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By Matthew Hinks
Amidst reports of rising home prices throughout California and fears of a new housing bubble, controversial plans floated by California cities to deal with the lingering effects of the mortgage meltdown by invoking their powers of eminent domain are gaining traction. The City of Richmond in Northern California has begun implementing the plan by sending letters to hundreds of holders of underwater mortgages — mortgages on homes that are now worth less than the mortgage amount — offering to purchase the loans at a discount. If the mortgage holders refuse, Richmond’s mayor has indicated that the city will move to seize the loans pursuant to its eminent domain powers.

The idea came to national prominence last year when the County of San Bernardino combined with the cities of Ontario and Fontana to form a Joint Powers Authority to publicly examine proposals to assist homeowners within their jurisdictions who are underwater on their mortgages. The JPA publicly flirted with the use of eminent domain to seize underwater mortgages only to abandon the idea after opposition surfaced.

The Los Angeles Times reports that the City of El Monte is considering adopting a similar plan. Other cities across the country and throughout California, including La Puente, near El Monte, and Orange Cove and San Joaquin in Fresno County, are reportedly doing the same.
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by Neill Brower
An August 5, 2013, the California Supreme Court provided some additional flexibility to local agencies in deciding what conditions properly constitute the “baseline” for analysis under the California Environmental Quality Act (“CEQA”). The decision, Neighbors for Smart Rail v. Exposition Metro Line Construction Authority (“Neighbors”), Case No. S202828, narrowly upholds the environmental impact report (“EIR”) prepared for phase 2 of the Exposition Corridor Transit Project (“Expo Phase 2”) and strikes a middle ground among previous decisions regarding the use of various future baselines. The court ruled, among other things, that although an agency may, in very limited circumstances, evaluate project impacts on the basis of conditions anticipated to exist at the time of certification of an environmental impact report (“EIR”) for the project, or on a hypothetical longer-term future baseline, these cases remain the exception, rather than the rule. If using only a hypothetical future conditions and omitting existing conditions as a baseline, an agency must demonstrate that an analysis based on existing conditions “would detract from an EIR’s effectiveness as an informational document” by providing an uninformative or misleading analysis. In most cases, an agency must still evaluate the impacts of a project in comparison to existing conditions, though nothing prevents additional analysis of long-term impacts, particularly in the context of a cumulative analysis or a “no project” alternatives analysis.
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By Matthew Hinks
Effective environmental review of a real estate development project under the California Environmental Quality Act (“CEQA”) often requires that the approving agency and representatives of the developer work together collaboratively to ensure that environmental review is carried out according to the dictates of the law. However, doing so raises the question of the protectability of communications shared between the developer, the CEQA lead agency and their lawyers. Communications between an attorney and his or her client are privileged and are therefore not subject to disclosure as part of the discovery process or the administrative record in CEQA litigation. But what about in situations where communications take place or are shared among a developer, a lead agency and their lawyers?

A new California Court of Appeal opinion — Citizens for Ceres v. Superior Court — offers a new answer to that question, which will have significant practical implications for property owners and developers engaged in the CEQA process. However because the opinion appears to conflict with a prior Court of Appeal opinion, it is unclear how the rule announced by the Ceres court will get applied in future litigation. Moreover, there is significant question as to whether the Ceres rule will get applied outside of the CEQA context.
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By Matthew Hinks
State density bonus law — one of many California statutes enacted to implement the state’s policy of promoting the construction of affordable housing — has withstood a significant challenge posed by the County of Napa (the “County”) in a new California Court of Appeal opinion, Latinos Unidos del Valle de Napa y Solano v. County of Napa. The Court’s opinion is good news, not only for advocates of affordable housing, but also developers of multifamily housing who rely upon the law, which provides valuable development incentives and is a useful and powerful tool in the permitting process.
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by Matthew Hinks
The recent spate of court cases dealing with local regulation of medical marijuana dispensaries (“MMDs”) offers an interesting illustration of the interplay between federal, state and local laws that regulate the same subject matter, and the impact that dynamic has upon local land use regulation. Each of the three levels of government regulate the use and sale of marijuana, albeit for different purposes and in vastly different ways. Federal law continues to classify marijuana as a Schedule I controlled substance under the Controlled Substance Act. With the passage by voter initiative of the Compassionate Use Act of 1996 (“CUA”) and the legislatively-adopted Medical Marijuana Program of 2003 (“MMP”), the State of California chose to remove certain state law obstacles from the ability of qualified patients to obtain and use marijuana for legitimate medical purposes. On the local level, many municipalities have taken steps to either outright ban MMDs or otherwise heavily regulate them through their zoning laws.
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By Matthew Hinks
The California legislature has declared the availability of housing for every Californian to be a matter of “vital statewide importance.” Thus, the legislature has charged local governments with facilitating the provision of housing for all economic segments of the community through the implementation of “housing elements” as part of the community’s general plan. The components of those housing elements, including an assessment of housing needs for all income levels, the identification of adequate housing sites, and a program that assists in the development of such housing to meet the needs of low-income households.

San Jose’s Inclusionary Housing Ordinance

To implement the state’s inclusionary housing policy, the City of San Jose (the “City”) passed in 2010 an Inclusionary Housing Ordinance (“IHO”). The IHO requires multi-unit residential developments including at least 20 units to set aside 15 percent of the units for purchase at a below-market rate to households earning no more than 110 percent of the area median income. Alternatively, the developer could comply with the IHO by paying an in-lieu fee not to exceed the difference between the price of a market rate and affordable housing unit or dedicating land.
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By Matthew Hinks
Chief Justice John Roberts recently observed during oral argument on the Supreme Court’s latest foray into the field of regulatory takings that the government does not lose a Penn Central case very often. A new opinion from the California Court of Appeal in Lockaway Storage v. County of Alameda represents one of those rare instances. But more than offering just an isolated example of a property owner victory in such cases, the court’s opinion in the Lockaway case delivers a significant blow to a major obstacle that has stood in the way for developers alleging damages caused by project delays — the California Supreme Court’s seminal decision in Landgate v. California Coastal Commission.

Facts of Complaint

In May 2000, Lockaway Storage (“Lockaway”) purchased an 8.45-acre parcel of land in an unincorporated area of Alameda County. The property was zoned for agricultural uses with an alternative conditional use for “open storage of recreational vehicles and boats”. Prior to Lockaway’s purchase of the property, the County had issued a Conditional Use Permit (“CUP”) authorizing an rv storage facility, which would expire if it was not implemented by September 22, 2002.
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By Matthew Hinks
Statues of limitations issues frequently loom large in litigation under the California Environmental Quality Act (“CEQA”) and can confound litigants and their counsel. Depending on the challenge being made and the context in which it is made, claims brought under CEQA may be subject to a range of limitations periods — from 30 to 180 days. Moreover, the date on which a CEQA claim accrues is not always clear. For example, an agency making a CEQA decision may file a Notice of Determination, which generally triggers the shorter CEQA limitations periods, but parties with an interest in that same decision may not always get notice of the filing. For these reasons, among others, calculating the correct statute of limitations period applicable to a CEQA claim can be risky business. A new opinion from the California court of appeal, Alliance for the Protection of the Auburn Community Environment v. County of Placer, raises the stakes even higher and holds that a party may not obtain relief from a late filing by reason of mistake, inadvertence, surprise, or excusable neglect.
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To review the statistical results of the survey, click here.

JMBM’s Real Estate Group recently polled nearly 200 California real estate professionals, gathering their views about the California real estate market and their expectations for 2013.

According to these industry insiders, there is a lot of good news to report. California real estate appears to be in the midst of a sustainable recovery. Survey respondents indicated that capital is more widely available than in recent years, and, for the first time since the housing bubble burst, developers are eager to commence project entitlements.

In terms of the real estate market in general, here is what we learned:

  • 2% of our respondents described themselves as “bullish.”
  • 55% described themselves as “cautious.”
  • 28% believe the market has already recovered; 43% believe the real estate market will achieve sustained recovery by the end of this year; 29% feel it will take at least 2 years to recover.
  • 90% feel that acquiring debt will be easier or the same in 2013, while a similar percentage (89%) believe acquiring equity will be easier or the same.

Over 93% indicated being active in the distressed market. However, nearly 61% noted a material decrease in note sale activity, signaling that loan defaults are down and that large numbers of expiring conduit loans appear not yet to have created a second wave of defaulted note sales.

Movement from distressed properties to stabilized real estate. JMBM represents clients in all facets of real estate, from entitlement through completion, from acquisition to disposition and, according to JMBM Real Estate Partner Seth Weissman, the survey results are consistent with what JMBM’s real estate lawyers are seeing. Weissman’s clients have been particularly active in the distressed market. “However, those transactions are giving way to more traditional ‘market’ deals as more conservative investors, looking to stabilized real estate as a traditional component of their portfolios, are re-entering the market,” said Weissman. “As the overall economy improves and interest rates remain low, we are seeing increased activity in office, multifamily, and industrial projects as well as the upscale single-family market.”

Multifamily. While cautiously optimistic about most sectors, our respondents indicated that multifamily is the most attractive market segment for investment. “Nearly two-thirds of our survey respondents are involved in some way in multifamily housing,” said Benjamin Reznik, Chair of JMBM’s Government, Land Use, Environment and Energy Group. “Demand for quality rentals remains very strong, and developers and lenders are eager to meet that demand.”

Hospitality and retail. A full third of our respondents are involved in the hospitality sector. “These hotel investors and developers see that the stage is set for continuing improvement in hotel industry fundamentals and hotel valuations for at least the next 5 years,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group®. “The market is also experiencing a renaissance of ‘hotel-retail mixed-use’ development, as retail and hotel developers both seek the increased revenue that is generated when the right hotel is added to a shopping center.”

What’s coming online. Niche areas of development and acquisition that our respondents are actively involved in include transit oriented development (18% ), creative office (16%), medical office buildings (13%), senior housing (10%) and student housing (9%). “These unique infill opportunities have gained momentum for developers able to identify strategic development sites and seize upon demographic, transit or employment opportunities in local markets,” said JMBM Real Estate, Land Use and Environmental Partner David Waite.

EIRs and Entitlements. As projects get back underway, respondents are keenly interested in entitlements, but challenged by the process.

  • While nearly 90% of respondents feel 2013 will be a good year to entitle or re-entitle properties, and almost half (49%) reason that zoning authorities will be more lenient due to lingering economic difficulties, we learn more as we delve into specific responses. As one respondent noted, this year will be “a good year because of cycle considerations, not an easy year.” Another noted, “Getting entitlements is hard, and getting harder. Waiting just makes it worse.”
  • The picture on entitlements appears to dovetail with the general market sentiment. As one person said, “Entitlement now is necessary for successful delivery into a robust market.” Another noted that, “Market demand for entitlement projects are high, and barriers to entry are difficult.” A third agreed: “Entitlement is still very hard, so new entitlement will add great value.”
  • A majority also suggest that applicants will be more aggressive with their applications, and 36% think projects will be approved more quickly because the pool of applications has remained small.
  • 50% of participants said they would face the challenge of preparing and circulating a new or updated environmental impact report (EIR) this year. “While the prospects for CEQA reform appeared promising at the end of 2012, expectations for meaningful reform should be muted as a variety of environmental stakeholders and special interests jealously guard their cherished seat at the CEQA table,” said Waite.

Developers continue to be challenged by the entitlement process and realize that success may be buoyed by other factors, including the skills of qualified professionals. As one person wrote, “Applicants who engage high quality land use attorneys and consultants have a much higher chance of getting projects approved.”

Waite agrees. “There are so many good projects in the pipeline that languish simply because they lack knowledgeable advisors willing to thoughtfully and aggressively engage with regulators to achieve positive outcomes,” he said. “As development activity increases, having the right team of professionals in place will be more important than ever.”

We are pleased to share this feedback from our survey participants, and thank our clients and friends for their participation in the survey.

We look forward to assisting you in any way possible and invite you to contact us.

For a list of all JMBM real estate lawyers, click here.

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by Kerry Shapiro
As reported earlier this week in this blog, the recent Ninth Circuit Court of Appeals decision in Center for Biological Diversity v. Salazar allowed a uranium mine on federal lands in Arizona to re-open after being idled for seventeen years absent any new federal approval or supplemental environmental review. This decision is notable on its own, but carries added significance in California, where it now highlights a potential conflict between federal and state law regarding idle mines and the resumption of mining operations at such mines.
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