamlining by providing 10% of its units as affordable to very low income households or 20% of its units to low income households. An ownership project can qualify by providing 10% of its units as affordable to low income households. SB 35 allows for ministerial approval, meaning it eliminates environmental review under CEQA and discretionary entitlements from the Planning Commission. It also imposes a maximum 6-month time frame for approval of planning entitlements. If San Francisco becomes a “10% jurisdiction,” it could unlock the ability to pursue projects that are otherwise cost-prohibitive due to long processing and approval timelines. Together, SB 35 and the new additional density bonus could significantly spur housing development in San Francisco next year.   Authored by Reuben, Junius & Rose, LLP Attorney Sabrina Eshaghi. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.  

public works dbi

Permit Process Improvements

In recent months, City agencies have been working hard to improve review and issuance timelines for permits. This update focuses on the way that San Francisco Public Works (“Public Works”) will review releases for building permit applications (“BPAs”) filed after September 1, 2023 and upcoming changes from the San Francisco Department of Building Inspection (“DBI”) to improve process. Public Works Public Works has formally created a series of information sheets that help applicants include the necessary information to have the most streamlined review possible as well as obtain releases for building permits with scopes of work that qualify. We have summarized the changes below, but for the complete process, check out their “What’s New” page. Currently, when a BPA is routed by DBI to Public Works, the Public Works plan checker will determine which Public Works permits are required for construction or occupancy of the public right-of-way. The applicant for the BPA is notified of the corresponding Public Works permit(s) required as a result of the proposed construction or occupancy. At that time, the BPA is placed on hold by Public Works and a note detailing the permit requirements are added to the DBI’s Permit Tracking System (PTS) by the Public Works plan checker. The hold on the BPA will remain in place until the applicant submits the appropriate Public Works permit applications and the Public Works plan checker has performed a detailed engineering review of the application(s), which, due to current staffing, can often delay the issuance of the building permit. “Recognizing the importance of timely issuance of building permits, Public Works has evaluated and identified procedural reforms to allow for construction on private property, associated with BPAs, to commence while associated public right-of-way infrastructure, other construction and/or occupancy permit applications under the purview of Public Works are under review. It is vital that Public Works safeguard the public right-of-way, while at the same time establishing design review standards to allow for the timely release of BPAs that meet established minimum criteria. To accomplish this important goal, Public Works has created minimum submittal requirement tiers based on the BPA scope of work.” Projects that fall under Tiers I and II will be eligible for early BPA release. Tier II requires BPA plans show minimum information as required by Public Works, detailed in their “MINIMUM STANDARDS FOR DESIGN REVIEW FOR BPA RELEASE” and in “PLAN CHECKER VERIFICATION LIST FOR BPA RELEASE” which starts at page 11 of the Minimum Standards for design review for BPA release memo. A plan checker may request additional information to clarify specific items shown on BPA plans. If plans do not meet the minimum standards for review, the applicant shall resubmit revised plans to meet those standards prior to receiving a BPA release from Public Works. Public Works has worked hard to create clear guidelines to improve the release process for building permits and we have found it to be working well over the last few weeks that it has been in process. Sincere thanks to all the public servants who collaborated to make this happen. DBI DBI has been doing an excellent job of catching up on their intake project backlog and recently announced that starting January 1, 2024, all intake review permits will be electronically reviewed. Electronic Plan Review has proven to save time on project review and it also saves customers money. Learn more about how to submit plans using Bluebeam Electronic Plan Review here. Additional Electronic Plan Review information is located here, and specific information for how to use Bluebeam on a Mac is here. DBI is also developing a concierge plan review service for over-the-counter paper review that will focus on projects needing more than an hour of review but less than four hours of review. They are hoping to implement this service in early 2024 and we will update you on this exciting option as soon as it is available.   Authored by Reuben, Junius & Rose, LLP Manager, Post Entitlement Division Gillian Allen. The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

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