A California Court of Appeal held that longstanding use of a landowner’s property for access and parking by residents of the adjacent lot had established a prescriptive easement. Husain v. California Pacific Bank, 61 Cal.App.5th 717 (2021).

For many years the landowner’s and neighbor’s properties had been held under common ownership and used for residences. One property (the “El Camino” property) was developed with a large apartment complex and an underground parking garage, while the other property (the “Willow” property) was developed with a duplex and a surface parking lot.  Former owners had obtained local approval of a nonconforming use to allow tenants of the apartment complex to utilize off-site parking on the Willow lot.  In 2011, the former owner defaulted on its mortgages and the El Camino and Willow properties were sold to different lienholders at trustee sales, after which tenants of the El Camino apartments continued to use the Willow property driveway for access and parking consistent with past use despite the severance of ownership.  In 2017, plaintiff acquired the Willow property and shortly thereafter brought a quiet title action against the bank owner of the El Camino property, who cross-complained for a prescriptive easement.

Under state common law, a person establishes a prescriptive easement over another’s property through open, notorious, continuous and adverse use of the property for an uninterrupted period of five years.  The owner of the servient estate must have at least constructive notice of the others’ use, and such use must be made without express or implied recognition of the owner’s property rights.  At trial, plaintiff attempted to defeat a prescriptive easement finding by arguing that the residential tenants’ use was “permissive,” citing precedent that a permissive use survives a change in ownership until a new owner unequivocally repudiates the prior permissive use.

However, the Court of Appeal faulted plaintiff’s argument on dual grounds.  First, because a property owner cannot hold an easement against itself, the court found that the prescriptive period did not begin to run until 2011 when the dominant and servient estates were severed via the trustee sales.  The court also highlighted evidence in the record that the former owner characterized the El Camino owner’s use of the Willow property as a “trespass” during foreclosure proceedings in 2011.  Moreover, the court emphasized that whether or not a use of property is permissive or adverse is a question of fact for the trial court and no abuse of discretion had been shown.

Last, the Court of Appeal found equitable support from the indemnification terms of plaintiff’s purchase agreement.  When it purchased the Willow property in 2017, plaintiff signed an indemnification and hold harmless agreement that cited “potential easement issues” and identified with specificity the known past use of the Willow property by tenants of the El Camino property.  The agreement further stipulated that “buyer is on notice to conduct its own diligence and legal review of these issues.”  Accordingly, where plaintiff had actual notice of the potential easement prior to its purchase of the property and would have had the opportunity to account for the easement in negotiations of the purchase price and other recourse terms, equitable considerations reinforced the determination that a prescriptive easement had been established.

A city’s ban on short-term vacation rentals in the coastal zone constitutes “development” under the California Coastal Act. Therefore, the Coastal Commission must first approve a coastal development permit, an amendment to the city’s certified local coastal program, or an amendment waiver before such a ban can be imposed. Kracke v. City of Santa Barbara, 63 Cal. App. 5th 1089 (2021).

Until 2015, the City of Santa Barbara allowed short-term vacation rentals as long as the owner registered the unit with the city, obtained a business license, and paid transient occupancy taxes. In 2015, the City Council directed its staff to regulate short-term rentals as hotels under the city’s zoning code. Because the zoning code did not permit hotels in most residential districts, the city’s action was effectively a ban on short-term rentals in most residential areas. As a result, the number of short-term rentals in the coastal zone dropped from 114 to 6. The owner of a company that managed short-term rentals filed a petition for writ of mandate challenging the city’s new policy.

The Coastal Act requires a coastal development permit for any “development” in the coastal zone. “Development” is defined in the statute to include changes in the density or intensity of use of land and changes in the intensity of access to water. Courts have interpreted the term broadly to encompass any impediments to access, not merely physical alterations.

The court of appeal held that the city’s change in policy “necessarily” changed the intensity of use of and access to land and water in the coastal zone. Accordingly, the city was required to first obtain Coastal Commission’s approval, either through a coastal development permit, an amendment to its certified local coastal program, or an amendment waiver.

The court explained that the reduction in the number of short-term rentals in the coastal zone was inconsistent with the Coastal Act’s goal of improving the availability of lower cost accommodations along the coast. Further, the court explained, its decision was consistent with Greenfield v. Mandalay Shores Community Association, 21 Cal. App. 5th 896 (2018), in which the court of appeal held that a homeowner’s association’s ban on short-term vacation rentals was “development” under the Coastal Act because it changed the intensity of use and access to single-family residences in the coastal zone.

The court’s decision is also consistent with the Coastal Commission’s policy. In 2016, the Coastal Commission sent a guidance letter to local governments explaining its position that regulation of short-term vacation rentals constituted development under the Coastal Act. (The Coastal Commission filed an amicus brief supporting the petitioner.)

The court’s decision in this case reinforces the broad powers of the Coastal Commission over local policies that impede access to the coastal zone. This case, together with the court’s 2018 decision in Greenfield, hold that any restrictions on short-term vacation rentals in the coastal zone—whether by a private entity or a local government—are subject to the Coastal Act and must be approved by the Coastal Commission.

A court of appeal invalidated a water district’s adopted rate increases, concluding that the district failed to meet its burden under Proposition 218 of establishing that the increases did not exceed the cost of providing the water service. KCSFV I, LLC v. Florin County Water District, No. C088824 (3rd Dist., May 28, 2021).

Following a hearing, the Board of Directors of the Florin County Water District voted to increase its water rates by 50 percent. Data presented by staff at the hearing showed that revenues would exceed expenditures in each of the four years following the rate increase, culminating in a net profit of almost $1.4 million in the fourth year.

The Court of Appeal upheld plaintiffs’ challenge to the rate increase, finding that the District failed to prove that the amount of the increase did not exceed the cost of providing the water service. Under Proposition 218, revenues from water charges may not exceed either “the cost of providing the property-related service” or the “proportional cost of the service provided to [each] parcel.” Art. XIII D, § 6(b). In this case, nothing in the administrative record explained either how the net revenue the District would derive from the rate increase was related to the cost of providing the property-related service or how the water charge was proportional to the cost of providing service to each parcel. “In simple terms,” the court said, “the net revenue appears to be a profit after expenses are deducted from revenues.”

The District argued that the rate increase was justified because the District had been operating at a deficit and drawing funds from reserves to meet its obligations and therefore “opted to increase rates to allow for the rebuilding of meaningful reserves.” While generally accepting the proposition that reserves may form a component of a property-related charge, the court found nothing in the record that identified or quantified historic or projected reserves needed for the District’s services or showed that the projected net revenue was pledged for any particular purpose. Instead, the court said, “the district asks us to take an attorney’s argument as evidence, which we cannot do.”

The court also rejected the District’s argument that plaintiffs had failed to exhaust administrative remedies because they had not presented their objections and arguments at the hearing required under Proposition 218. Assuming without deciding that a Proposition 218 hearing generally constituted an administrative remedy that needed to be exhausted, the court found the requirement inapplicable here because the District had not complied with Proposition 218’s notice requirements. The court ruled that Proposition 218 required the agency proposing a rate increase “to provide ratepayers with notice of the actual amount of the rate increase pertinent to [them] to allow the ratepayer a meaningful opportunity to determine whether to consent to or oppose it.”

In this instance, the court said, the District had provided only hypothetical examples of how a ratepayer’s charges would increase over time. This “hide-the-ball approach to the amount of the rate increase” was incongruent with “the constitutional obligation imposed upon the district to calculate the amount of the charge to be imposed upon each parcel and to provide ratepayers with notice of such amount.” Because the District’s notice did not comply with the procedural requirements of Proposition 218, plaintiffs were excused from exhausting any administrative remedy that might otherwise apply.

In March 2020, as part of a series of emergency measures in response to the COVID-19 pandemic, Governor Newsom signed Executive Order N-29-20, allowing local and state agencies to hold virtual meetings via teleconference and to make meetings accessible electronically notwithstanding the open meeting requirements in the Bagley-Keene Act and the Brown Act. These provisions were due to expire on June 15, 2020.

On June 2, 2021, in response to a written request by a coalition of local government agencies, the Governor announced that N-29-20 will not terminate on June 15, and that state and local agencies can continue to conduct virtual public meetings as needed. The Governor did not set a new expiration date for N-29-20 and committed to provide advance notice before rescinding the order to provide the agencies the time needed to meet statutory and logistical requirements.

Under the Governor’s announcement, state and local agencies may continue to hold meetings in California via teleconferencing and allow members of the public to observe and address the meeting by telephone or on the internet. All requirements of the Bagley-Keene Act and Brown Act requiring the physical presence of agency officials, staff or the public at public meetings remain suspended.

California Governor Gavin Newsom recently signed legislation, Senate Bill No. 7, that reenacts a streamlined litigation process for certain “environmental leadership development projects” and extends eligibility to additional housing projects. Previous legislation offering similar benefits to a narrower range of developments expired on January 1.

To qualify for judicial streamlining under SB 7, a project must meet the following criteria:

  • The project is for residential, retail, commercial, sports, cultural, entertainment, or recreational uses.
  • The project is located on an infill site.
  • For residential projects, at least 15 percent of units are set aside for lower-income households.
  • For non-residential projects, the project is certified as LEED Gold or better, and achieves a 15 percent improvement over comparable projects in vehicle trips per capita.
  • The project is consistent with the Sustainable Communities Strategy or Alternative Planning Strategy and does not result in any net additional emission of greenhouse gases, including greenhouse gas emissions from employee transportation.
  • The project will result in an investment in California of at least $15 million for housing projects and at least $100 million for other projects.
  • The project creates highly skilled jobs, promotes apprenticeship training, and pays prevailing wages for construction.

Certain wind and solar energy projects, and clean energy manufacturing projects also are eligible for SB 7 streamlining.

The new law provides for the Governor to certify projects that are eligible for streamlining and then to submit that determination to the Joint Legislative Budget Committee for review and concurrence or non-concurrence.

If a project qualifies for SB 7 streamlining, the public agency must prepare the record of proceedings during the CEQA review process and must certify the record within five days of approving the project. The applicant must agree to pay the costs of preparing the record, as well as court costs. Court proceedings, including any appeals, should be resolved, to the extent feasible, within 270 days after the certified record of proceedings is filed.

SB 7 streamlining is available only to projects that are certified by the Governor before January 1, 2024 and that receive approvals before January 1, 2025.

SB 7 also authorizes projects to proceed under the litigation streamlining legislation that expired earlier this year (AB 900) if the project was certified by the Governor before January 1, 2020 and is approved no later than January 1, 2022.

Plaintiff’s Brown Act claims were barred because unreasonable delay in prosecuting the lawsuit substantially prejudiced parties and the general public. Julian Volunteer Fire Company Association v. Julian-Cuyamaca Fire Protection District, No. D076639 (4th Dist., March 30, 2021).

The Julian-Cuyamaca Fire Protection District requested the San Diego Local Agency Formation Commission to dissolve the District and have the County of San Diego assume fire prevention services in the area. Two weeks later, the Julian Volunteer Fire Company Association sued, alleging the District had violated the open meeting laws of the Brown Act in its approval of the resolution requesting dissolution. While the lawsuit was pending, the dissolution proceedings moved forward: The County voted to seek to expand its sphere of influence over the District’s functions and serve as its successor agency, and LAFCO held a special election, resulting in a majority vote favoring the District’s dissolution. After the election, the Volunteer Association filed a motion asking the court to enter judgment in its favor on its Brown Act claims.

On appeal, the court found that the Volunteer Association’s Brown Act claims were barred by the laches doctrine because plaintiff unreasonably delayed in prosecuting its claims and prejudice resulted. The Volunteer Association did not seek a ruling on the merits until almost a year after filing suit, at which point LAFCO’s special election results had already been announced and the entire LAFCO process had been completed. The Volunteer Association “made a deliberate decision to wait and see whether the same result could be achieved through means other than pursuing its Brown Act allegations.” But Brown Act claims are “subject to an unusually short limitations period because it is vital that the validity of an agency’s actions be resolved expeditiously.” In light of this policy, coupled with the policy underlying the LAFCO Act to ensure orderly and efficient transfers of authority, a party could not justify waiting to resolve Brown Act allegations merely because other avenues existed for obtaining the same result. By waiting until after the proceedings were complete to seek adjudication of its Brown Act claims, the Volunteer Association caused County and LAFCO to incur substantial and potentially unnecessary costs to comply with statutorily required procedures. Such a result would be “inequitable to the District voters, LAFCO, and County under the circumstances.” Because the Volunteer Association’s tactical delay resulted in significant prejudice to LAFCO, the County and the public, its Brown Act claims were barred by laches.

An initiative measure that required new development to mitigate not only its individual traffic impacts but also cumulative impacts of other projects on traffic levels of service violated the rough-proportionality standard of Nollan and Dolan and was therefore unconstitutional. Alliance for Responsible Planning v. Taylor (County of El Dorado, No. C085712 (3rd Dist., May 4, 2021).

El Dorado County voters adopted Measure E, whose stated purpose was to end the practice of “paper roads” under which developers paid fees to mitigate traffic impacts but construction of the improvements was often delayed, resulting in unacceptable levels of service. Measure E modified County General Plan Policies to require that all necessary road improvements be completed by the project proponent so as to “fully offset and mitigate all direct and cumulative traffic impacts . . . before any form of discretionary approval can be given to a project.”

Petitioner sued, contending that the measure violated the takings clause by effectively requiring the developer to pay not only for the project’s impact, but also for the incremental effects of other projects.

The appellate court agreed. Under the “rough-proportionality” standard of Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994), the government must “make some sort of individualized determination that the required [exaction] is related both in nature and extent to the impact of the proposed development.” Here, by requiring an individual project proponent to complete “[a]ll necessary road capacity improvements” to prevent peak-hour gridlock, Measure E “plainly cast[] a wider net than the harm resulting from an individual project.” Under any reasonable interpretation of the measure, it “required a developer to construct improvements exceeding the extent of the project’s own impact.”

The court rejected the defendant’s claim that Measure E was a land use control, not an exaction. The court distinguished California Building Industry Assn. v. City of San Jose, 61 Cal.4th 435 (2015), in which the challenged measure required developments to sell a percentage of units at below-market rates. There, the court said, the ordinance did not require the developer to give up a property interest but “simply place[d] a restriction on the way the developer may use its property by limiting the price for which the developer may offer some of its units for sale.” Under Measure E, by contrast, the developer had to give up a property interest — the cost of construction of roadway improvements — as a condition of approval. The measure thus constituted an unconstitutional exaction, not a land use control.

Senate Bill 35 (Government Code section 65913.4) was enacted in 2017 as part of an effort by the State Legislature to increase housing production. The law compels local agencies, including charter cities, to issue streamlined approvals for qualifying multifamily residential projects, even, at times, where a project conflicts with a local ordinance. In Ruegg & Ellsworth v. City of Berkeley, the court rejected Berkeley’s claim that SB 35 impermissibly interfered with the constitutional “home rule” authority over historic preservation granted to charter cities. No. A159218 (1st Dist. Apr. 20, 2021). The decision represents the first published opinion to uphold SB 35 against challenge.

To qualify for streamlined, ministerial approvals under SB 35, a project is required to comply with several criteria, among them that the development is not located where it would require demolishing “a historic structure” placed on a national, state, or local historic register. (Gov’t Code § 65913.4(a)(7)(C).) In Ruegg, the City of Berkeley denied a streamlining application on several grounds, including that the controversial, proposed mixed-use development would affect part of the West Berkeley Shellmound, a designated local landmark. The court rejected the City’s determination, finding there was no evidence that this (widely-acknowledged) subsurface resource reasonably could be viewed as an existing “historic structure” under SB 35.

The court also held that the Legislature was not prohibited from addressing through SB 35 the “municipal affair” of local historic preservation. SB 35, the court determined, addresses a matter of statewide concern—the lack of affordable housing—and the streamlining law is reasonably related to resolving that issue and does not unduly interfere with the City’s historic preservation authority. On these grounds, the court determined that the project at issue was not subject to a requirement in Berkeley’s Landmark Preservation Ordinance that a city commission approve construction in a designated landmark.

The court’s conclusion rested, in part, on its recognition that “historical preservation is precisely the kind of subjective discretionary land use decision the Legislature sought to prevent local government from using to defeat affordable housing development.” In upholding SB 35, the court had little trouble sustaining the direct connection the Legislature drew between subjective local land use decisions and the statewide affordable housing crisis.

Multiple applications for a development project are not required where the first permit denial makes clear that no development of the property would be allowed under any circumstance. Felkay v. City of Santa Barbara, No. B304964 (2nd Dist., March 18, 2021).

Felkay purchased an ocean-front lot with the intention of building a residence. The planning commission rejected the application for the residence finding that it violated City Policy 8.2 which prohibits any development on the bluff face regardless of size. On appeal to the City Council, the City found that Felkay’s takings claim was not ripe because Felkay had not investigated other potential uses of the land, including development of the area above the bluff face, agricultural or educational uses, or merging the property with the adjoining lot he owned. Felkay filed a consolidated petition for writ of administrative mandamus and complaint for inverse condemnation.

The court of appeal explained that, in general, before an inverse condemnation action is ripe, a landowner must have made at least one development proposal that has been rejected and pursued at least one meaningful application for a zoning variance or similar exception, which has also been finally denied. Once the permissible uses of the property are known to a reasonable degree of certainty, a takings claim is likely to have ripened. However, in this case, the court found that Felkay was not required to submit a second development proposal because the City “made plain” that it would not allow any development below the 127-foot elevation, and had determined that the area above that elevation was “not buildable.” Therefore, submission of a second application would have been futile because the agency’s decision was certain to be adverse. For these reasons, the court found that Felkay’s claim was ripe and that all administrative remedies had been exhausted.

Additionally, the court rejected the City’s argument that Felkay’s failure, as part of his mandamus claim, to challenge the City’s decision declining to waive the requirements of Policy 8.2 estopped him from seeking damages for inverse condemnation. The City had stipulated that limited issues would be heard under the mandamus claim and that the inverse condemnation claims would be reserved for trial — the Policy 8.2 waiver was not among the claims to be heard as part of the mandamus proceeding. The City forfeited the issue by failing to object to the apportionment of issues between the writ proceedings and inverse condemnation trial. Therefore, Felkay had also effectively exhausted his judicial remedies.

Three months ago, the Fourth District Court of Appeal upheld a Coastal Commission fine of $1 million on homeowners who performed major reconstruction on their Malibu home without obtaining coastal permits and refused to halt construction after notification of the violation by Commission staff. (See our report: Coastal Commission Order to Homeowners to Remove Seawall and Pay $1 Million Fine Upheld). Now, the Second District Court of Appeal has upheld a Commission penalty of $4,185,000 on Malibu homeowners who refused to remove structures that blocked a public access easement granted to the Coastal Commission by a prior owner of the home. Lent v. California Coastal Commission, No. B292091 (2nd Dist., April 5, 2021).

Background

In 1978, the owner of beachfront property in Malibu applied to the Coastal Commission for a coastal development permit to build a house. As a condition of approving the permit, the Commission required, and the owner dedicated, a five-foot-wide easement for public access through the property from the highway to the beach.

Notwithstanding the easement, in 1983, the owner built a wooden deck and stairway (shown in the photo below) over most of the easement area. The owner also constructed a fence and gate that entirely blocked access to the easement area from the highway. The Coastal Commission did not issue a permit or otherwise approve any of these structures.

 

The Lents bought the property in 2002. In 2007 the Commission notified the Lents that the structures were inconsistent with the easement and violated the Coastal Act. After subsequent failed attempts to convince the Lents to remove the structures, the Commission served them with a notice of intent to issue a cease-and-desist order. The notice informed the Lents that the Commission could impose administrative penalties under Public Resources Code section 30821 of up to $11,250 per day per violation.

Two weeks before the hearing on the cease-and-desist order, Commission staff issued a report stating that a penalty of up to $8,370,000 was warranted because the violations caused “significant blockage of public access” and the Lents refused to undertake any “voluntary restoration efforts” despite the Commission’s efforts over many years.  The staff report, however, recommended a penalty between $800,000 and $1,500,000, and specifically $950,000.

The $4 Million Penalty

After hearing testimony from the Lents and other interested parties, the Commission voted unanimously to issue the cease-and-desist order, requiring removal of the structures and imposing a penalty of $4,185,000 (50% of the maximum authorized penalty). The Lents sued to set aside the penalty, contending that its imposition violated their rights to due process of law and that the penalty was an excessive fine under the federal and state constitutions.

The appellate court found no merit in the Lents’ due process claims. “[A]lthough not as robust as trial-like proceedings,” the notice and hearing procedures governing imposition of penalties by the Commission guaranteed that a property owner had notice of the alleged violations, an opportunity to present evidence, notice of the recommendation by the Commission staff and supporting evidence prior to the hearing, and an opportunity to present a defense prior to and at the hearing. The court likewise rejected the claim that the Commission violated due process by imposing a penalty over four times the amount recommended by its staff. The court said due process did not mandate advance notice of the exact penalty the agency intended to impose, so long as the agency provided adequate notice of the substance of the charge.  The court also pointed out that staff had informed the Lents in writing that the statute authorized a penalty of up to $11,250 per day; “the Lents at that point knew all they needed to know about the potential penalty they faced, how the Commission would calculate it, and why.”

The court also found that the penalty did not amount to an excessive fine under the state or federal constitutions. A fine is constitutionally excessive only if “grossly disproportionate to the offense.” Examining the factors relevant to proportionality, the court held that the penalty was constitutionally valid because (1) the Lents had a high degree of culpability evidenced by their willful refusal to remove the structures for over nine years after the Commission told them the structures violated the Coastal Act; (2) the Lents’ conduct effectively precluded the Commission from using the easement to enable public access to a beach that was part of a three-mile stretch of the coast with no other public access; (3) other statutes authorized daily penalties for activities similar to those involved here—including undertaking activity without obtaining a required permit—some of which were higher than the amounts authorized under section 30821; and (4) the Lents had submitted no evidence of inability to pay the penalty.