In last week’s update, Daniel Frattin described the new preliminary project application (“PPA”) process and described what many believe is a fundamental problem with the new system: it simply adds more process without solving underlying problems. There is no question that most people that deal with the Planning process on a regular basis would agree that the Planning process in San Francisco (a) is too complex; (b) takes too long; and (c) is too uncertain. And of course all these factors add to the unfortunate reality that the process is too costly. It is possible that establishing the PPA process will make things more time consuming and more costly. However, there is a chance that the process will actually help. Following last week’s update, several of our readers commented both in agreement with Mr. Frattin, as well as in support of the PPA process. Today we look at some possible benefits. The Planning process in San Francisco is very complex. Over the past decade, the Planning Code has grown substantially as an extremely active Board of Supervisors, and well-organized neighborhood groups and constituencies have driven forward all manner of new regulations. A new Charter commission has also been created (the Historic Preservation Commission). Today, the Planning Code consists of three volumes and is more than 2,000 pages. When any land use project, large or small, comes forward, it must clear this thicket of rules prior to getting building permits. Providing answers to questions from owners and developers about how the Code is applied, and how it will be interpreted given specific facts, is what many of the Planning Department staff do on a daily basis. But up until now, there really hasn’t been a formal process for planners to bring that expertise to bear by providing reliable and early advice. For many years the Planning Department has relied on two basic processes to review projects and answer questions posed by owners and developers: the project review meeting, and the Zoning Administrator Determination Letter. The Project Review Meeting…Past Its Prime The project review meeting has been a mainstay of the Department for many years. A short application is filled out, a fee is paid, and an appointment made with the planners. At the project review meeting, the property owner or developer gets about an hour of face-time from two or more planners to discuss a project, ask questions and generally try to suss-out all of the major and many of the minor questions or challenges of the project. These meetings can be helpful. However, as the complexity of the Code has grown, fewer and fewer easy or reliable answers come out of these meetings. The best an owner or developer can get these days is general buy-in on the most basic zoning provisions, and then typically ends up with a “we’ll have to get back to you” message from the planners. This is again not surprising and by no means a knock on the planners: the Code is extremely complex as are the Planning Department’s policies in implementing them. It is simply impossible for a small group of planners to sit down, take a quick look at a project and give reliable, detailed and nuanced advice. So the project review meeting can only go so far. There is also no formalized process for follow up questions; it is left to the individuals on both sides after the meeting to try and get issues resolved informally, if at all. But often, the owner/developer is left with having to file an application to get any further attention from the staff and start dealing with issues directly. The PPA tries to do what the project review meeting can’t do: provide reliable written comments from all divisions of the Planning Department and direction on a specific project after the staff has had time to review the proposal in detail. The project review meeting by design doesn’t result in any written direction from the staff. Often owner/developers follow up meetings with “minutes” they prepare to memorialize what was discussed, but because the meetings don’t ever result in final decisions, these documents are not very valuable going forward. The PPA letter could be a significant step forward. By creating a formalized process where the Planning Department takes a longer time to mull things over (60-days is a long time in the life span of a developer and a project…), the PPA letter should be able to provide clear direction and certainty for a project’s entire entitlement process where none existed before. The ZA Written Determination – Perfect Tool For Narrow Code Questions Another less used but important tool of the Planning Department is the Zoning Administrator Determination Letter. Planning Code Section 307(a) provides that the “Zoning Administrator shall respond to all written requests for determination regarding the classification of uses and the interpretation and applicability of the provisions of this Code.” This can be an extremely important tool in complex situations. However, it is a bit cumbersome in that it requires the owner/developer to prepare a detailed written request posing a question to the Zoning Administrator, which the ZA ultimately answers in the form of a letter. Three important things to keep in mind about the determination letter: first, it acts as kind of a precedent, is made available to the public, and therefore requires careful consideration by the Zoning Administrator and the staff before coming to any final conclusions. This can take time. Equally as important and cumbersome is that the letters are appealable to the Board of Appeals. This can pose a serious problem for a developer of a controversial project, as he is put in a position of choosing between the need for clear answers from the Zoning Administrator, and the risk of the answers themselves becoming a controversial issue and opening up an entire new front of process and complication. The determination letters also deal primarily with code issues, not Department policy or CEQA review, so they are not used to get

On February 1st, the Planning Department started to require a Preliminary Project Assessment (“PPA”) for most new development in the City. Over the next two weeks, we’ll consider the pros and cons of this new process, which is part of the Planning Department’s efforts to improve efficiency and promote more timely and consistent review of projects. This week, we’ll describe the PPA and air concerns about its effects on the entitlement process. What is the PPA? The PPA is a formal process for receiving written feedback on a project. A PPA is mandatory for any new project creating six or more dwelling units, or constructing a new building or addition of 10,000 square feet or more. It must be completed before filing any environmental review or entitlement applications. Here’s how it works: Application – The PPA is initiated by filing a PPA application at the Planning Information Counter. The application materials are extensive; more or less all the materials included in an environmental evaluation are required for the PPA. These include plans, site plans, and construction cost estimates, among others. The application fee of $4,427 that is credited toward future environmental review and/or entitlement fees. Review – Once the application is submitted, it is routed to Major Environmental Analysis, Neighborhood Planning, and Citywide Policy Planning for review and comment. During this time, a project sponsor may request a 30-minute meeting with assigned planners to present and explain the proposal. PPA Letter – Within 60 days of receiving a PPA application, the Planning Department will issue a PPA letter. The PPA letter is intended to be a procedural roadmap that will (a) identify the required level of environmental review and technical studies needed to complete it; (b) advise the applicant of the approvals and applications required; and (c) offer coordinated feedback from all Planning Department divisions regarding environmental, design and policy issues. PPA letters will be posted on the Planning Department’s website, and Project sponsors can schedule a project review meeting with planners once the PPA is issued. The PPA letter is valid for 18 months. You Mean I Need a Permit to File An Application? In a word, yes. The PPA is a permission slip to file applications. Though it is hard to find fault with the goals of the PPA – to bring greater consistency and efficiency to the City’s notoriously convoluted and unpredictable development review regime – it is easy to wonder if yet another process is the right way to achieve them. Process has a way of taking on a life of its own in San Francisco’s hyper-political land use arena. Pressure for public input and notice is ubiquitous. San Francisco’s numerous and committed opponents of development will undoubtedly want their voices heard in the PPA process. Although PPA letters are not supposed to be subject to appeal, sophisticated opponents may nonetheless petition the Board of Appeals to take jurisdiction over them. Jurisdiction requests could trigger public hearings on a project-before applications are even submitted. A PPA letter is supposed to be issued within 60 days of application submittal, but there is no clear remedy if the Planning Department fails to respond within the time limit. Can applications be submitted if the time limit has elapsed without response or will applications be refused? This is a key concern, since statutory time limits for reviewing applications are routinely exceeded. In the recent past, just getting an application assigned to a planner has taken longer than it should to complete the entire environmental review process. CEQA requires applications to be reviewed for completeness within 30 days of submittal. The City then has 30 days from application completion to determine whether a project is exempt from environmental review, 180 days to prepare a negative declaration, or a year to certify an EIR. Though improved management by the Planning Department and a down economy have improved review times, compliance with statutory deadlines remains the exception, not the rule. In a sense, the PPA institutionalizes non-compliance with CEQA time limits. Though the PPA application is equivalent to an environmental application, the only thing a project sponsor comes away with is a procedural roadmap and preliminary commentary from the Planning Department. Getting this preliminary feedback and permission to file applications will take up to 60 days, about the same amount of time as it should to complete CEQA review for many small and mid-sized projects. This kind of feedback is already available quickly and more affordably through project review meetings. Though the PPA is supposed to be “valid” for 18 months, it will not necessarily provide greater certainty about outcomes or binding design feedback, nor will it protect project sponsors from subsequent changes in law or policy. If a PPA letter gives erroneous information about legal requirements for approval, the law will supersede the contents of the PPA. In other words, the burden of errors or omissions will fall on the project sponsor. As it does now, the Planning Department will continue to reassess its position on projects based on new information presented in environmental studies, opposition from neighbors, or as the Planning Commission and Historic Preservation provide policy guidance, either formally or informally. For many projects, there will be too many unknowns for PPA letters to provide meaningful guidance. For example, the historic status of existing buildings is often the linchpin for determining both the level of environmental review and the design the Planning Department will support. Unless a building has been previously surveyed (most have not), determining historic status requires a project sponsor to submit a detailed report by a preservation architect. The Planning Department then reviews the report and decides if a building is historic. In these cases, a PPA letter will tell project sponsors that a historic report is required, something most know already. It will not, however, be able to provide meaningful guidance about the level of CEQA review until the report is completed and evaluated as part of the environmental review process. Is this feedback really

Court Finds that a “No Waiver” Clause is Waivable Sometimes (but admittedly rarely), the law makes you chuckle. In a recent case where it was clearly looking to find the “fair” result, the California Court of Appeal for the Second District found that a provision prohibiting a waiver of rights could itself be waived by the parties’ conduct. Since most contracts contain a “no waiver, except in writing” clause, this ruling is a reminder that parties’ conduct will always be considered. The facts involved a lease with a termination right that could be exercised upon payment of a fee. The landlord accepted $256,000 of the total termination fee of $273,000. The tenant tried to apply the security deposit to the balance of the termination fee. The landlord refused to do so, citing a provision in the lease that prohibited the application of the security deposit to rent, and demanded full payment. However, the landlord also retained tenant’s payment and claimed that tenant and breached the lease and was also obligated to pay all of the remaining rent for the balance of the term. Landlord claimed that the lease explicitly stated that acceptance of a payment less than the amount due did not waive landlord’s right to recover the balance and enforce its legal remedies. The court refused to follow this argument. Despite the anti-waiver language, the court found that the definition of rent did not include the termination fee. Furthermore, the court noted that the provision prohibiting a waiver of rights by acceptance of a partial payment could be waived by conduct. The court went on to state that the plaintiff’s argument defied common sense, and was essentially a “Gotcha,” to which the tenant was entitled to state “No Yadon’t.” Gould v. Corinthian Colleges, Inc., 192 Cal. App. 4th 1176 (2011). While not breaking any new legal ground, we found the case to be a good lesson that despite the language in a contract, the courts will also look to common sense and good faith conduct. One cannot rely on strict language that is inconsistent with these concepts or that unfairly penalizes a party. This is something to keep in mind in any business transaction. Census 2010 Numbers Arrive The numbers are starting to pour out of the 2010 Census website and we are getting our first look at the state of San Francisco’s population and housing in 2010 compared to 2000. San Francisco’s population grew from 776,733 in 2000 to 805,235 in 2010. While a “largest cities” list has yet to be released by the Census Bureau, we do know that San Francisco population has now passed Detroit (which suffered a catastrophic drop in population of 25%, with a current population of 713,777). In terms of housing, San Francisco has added 30,415 housing units in the past decade, for a total of 376,942 units. 31,131 of those units are currently sitting vacant for a 91.7% vacancy rate (as compared to 95.1% in 2000). Citywide, the housing stock grew by 9%. Early numbers are showing above average gains in census tracts in the Northeast Waterfront, the Financial District, Civic Center, Hayes Valley, the Mission, Upper Market, the Central Waterfront, the Bayview, Oceanview-Merced-Ingleside, and Visitacion Valley. The area with the largest housing gains, unsurprisingly, has been South of Market and Mission Bay. Several SoMa census tracks doubled and tripled in housing units in the past decade, and one census tract covering Mission Bay and areas of SoMa and Showplace Square saw a 900% increase – going from 470 to 4,281 units. While the City has made gains over the past decade in housing stock, there is still more to do. The Association of Bay Area Governments has estimated that San Francisco needs to build over 31,000 new housing units between 2007 and 2014 just to keep up with its share of housing for the Bay Area. The Planning Commission is set to adopt a new Housing Element of the General Plan today, which is intended to put the City on the path of meeting its regional housing demand. Supervisor Farrell’s Legislation Easing Controls on Restaurants on Upper Fillmore Passes On Tuesday, the Board of Supervisors passed 10-0 an amendment to the City’s Planning Code that will permit new restaurants (and new bars associated with restaurants) along Fillmore Street roughly between Bush and Jackson Streets with approval from the Planning Commission. Previously, all new bars and restaurants had been prohibited in this area. “Chain” restaurants and bars will still be prohibited. The relaxing of controls on restaurants is intended to help fill a number of vacant storefronts in the area. Supervisor Farrell sponsored the legislation, and its passage has been hailed as an early success for the new supervisor. The legislation is also a significant success for the Board as a whole, indicating that it is moving past the ideological fights of the past decade by building consensus and reaching practical solutions for the City. The San Francisco Business Times reported this week that Farrell has also predicted success for a more significant – and controversial – measure, the Mid-Market payroll tax exemption, saying, “That [Supervisors Chiu and Kim] sponsored it pretty much guarantees it will get through.” Historians may not mark 2011 as the beginning of another Era of Good Feelings, but to many San Franciscans, the cessation of partisan tension at the Board of Supervisors has been a welcome development. 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, 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. Copyright 2011 Reuben & Junius, LLP. All rights reserved.    

Oakland Passes Major Citywide Rezoning of Residential and Commercial Areas On Tuesday, the Oakland City Council finally passed a major rezoning of all of the city’s residential and commercial zoning districts, thus capping a 2+ year process that included over 50 community meetings since the fall of 2008 and review by four different city panels. The rezoning becomes effective on April 14, and project sponsors have the option of using the old zoning or the new zoning for projects whose applications are submitted between now and then. Prior to the rezoning, Oakland’s General Plan and Planning Code contained numerous inconsistencies in how the city’s residential and commercial zones are regulated. This has led to an overly-confusing system of land use regulations and an inefficient entitlement process. The rezoning will resolve these issues by making the General Plan and Planning Code consistent and reducing the burdens of the entitlement process. Every residential- and commercial-zoned property in Oakland has been rezoned. Effectively, this will not constitute a major change in the type and size of development that is permitted on most of the affected properties. In most cases, the zoning has been updated to make the development controls more clear. However, some areas of the city have been identified as “grow and change” areas, where higher densities and more uses will be permitted. These areas include San Pablo Avenue, Telegraph Avenue south of Highway 24, the MacArthur corridor, Martin Luther King Way south of Children’s Hospital, Broadway south of 51st Street, International Boulevard and East 12th Street. Height limits are being established on certain major corridors in order to better relate future growth to the surrounding neighborhood. A number of last minute changes to heights and zoning were made in these areas by the City Council. For land use professionals working in Oakland, the rezoning will make the analysis of development potential for properties in the city much easier. The rezoning proposal that went to the City Council can be found at http://mytinyurl.com/hdxz55rdt4. Note that the City Council did make some minor changes. Contact us with any questions regarding the rezoning. Berkeley Tries Once Again to Update Downtown Area Plan, Zoning Moving slightly north, Berkeley this week attempted to restart (a third attempt) its process to adopt a new Downtown plan, to be followed by a rezoning of the downtown area. The Downtown plan process has been long and complicated to date. In 2009, the City Council adopted a new Downtown plan after a four year public process. The plan was subsequently rescinded in February 2010 by the City Council once a petition containing more than 9,000 signatures was organized calling on the city to send the plan to voters for approval. One of the more controversial elements of the 2009 plan was to increase height limits generally to 85 feet, with exceptions for a handful of buildings that could have reached up to 225 feet in height. In April of 2010, the City Council adopted a new Downtown plan, and placed an advisory measure on the November ballot regarding the more controversial aspects of the plan. In November, voters approved Measure R with 64% voting in favor. The measure called for height limits to be increased to 75 feet, with exceptions for a handful of buildings that could reach up to 180 feet in height. The measure included permit streamlining provisions for projects that provide environmental, affordable housing or local hiring concessions above that required by the City code. The measure also calls for enacting green building standards and implementing a Transportation Demand Management plan to discourage car use. This week, Berkeley published its new draft Downtown plan which incorporates both the 2010 Downtown plan and Measure R. The Planning Commission held its first hearing on the plan on Wednesday, and will spend the next two months or so working on the plan, with an eye towards approving it and sending it to the City Council at a hearing on May 18. Planning Department staff is currently drafting underlying zoning controls to be considered by the Planning Commission this summer. The City Council is expected to take up both the Downtown plan and the zoning amendments in September. At that time, Planning Department staff may also incorporate a new Streets and Open Space Improvement plan, with accompanying new development fee, into the Council’s discussion. The 2011 Berkeley Downtown plan can be found here: http://mytinyurl.com/jrzsy09r1f. 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, 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. Copyright 2011 Reuben & Junius, LLP. All rights reserved.    

One of the biggest proposed projects in the City right now is the California Pacific Medical Center (CPMC). Informational reports will be presented by the Planning Department’s staff at three separate Planning Commission hearings. The first, being held today, will cover healthcare delivery and seismic improvement issues. The second, to be held a week or two later, will cover the design of the various proposed buildings. The third will be held in May and will provide an overview of the entitlements that are being sought for the project. The Planning Commission and the Board of Supervisors will exercise significant discretion in considering the various entitlements and approvals needed, as well as the proposed development agreement. Project Description The Project is comprised of four medical centers in San Francisco: the California Campus (previously known as the Children’s Hospital of San Francisco), the Pacific Campus (previously known as the Pacific Presbyterian Medical Center), the Davies Campus (previously Ralph K. Davies Hospital), and the St. Luke’s Campus. Three of CPMC’s four acute-care hospitals (California, Pacific, and St. Luke’s) must be rebuilt by 2015 in order to comply with state law concerning the seismic stability of hospitals. CPMC proposes to consolidate the acute-care services currently located at the California and Pacific Campuses, and locate them at a new medical center to be constructed at Van Ness Avenue and Geary. This new Cathedral Hill Campus would include a hospital on the west side of Van Ness Avenue and a new Medical Office Building on the east side of Van Ness Avenue. The sites are bounded by Franklin Street, Post Street, Van Ness Avenue, Cedar Street, Geary Street, and Geary Boulevard. At St. Luke’s Campus, CPMC proposes to construct a new hospital that will be located adjacent to the existing hospital tower on Cesar Chavez Street. The existing St. Luke’s hospital tower would be demolished after the new hospital is built, operational, and patients have been transferred. In a subsequent phase, a replacement medical office building would be built. CPMC also proposes to reauthorize their previously approved Conditional Use for the Davies Neuroscience Institute (aka Noe Street Medical Office Building) located at 601 Duboce Street. Long Range Development Plan A draft Environmental Impact Report (EIR) was published by the Planning Department on July 21, 2010 for the CPMC Long Range Development Plan (LRDP). The LRDP is CPMC’s multi-phased construction plan to meet State seismic safety requirements for hospitals (SB 1953; California Health & Safety Code 130060 et seq.) and create a 20-year framework and Institutional Master Plan for its four existing medical campuses. Under the LRDP, at the proposed new Cathedral Hill Campus, CPMC would demolish the existing Cathedral Hill Hotel and 1255 Post Street office building and construct the proposed new Cathedral Hill Hospital, a 15-story, 555-bed hospital at the northwest corner of Van Ness Avenue and Geary Boulevard. In addition, a nine-story medical office building would be constructed at the northeast corner of Van Ness Avenue and Geary Street, across Van Ness opposite the proposed Cathedral Hill Hospital site. The existing Cathedral Hill site consists of seven buildings. Present uses on this site include retail, nightclubs, a restaurant, residential units, and two residential hotels, all of which would be demolished. An underground pedestrian tunnel is proposed beneath Van Ness Avenue, connecting the Cathedral Hill Hospital and the medical office building. An existing medical and general office building at 1375 Sutter Street would be converted into a medical office building and be part of the Cathedral Hill Campus. Implementation of the LRDP at the Pacific Campus would result in the decommissioning of an existing nine-story hospital building and its renovation and conversion to an ambulatory care center, construction of a new nine-story addition and new structured parking at the existing building, and renovation of other existing buildings at this campus. New development at the Davies Campus would include the construction of a new four-story Neuroscience Institute building at the corner of Noe Street and Duboce Avenue, currently occupied by a 206-space surface parking lot. A new three-story medical office building (and related parking improvements) would also be developed at the Davies Campus after demolition of the existing on-site 290-space structured parking garage at the corner of 14th and Castro Streets. Development at St. Luke’s Campus would include construction of a new five-story, 80-bed, acute-care replacement hospital at the site of the existing 3615 Cesar Chavez Street surface parking lot, and demolition of the existing 1970’s St. Luke’s Hospital tower and construction of a five-story medical office building (and related parking improvements) on this former hospital site. CPMC would sell the California Campus after relocating that campus’s inpatient acute-care services to the new Cathedral Hill Hospital and its other services to the Pacific Campus by 2020. Some existing medical activities would continue at the California Campus in a relatively small amount of campus space that CPMC would lease back from the new property owner. Entitlements and Approvals CPMC would need to obtain the following entitlements and approvals from the City for the proposed LRDP: (i) San Francisco General Plan text and map amendments; (ii) General Plan referrals; (iii) San Francisco Planning Code text changes and Zoning Map changes; (iv) height limit changes; (v) lot mergers; (vi) Planned Unit Development and Conditional Use authorizations (including changes to applicable Planning Code standards, and exceptions related to building height and bulk, parking, and permitted uses at some CPMC campuses); (vii) approval of office development under Planning Code Sections 321 and 322 in accordance with Proposition M; (viii) encroachment permits; (ix) permits with the City for subsurface right-of-way use (Van Ness Avenue Tunnel and underground storage tank (Cathedral Hill)); (x) vacation and acquisition of the portion of San Jose Avenue between Cesar Chavez and 27th Streets (St. Luke’s Campus); (xi) various permits and approvals for residential conversion, (xii) streetscape improvements; and (xiii) approval by the Board of Supervisors of a Development Agreement for the project. Draft EIR Findings This draft EIR found that implementation of the proposed LRDP at

MTA Considers New Fee on Residential Developments You heard that right. Just when 2011 was giving us signs of economic renewal, major new development fees are being considered by the City. A proposal scheduled to be heard by the Municipal Transportation Agency Board of Directors this past Tuesday would expand the existing Transit Impact Development Fee (TIDF) to apply to residential projects. Currently, the TIDF applies only to non-residential uses in the City. MTA has spent the past few years studying the issue, and has made recommendations for the new fee. These recommendations include: Expanding the TIDF to apply to new residential developments that include units of 1,000 square feet or greater, at $4.81 per square foot for 2+ bedroom units, at $4.14 per square foot for 1 bedroom and studio units, and $2.76 for senior housing. A reduction in the fee would be provided if parking is provided at levels lower than what is called for in the Planning Code. Increasing the TIDF on non-residential uses, from $1 to $4 per square foot. If the TIDF is not expanded to residential developments, MTA staff recommends that the existing TIDF be increased by roughly $3 to more than $7, depending on the use. MTA staff has also communicated to the MTA Board that studies will be completed soon that will justify new impact fees to offset the cost of bicycle and pedestrian improvements. The expansion of the TIDF to residential projects is expected to generate $2 million to $5 million annually. MTA staff admitted at the Tuesday hearing that they conducted very little noticing or public outreach of the fee proposal, which was evidenced by the large and angry crowd of builders, architects and developers that testified at the hearing. In response, the MTA Board sent the item back to staff to conduct public outreach. The proposal must go through an MTA subcommittee, the MTA Board, and the Board of Supervisors (at least) before the increases become the law of the City. We will certainly keep you posted on the proposed TIDF expansion and any other fees that the MTA takes up in the future. California Court of Appeals Strikes Down Recent Changes to San Francisco Rent Control Ordinance In 2008, San Francisco voters approved Proposition M, which broadened tenant protections in the City’s Rent Control Ordinance. Specifically, Prop M lists more than a dozen examples of acts of harassment which are prohibited by the Rent Control Ordinance and which would justify a decrease in rent by the Rent Board. The list includes such acts as abusing the landlord’s right of access to a rental unit, attempting to coerce the tenant to vacate the unit with offers of payment accompanied by threats or intimidation, continuing to offer payments to vacate after the tenant has notified the landlord they no longer wish to receive such offers, and interfering with a tenant’s right to privacy. Prop M also provided a civil remedy for these harassments with potential damages equal to three times the actual damages suffered and also authorized attorneys’ fees for tenants who are successful in an eviction action. Prop M was challenged after it was passed and on February 23, in Larson v. City and County of San Francisco, the California Court of Appeal for the First Appellate District struck down many of its provisions. Most of the listed harassments, specifically those that were not easily quantifiable, were removed from the Rent Board’s jurisdiction as a violation of the judicial powers clause of the California Constitution. The Court cited the unquantifiable nature of most of the listed harassments and stated that determining the vague type of damage that comes from such harassment is a judicial function, not appropriately within the jurisdiction of the Rent Board. The Court stated, “Thus, [those listed harassments] pose[] the precise risk the Supreme Court identified…‘of producing arbitrary, disproportionate results that magnify, beyond acceptable risks, the possibility of arbitrariness inherent in any scheme of administrative adjudication.’” A tenant can only receive a decrease in rent for those unquantifiable types of harassment by bringing a successful civil action in California Superior Court. One type of harassment, which prohibits a landlord from continuing to offer a tenant payment to vacate when a tenant has informed the landlord they no longer wish to receive such offers, was struck down in its entirety as a violation of the First Amendment’s free speech protections, and cannot be enforced even in California Superior Court. As a result, the only types of harassment defined by Prop M that will be within the jurisdiction of the Rent Board are (1) the interruption, termination or failure to provide housing services required by contract or law, (2) the failure to perform repairs and maintenance required by contract or law, or (3) the failure to exercise due diligence in completing repairs and maintenance once undertaken or the failure to follow appropriate industry protocols to reduce exposure to noise, building materials, toxins or molds with potentially harmful health impacts. The commission of any of these harassments will now provide a basis for the Rent Board to reduce a tenant’s rent. Prop M’s attorneys’ fees provision for successful tenants in an eviction action (also known as unlawful detainer) was also struck down by the Court, which stated that the City had no authority to amend or add to the unlawful detainer statute – which is a state law. Please contact us if you would like a copy of Prop M or the Court of Appeals decision.   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, 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

SB469 Would Require Economic Impact Study For New Big Box At a time when many Washington politicians are rallying against government regulation and pushing to relax restrictions on businesses across the board, one California bill is swimming in the other direction. California Senator Juan Vargas, District 40 (Riverside), has introduced new big box legislation in the California Senate. SB469 would require an applicant seeking permits from a local government for a “super store” to submit an “economic and community impact analysis report” along with the application. Superstore is defined in the bill as “a single tenant retail establishment that exceeds 90,000 square feet.” Among other things, the impact analysis report must include an assessment of the extent to which the proposed super store will capture a share of retail sales in the economic and community impact area; an assessment of how the store will affect the “supply and demand for retail space in the area” and an assessment of the number of retail jobs in the area and an analysis of whether the proposed store “will result in a net increase or decrease in employment in the economic and community impact area, and a projection of the costs of public services and public facilities that would result from construction and operation of the store”.  These are expensive and time consuming studies.  Big box stores in California are becoming increasingly difficult to permit, and if passed, SB469 will not make it any easier. And Then There Were Two (Big Bookstores in San Francisco) Just five months after last updating you on the big bookstore industry in San Francisco, Borders Group – the owner of Borders bookstores – declared bankruptcy last week. The move will reportedly result in 200 stores closing nationwide, with 11 closing in the Bay Area. The Borders stores at Union Square and at the Westfield Centre are expected to close, leaving Stonestown as the only remaining location in town. The Borders on King Street in Mission Bay closed in October. The Borders in Alameda will close and the location in Emeryville will remain open. Industry analysts and brokers are bullish on the soon-to-be-vacant large retail spaces throughout the country. Many of the properties are in major markets that are relatively difficult for retailers to enter (read: San Francisco). And unique uses are being proposed: bowling alleys, gyms, supermarkets and office supply stores according to one analyst. The former Borders space on King Street was temporarily used as a Giants gift store selling World Series paraphernalia. Here’s hoping the owners of these properties can continue to find innovative – and more permanent – tenants for these unique spaces. AB 208 Offers More Help For Stalled Subdivision And Condo Projects In furtherance of a law enacted in 2009, Assembly Bill 208, introduced on January 31, 2011, proposes to extend the life of qualifying tentative maps and related state agency approvals until economic conditions permit the completion of stalled subdivisions and condominium projects. Tentative Map Extension. AB 208 would automatically extend for 2 years any existing unexpired tentative map or vesting tentative map that would otherwise expire prior to January 1, 2014. To be eligible for the extension, a map must have been valid on July 15, 2009, and set to expire before January 1, 2014. The 2 year extension is in addition to any other extensions provided under state law or local ordinance, and in addition to any extension provided by AB 333 in 2009. See Cal. Govt. Code Section 66452.23. Related State Agency Approvals Also Extended. Important for those projects receiving other state agency approvals, such as a San Francisco Bay Conservation and Development Commission (BCDC) Permit or California Coastal Commission (CCC) Coastal Development Permit, the proposed law would also extend for 2 years related state agency approvals for those projects that extend their maps under AB 208. Local City & County Approvals Not Included. AB 208 only applies to tentative maps, vesting tentative maps and related state level approvals. The proposed law does not extend local city or county approvals or permits. Conditional Use Permits, Variances, Special Use Permits, building permits and other local approvals remain subject to local regulations with respect to expiration periods and available extensions, if any. The Trade Off. For those projects utilizing the 2 year map extension under AB 208, there are a few tradeoffs. In order to offset any potential adverse impacts on local cities or counties from multiple extensions of tentative or vesting tentative maps, AB208 modifies Cal. Govt. Code Section 65961 by (i) reducing from 5 years to 3 years the period of time after recordation of a map during which a city or county is prohibited from imposing new conditions on a building permit if such conditions could have been imposed as conditions of the previously approved tentative or vesting tentative map, and (ii) eliminating the prohibition on a city or county imposing new local fees upon the issuance of a building permit. 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, 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. Copyright 2011 Reuben & Junius, LLP. All rights reserved.    

A case decided by the Massachusetts Supreme Court could have a devastating effect on property acquired by foreclosure if followed by the California courts. In U.S. Bank, N.A. v. Ibanez (SJC-10694), decided on January 7, 2011, the court ruled against foreclosing lenders who improperly documented their assigned mortgage interests and those who purchased the foreclosed properties. In U.S. Bank, a mortgage was assigned “in blank” (the assignment did not specify the name of the assignee) to multiple successive lenders, eventually becoming part of a mortgage-backed security asset pool. The mortgage-backed security asset pool involved a private placement memorandum (an unsigned offer of mortgage-backed securities to potential investors) which contemplated that the mortgages would ultimately be assigned into a securitization trust agreement with U.S. Bank as the trustee of the trust. U.S. Bank then foreclosed on the property by non-judicial sale as the “owner” of the mortgage. However, the mortgage was not actually assigned to U.S. Bank and recorded until more than one year after the foreclosure sale. The Massachusetts Supreme Court held that because the assignment was not executed by U.S. Bank and recorded until after the sale, U.S. Bank did not have the requisite ownership interest of the mortgage necessary to foreclose and the foreclosure was null and void. The court stated that if, prior to the sale, there had been an executed securitization trust agreement with language authorizing present assignment, and a schedule including Ibanez’ mortgage, the foreclosure would have been valid. But U.S. Bank could not produce such an executed trust agreement, only the assignment recorded after the sale. This ruling applies retroactively, thus any purchasers of foreclosed properties in Massachusetts affected by this issue technically no longer own their properties, and title automatically reverts to the previous owner upon whom the lender foreclosed. California is a state which operates under a non-judicial foreclosure system, similar to Massachusetts. Although this decision is not binding in California, the reasoning could be followed by California courts sometime in the near future. California courts have previously held foreclosure sales invalid due to lender’s procedural oversights. For example, in Dimock v. Emerald Properties LLC (81 Cal.App.4th 868), decided in 2000, the original trustee filed a notice of default and the lender subsequently recorded a substitution of trustee. Upon the borrower’s failure to pay according to the terms of a forbearance agreement, the lender proceeded with a foreclosure sale under the original notice of default and the original trustee. The court in Dimock held that because the substitution of trustee was recorded, the original trustee had no power to convey the property, and its deed to the new buyer at the foreclosure sale was void. The court stated that if the lender had recorded another substitution of trustee reinstating the original trustee, it could have properly proceeded with the original notice of default and foreclosure sale. Although not specifically involving a lender and it’s lack of authority to foreclose due to improper assignment, Dimock shows that a foreclosure sale can be nullified in California due to a lender’s failure to properly and timely record required documentation. If U.S. Bank is followed in California it would cause great uncertainty as to ownership of property involved in these types of foreclosures. This case is a stark reminder to lenders who acquire their mortgage interest by assignment, to execute and record their assignments in a timely manner prior to initiating a foreclosure sale. This is especially critical in a case involving mortgage-backed securities in which multiple mortgages are assigned to different lenders throughout the process. If applicable, lenders must be sure to properly execute securitization trust agreements which include language about present assignment of the specific mortgages. If lenders fail to properly document such assignments and U.S. Bank is followed in California, those who acquire their property through foreclosure and subsequently have it taken away due to an improper sale may seek recourse against these offending lenders. 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, 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. Copyright 2011 Reuben & Junius, LLP. All rights reserved.    

Changes in South of Market Parking Requirements Considered by Planning Commission, Board of Supervisors For some time, San Francisco has been a national leader in urban planning. Over the past few years, the city has strived to maintain that role through promoting New Urbanism and “livable city” initiatives that make it a more comfortable place to work and live. City officials, planners and public policy advocates have been increasingly emphasizing the need for dense, transit-oriented development, more pedestrian- and bike-friendly streets, and reducing traffic congestion. To that end, one of the major evolutions in the city’s Planning Code has been to move away from requiring minimum levels of parking in new developments and instead setting maximum levels of parking that can be provided. This transition began with the Rincon Hill Area Plan and was vastly expanded with the Eastern Neighborhoods Area Plan. Parking maximums now also apply to C-3 (downtown) districts. The city is now considering changing parking minimums to maximums in the South of Market area. New legislation being considered by the Planning Commission tomorrow would expand parking maximums to South of Market Mixed Use Districts, Mission Bay Districts, M-1 districts and C-M districts. The maximum parking levels would be similar to those in neighboring Eastern Neighborhood Mixed Use and C-3 districts. Street frontage design controls would also be expanded to cover these districts and parking fees intended to discourage long-term commuter parking would be required in these districts. In the end, the real significance of these new controls may be minimal. The Eastern Neighborhoods Area Plan eliminated most of the remaining M-1 and C-M districts in the city. If the Western SoMa area plan is ever enacted, most of the remaining South of Market Mixed Use districts would be completely overwritten. However, the new legislation further cements the fact that, moving forward, parking will increasingly be controlled by maximum limits, rather than minimum requirements. The Impacts of “Disestablishing” Redevelopment Agencies in San Francisco It’s amazing how things can change in a month. As we signed off for 2010, Redevelopment Agencies throughout the state were able to celebrate the holidays, reflect on the past year, and plan for the year ahead without the slightest worry that California’s 65+ year-old Redevelopment Law could be erased from the books. Fast forward just one month, and Redevelopment Agencies are literally in the fight for their life, as Governor Brown as proposed to “disestablish” the agencies as of July 1, 2011. The biggest change that would come from ending Redevelopment, beyond the loss of the Redevelopment Agencies that administer it, would be the loss of tax increment financing (TIF) to generate funds to be used for redevelopment activities, affordable housing and infrastructure improvements. Put simply, TIF allows redevelopment agencies to collect all property taxes that are generated in a redevelopment area above the baseline of existing property taxes that were collected when the area was established. Those new funds can be used directly to fund redevelopment activities or agencies can sell bonds that are repaid by future TIF funds. If Governor Brown’s proposal succeeds, these TIF funds would be redistributed to the state this year, and to local school districts and counties in future years. Tomorrow the Planning Commission will hold a public hearing on what exactly the disestablishment of redevelopment agencies will mean to San Francisco. In a memo to the Commission, Planning Director John Rahaim outlines the likely ramifications. Rahaim states the city’s ability to carry out revitalization plans in Mission Bay, Hunters Point Shipyard, Treasure Island, and the Transbay District will be “severely affect[ed]” by the loss of TIF funds. As a regulatory matter, Rahaim states that it is unknown whether the changes would mean the redevelopment-area-specific zoning controls would continue to apply, or if they would revert to underlying city Planning Code controls. Finally, Rahaim cites that the Planning Department currently receives around $500,000 annually from the San Francisco Redevelopment Agency to assist with the administration of redevelopment areas in the city – money that the Department will not be able to rely on if Governor Brown’s proposal goes through. San Francisco Redevelopment Agency Director Fred Blackwell has also been extremely active in fighting back against Governor Brown’s proposal. A memo provided by his agency cites some very compelling figures to support redevelopment’s positive impact on San Francisco. According to the memo, in 2010, redevelopment projects created 3,079 construction jobs – consisting of over $21.7 million in gross earnings. Over 1,400 affordable housing units in 11 projects are currently in the redevelopment pipeline and an additional 6,000 more affordable units are being planned in the Mission Bay, Transbay, Treasure Island and Hunters Point Shipyard redevelopment areas. The likelihood of all of these units being constructed drops precipitously if the redevelopment agency is eliminated. Finally, the memo states that more than $50 million in infrastructure improvements are planned for 2011 using TIF funds generated in redevelopment areas. Add to the all of this the fact that Governor Brown has yet to make public the details of his plan. But that hasn’t stopped this ball from moving forward. State Senate and Assembly committees have already been holding hearings on the proposal. One major question regarding the future of this proposal is whether a constitutional amendment is required – which would need the approval of voters. Boy, July 1 doesn’t seem too far away, does it? More Encouraging Signs from City Hall Last week we reported to you the efforts new Supervisors Wiener and Farrell were making towards land use reform. These aren’t the only new residents of City Hall that we are seeing positive signs from. Admittedly, Mayor Ed Lee has been in office for just a month now, but what we see so far we like. First, Mayor Lee joined a group of Mayor’s from California’s largest cities to defend Redevelopment Agencies from Governor Brown’s proposed axing. To be expected, we guess. However, in his first major policy initiative of his administration, Mayor Lee initiated a proposal, designed to

Arbitration Clauses Continue to be Unenforceable in Construction Defect Cases A recent Court of Appeal decision has continued the march against the enforceability of binding arbitration in construction defect cases involving condominium projects and other common interest developments. In Pinnacle Museum Tower Association v. Pinnacle Market Development (US) (2010) 187 Cal.App.4th 24, the Court held that even though the arbitration clause was clearly displayed on the front page of the CC&Rs and in the condominium purchase agreements, it was not enforceable against the homeowners association. This was because the homeowners association only existed through the actions of the developer, so it could not effectively “agree” to arbitration and the associated waiver of the right to jury trial. In reaching this ruling the Court relied on the decision in Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, which held that waivers of jury trial rights in contracts were not enforceable if the waiver occurred before contract execution. The Court also found that the Legislature has provided a specific set of pre-dispute procedures that must be followed before litigation, and that the Legislature allowed the parties to determine if arbitration would be binding or non-binding. (SB 800 procedures.) Finally, the Court ruled that arbitration clauses would not be enforced in individual homeowner contracts because the provisions were unconscionable, unfairly one-sided, and did not provide sufficient notice to the buyers. The ruling in Pinnacle is consistent with a number of cases that have found arbitration clauses unenforceable against homeowners associations. Other courts have used the doctrines of unconscionability and inconsistency with California Civil Code Section 1298.7 (right of action for defect claims may not be precluded by an arbitration clause) to strike down arbitration provisions. Another case has disallowed judicial reference. Based on the many cases finding against developers and arbitration, it is difficult to imagine that any arbitration provisions would be enforceable without legislative or Supreme Court intervention. One interesting point is that the Court seemed to leave developers with an opening to create an enforceable arbitration provision. The Court stated that because the CC&Rs could be amended by the homeowners association (in this case, the arbitration provision was not allowed to be amended) and if the language in the CC&Rs stated that the homeowners association would be deemed to accept the arbitration provision unless it was rescinded by the homeowners association, then perhaps this would be enough to show meaningful consent by the homeowners association. The good news is that perhaps developers will receive some guidance and reconciliation of the different Court of Appeal opinions. The California Supreme Court granted review of Pinnacle on November 10, 2010. The two issues to be decided are (1) whether a homeowners association is bound by an arbitration provision in CC&Rs recorded before the association came into existence, and (2) did the Court of Appeal err by applying the unconscionability provision only to the arbitration clause, despite the requirements of the Federal Arbitration Act (favoring arbitration). Hopefully, the Supreme Court will give developers clear rules on whether CC&Rs can require arbitration of construction defect cases, since the Legislature has not done so. We will be tracking this decision. SF Assessor’s Office Accepting Informal Review Applications The San Francisco Assessor’s office will take applications for an “informal review” of homeowners’ requests for a property tax reduction. Owners of single family homes, residential condominiums, townhomes, or live-work units may submit an application to the Assessor prior to March 31, 2011. The Assessor will then perform an informal review to determine if the property value has declined. Taxpayers will be notified of the Assessor’s decision, and will retain the right to a formal appeal. Appeals may be filed from July 5, 2011 until September 5, 2011. Go to sfassessor.org for more information and forms. Update on Backlog of Real Estate Tax Appeals As we have talked about in prior updates, there is an extensive backlog of real estate tax appeals. There were approximately 6600 appeals filed for the 2010-2011 tax year. It is taking about 12-18 months for an appeal to be heard. The 2009 tax appeals are estimated to be completed around July of 2011. Once the 2009 appeals are completed, the Appeals Board will begin hearing the 2010 appeals. We understand that the Assessor’s office may be looking to help reduce this backlog by working on informal settlements of residential property appeals, which make up about 65% of all the appeals. If you would like to learn more about how these informal settlements work, or have other questions about tax appeals, please call Kevin Rose. 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, 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. Copyright 2011 Reuben & Junius, LLP. All rights reserved.