United States: West Coast Real Estate Update: Oct. 10, 2016

Susan J. Booth is the head, Karl J. Lott is a partner of the West Coast Real Estate Group, Douglas A. Praw is a partner, Ashley K. Jason and Paul J. Park are associates and Geoffrey M. Geddes is a public finance project manager in Holland & Knight's Los Angeles office. Stacie Goeddel is a partner and Robert M. Haight Jr. is an attorney in the Holland & Knight's San Francisco office.

California Coastal Act Blocks Housing Project in Venice Despite Earlier Approvals

Judge James C. Chalfant of the California Court of Appeal on Sept. 29, 2016, affirmed a lower court ruling denying a developer's petition that sought to overturn the City of Los Angeles' decision to halt a previously approved 15-unit housing project in Venice.

In 2013, City of Los Angeles planning officials approved developer Kalnel Gardens LLC's proposed project to tear down a two-story, three-unit apartment building and construct a total of 15 housing units on the site. The project proposed five duplexes and five single-family homes with roof heights reaching 40 feet and a setback of 25 feet. Kalnel was allowed to exceed the normal density restrictions and obtained a height variance above the usual 25-foot limit because two of the units were designated for very low income households.

In September 2013, a group of neighboring residents appealed the planning department's various approvals concerning Kalnel's project. The residents argued the project violated the California Coastal Act (Coastal Act) because its height, density, setbacks, and other visual and physical characteristics were out of step with the existing neighborhood, which consists mostly of 1920s-era one-story bungalows.

After an appeal hearing in December 2013, the West Los Angeles Area Planning Commission (the Commission) found that Kalnel's project did not conform to the Coastal Act because its size, height, bulk, mass and scale were incompatible with and harmful to the surrounding neighborhood and because the setbacks were too small. The Los Angeles City Council then adopted the Commission's findings and halted the project.

Kalnel sued the city, seeking an administrative mandate that would allow it to proceed with the project. The trial court found that the density bonus, height and setback variations initially approved for the project were proper under the housing density statutes and other city zoning plans and regulations. However, the court found that the housing density statutes were subordinate to the Coastal Act and therefore denied Kalnel's petition.

Gov. Brown Signs Legislation to Enhance Foreclosure Protections for Surviving Spouses

California Gov. Jerry Brown signed Senate Bill 1150, which enhances foreclosure protections for surviving spouses who are not on their homes' mortgage notes, on Sept. 29, 2016. The bill was signed despite concerns from financial industry groups that the legislation could expose lenders to frivolous lawsuits.

The legislation intends to help surviving spouses in scenarios where difficulties involved in proving property ownership delay loan modifications while the foreclosure process proceeds.

The legislation gives surviving spouses many of the same rights enjoyed by borrowers under the California Homeowner Bill of Rights. As a result, lenders will not be able to negotiate a loan modification with a surviving spouse while simultaneously pursuing foreclosure. In addition, the bill gives surviving spouses legal remedies to stop a foreclosure and the ability to seek monetary damages if a foreclosure proceeds.

New Seismic Requirements Add Costs to Redevelopment Projects and Building Owners

The Catalina Lofts redevelopment project on Skid Row is one of the first projects permitted under City of Los Angeles Ordinance 183893 – the new non-ductile concrete mandatory seismic reinforcement ordinance. The law requires any building with a roof or floor supported by a concrete wall or concrete column and constructed before Jan. 13, 1977, to be retrofitted for earthquake safety. This requirement has more than doubled Catalina Lofts' structural upgrade budget, taking it from $1 million to $2.5 million. In addition, the developer would like to create useable space on the roof of the building to allow tenants to enjoy stunning views of the downtown skyline. However, to legally use the roof, new code compliance requires that the entire building be considered high-rise, even though it is only six stories tall. This means the developer must provide expensive life safety systems that are usually only found in much larger buildings.

The ordinance not only applies to redevelopment but also to existing structures. The City of Los Angeles has begun sending Orders to Comply to owners of buildings that fall within the scope of the ordinance. From receipt of the Order to Comply, building owners have three years to submit completed checklists to determine if their building is a non-ductile concrete building, 10 years to submit proof of previous retrofit or plans to retrofit or demolish the building and 25 years to complete construction of any necessary retrofit. Going forward, the requirements of the new ordinance will be an important consideration for owners and redevelopers of many of Los Angeles' older buildings.

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