Articles Posted in Government Regulation

Apartment-Building-300x199

Author: Staff

An apartment building can be a great investment for a California real estate investor, but it often requires a great deal of maintenance and attention. California law sets numerous standards and requirements for leased residential premises, particularly when a property includes multiple residences. These include ongoing responsibilities for maintenance and management of the property. Rather than duties owed to individual tenants, these are duties owed to all tenants as a group. Here, we offer a general overview for apartment building owners in California.

Minimum Standard of Habitability

A California landlord is bound by the implied warranty of habitability, which holds that a landlord, merely by offering an apartment for lease, is warranting that it is suitable for residential use. California law defines this duty in very general terms, requiring a landlord to “repair all deteriorations…occasioned by his want of ordinary care,” and to “put it into a condition fit for such occupation, and repair all subsequent dilapidations thereof.”

This implied warranty also means ensuring that the premises meet legal requirements under local building codes, state and federal laws regarding accessibility, and laws involving hazardous substances like lead paint. If a landlord fails to meet their obligations under this warranty, a tenant can get out of a lease by claiming constructive eviction.

Continue reading

by

Township-of-Scott-300x199

Author: Luke Wake

Luke Wake is an attorney for the National Federation of Independent Business Small Business Legal Center—a Bona Law client. Luke and Jarod Bona have also published two law review articles together, on both takings and antitrust law. Luke is one of this nation’s leading experts on takings law. You can read some of his academic articles here.

The U.S. Supreme Court recently issued an important decision for property owners across the country. Chief Justice Roberts wrote the opinion in Knick v. Township of Scott, which held that landowners are entitled to pursue just compensation in federal court when local or state law has effected a taking of private property. This is major development because takings cases were previously relegated to state courts where judges are sometimes viewed as hostile toward claims seeking compensation over local land use laws.

Knick explicitly overturned Williamson County Regional Planning Board v. Hamilton Bank from 1985. In Williamson County the Supreme Court ruled that one cannot bring a takings claim in federal court until after litigating in state court. But Williamson County was a trap for landowners because, in reality, there is no path to federal court after you have litigated a case in state court. Well established doctrines prevent a litigant from re-litigating issues that have already been decided. The Supreme Court ultimately made this clear in San Remo Hotel v. City and County of San Francisco, where the Court held that there was no way to preserve a federal takings claim if an owner seeks just compensation in state court.

Of course, landowners have always been allowed to pursue just compensation against the federal government for a taking. Those claims must generally be brought in the Court of Federal Claims in Washington D.C. But for claims seeking compensation against state or local restrictions, litigants were stuck in state court. And worse, some government defendants had played games with Williamson County—seeking to remove cases filed in state court to a federal forum, and then seeking dismissal on the ground that the claim had not been litigating in state court. Not all courts allowed those sort of shenanigans, but some did.

In overturning Williamson County, the Knick decision has made clear that property owners may vindicate their federal rights in federal court. That was already true with regard to every other federal claim one might have had against state or local actors. Enacted in the 19th Century by the Reconstruction Congress, U.S.C. Section 1983 has long provided that litigants may sue for a violation of federal rights in federal court. Moreover, if a litigant is successful in litigating a 1983 claim, they are entitled to attorney’s fees—which makes it easier for citizens to hold government accountable.

But Williamson County had assumed that special rules precluded takings claimants from proceeding under Section 1983. The Takings Clause prohibits the taking of private property without payment of just compensation; however, Williamson County concluded that this should be understood as requiring a litigant to pursue compensation in state court in order to have a ripened claim. Yet as groups like Cato Institute and National Federation of Independent Business Small Business Legal Center argued as amicus curiae before the U.S. Supreme Court in Knick, this sort of logic is perverse because it would also preclude litigants from vindicating other constitutional rights. The Supreme Court would never require a litigant to sue in state court in order to ripen a claim alleging that local or state actors had violated the Equal Protection Clause or the First Amendment. So why was the Takings Clause singled-out for special ripening rules?

Ultimately, Chief Justice Roberts concluded that the Court was confused in Williamson County because there really was no good reason for the “state litigation rule.” The constitutional text provides a straightforward guarantee against uncompensated takings—meaning that a litigant is entitled to pursue just compensation in court (either federal or state) if there is no administrative procedure for obtaining compensation owed. So, for example, if a local ordinance precludes all development opportunity without authorizing payment to affected owners, an owner is allowed to proceed in federal court.

Continue reading

California-Wildfires-and-Real-Estate-300x200

Author: Staff

Wildfires are a major concern throughout California. In 2018, multiple major fires burned nearly two million acres of land, taking more than one hundred lives and causing billions of dollars in damage. The risk to life and property from wildfires is something that no California real estate investor can ignore. Because wildfires are, by definition, large and out-of-control, real estate investors cannot mitigate this risk on an individual basis. Investors can, however, make use of resources from the state and federal government when researching and planning an investment.

What Is a “Wildfire”?

The term “wildfire” generally refers to any fire that quickly spreads from its point of origin to cover a much larger area. California’s drought conditions have made enormous areas of land highly flammable, and wind can spread fires faster than people can run—or drive—away from them.

The California Public Resource Code defines an “uncontrolled fire” as one that meets one or more of three criteria:
– It “is unattended by any person”;
– The people attending it are not able to prevent it from spreading; or
– It “is burning with such velocity or intensity” that “private persons at the fire scene” would not be able to control it without the assistance of trained firefighters.
Continue reading

San-Diego-Vacation-rental-300x168

Author: Staff

San Diego’s City Council spent much of 2018 arguing over proposed vacation rental regulations. In July, the City Council passed two ordinances imposing strict limits on “short term residential occupancy” (STRO). Opponents of the ordinances circulated a petition that received enough signatures to put the matter before voters. The City Council repealed the ordinances in October. Arguments for and against the ordinances brought up the interests of homeowners who live among STRO properties, homeowners who use their homes as STROs for income, investors who own STRO properties but do not live in them, and lodging businesses (hotels and motels) that view STROs as competition. Even though the ordinances have been repealed, the issue is currently under debate in Los Angeles, and is likely to come up again in San Diego. California real estate investors should be aware of new developments.

Short-Term Rental, Defined

The city defines STRO as occupancy of a residential-zoned property for less than one month. The ordinances made a distinction between short-term rental of a property by an homeowner who also lives at the property, known as “home sharing,” and “whole home STRO,” in which the owner makes the entire property available for rent and does not reside there. It specifically targeted whole home STRO, declaring it to have the “most negative impacts to neighborhood communities.”

The Ordinances

The City Council adopted two ordinances in mid-July, and formalized them on August 2. The first ordinance, O-20977, addressed enforcement STRO restrictions. The second ordinance, O-20978, established the actual restrictions.
Continue reading

Author: Staff

Buying real estate is a risky venture for investors, with buyers betting on the property increasing in value or producing a revenue stream through rental. Buyers also take various chances regarding unknown defects in the property’s title, or defects in the property itself. Researching potential defects is a critical part of any California real estate investment. California law requires sellers of certain types of real estate to make a variety of disclosures to buyers, in the interest of giving prospective buyers as much relevant information as possible. Most of these disclosure rules apply to residential real property. Some investment properties, such as rental houses, are subject to residential real estate disclosure requirements. The sale of an apartment building with more than four dwelling units, however, is not necessarily subject to those rules. It is, however, subject to other disclosure requirements, including known defects or hazards, particularly environmental hazards. California also requires disclosure of certain earthquake risks.

Residential vs. Commercial Property

Residential properties, defined as properties with one to four dwelling units, are subject to a substantial number of disclosure requirements in California. Residential rental properties can appear to fall into both categories, since they are residential for tenants, but commercial for owners. Rental houses, duplexes, and other small structures generally fall under the “residential” category. Sellers must follow the residential disclosure guidelines, even if the buyer is another investor. Larger apartment buildings, on the other hand, are not necessarily subject to those requirements.

Common Law Disclosure Requirements

A 1963 decision by a California appellate court, Lingsch v. Savage, establishes that sellers of commercial property have a duty to disclose any facts known to them that “materially affect[] the value or desirability of the property.” Failure to do so with the intention of inducing someone to purchase a property can result in civil liability for fraud.
Continue reading

Author: Staff

California’s coastline is one of the state’s greatest assets. It offers some of the best scenery in the world, draws countless tourists, and boasts some of the highest property values in the state. Coastal property offers many opportunities for California real estate investors, but a unique set of rules may apply. The California Coastal Act (CCA) regulates an area known as the Coastal Zone. Back in the 1970’s, the state created the California Coastal Commission (CCC) to enforce the CCA. An issue that has caused controversy recently in cities and towns up and down the coast involves vacation rental homes, commonly known as short-term rentals (STRs). The CCC must approve municipal regulations affecting coastal STRs. It recently rejected an ordinance in Del Mar that would have limited the duration of time STRs could be rented to the public.

A voter initiative in 1972 first established the CCC, and it became a permanent part of the state government when the California Legislature enacted the CCA in 1976. It has jurisdiction over the Coastal Zone, and a significant part of its purpose is to preserve access to the coastline and public beaches. According to state law, the Coastal Zone extends from the U.S.-Mexico border to the California-Oregon state line. It begins at the “state’s outer limit of jurisdiction” in the Pacific Ocean, and extends inland “generally 1,000 yards from the mean high tide line of the sea.” The inland extent may be less than one thousand yards in urban areas, and more in undeveloped areas. Beachfront properties almost everywhere in the state are located within the Coastal Zone. Continue reading

Author: Staff

House flipping,” which is the process of purchasing a residential property, making improvements to it, and selling it, has been particularly popular in recent years among real estate investors in California and around the country. It often involves purchasing distressed properties, such as those that are already in, or at imminent risk of, foreclosure. Investors can therefore purchase a property well below its market value, and with a bit of work—new coats of paint, new appliances, and such—sell it for a considerably greater amount. House flipping can be subject to legal restrictions, however, including local land use ordinances and lending regulations. The Federal Housing Administration (FHA), among other functions, insures many home mortgage loans. It also sets restrictions on residential properties when its mortgages are involved. These restrictions can affect house flippers who intend to sell to a buyer who needs an FHA-insured loan.

What Is the FHA?

Author: Staff

Investing in San Diego real estate offers many great opportunities for returns, but it also poses many potential risks for losses and liabilities. Planning an investment requires researching and investigating risks associated with a particular property. This includes the property’s zoning designation and associated land use restrictions. The Land Development Code (LDC), located in Chapters 11 through 14 of the San Diego Municipal Code, sets forth the zoning regulations and procedures for properties located within the city. Zoning regulations allow certain types of construction and prohibit other types, but it is sometimes possible to get approval from the city to make an exception to the regulations, known as a variance. As a general rule, a variance cannot grant approval to a land use that has already been found to be in violation of the city code. This is why careful research on existing permits affecting a property is so important.

Zones and Regulations in San Diego

Author: Staff

Zoning is an important part of land use planning in nearly every major city in the United States. Local governments usually have jurisdiction over land use issues. Both the City of San Diego and San Diego County have zoning ordinances and procedures for permitting construction and development in different zones. California real estate investors need to be familiar with local zoning ordinances, as well as the restrictions of land use that go along with them, before committing to an investment. While investors should always keep in mind the adage that “you can’t fight City Hall,” it is possible to challenge or change a zoning designation. In San Diego, this can happen in several ways involving the Planning Commission or the City Council. Litigation may also be a means of modifying zoning designations, although it is rarely a first resort.

The Zoning and Rezoning Processes

San Diego BayAuthor: Staff

San Diego real estate investors need to be aware of land use restrictions, such as restrictive covenants included in a deed, or zoning and other restrictions under city or county laws. Both the City of San Diego and San Diego County have zoning laws that restrict the use of land within their jurisdiction. We will focus on zoning within the City of San Diego.

What Is Zoning?