CEQA Case Report: Understanding the Judicial Landscape for Development[i]

In a partially published opinion issued April 4, 2018, Small Property Owners of San Francisco Institute v. City and County of San Francisco, Case No. CPF14513453, the California Court of Appeal reversed the trial court’s judgment. The court held that state law preempted the City and County of San Francisco’s (City and County) ordinance provision prohibiting changes to nonconforming residential units for up to 10 years if the units’ tenants were evicted pursuant to the Ellis Act. In summary, the court determined:

• Petitioner waived its Planning Code and CEQA claims for failure to exhaust its administrative remedies.
• The Ellis Act preempted the City and County’s 10-year waiting period for alterations to non-conforming units if the owner had evicted a non-fault tenant.

The petitioner, a local property owners’ organization (Petitioner), petitioned for writ of mandate seeking to invalidate the City and County’s ordinance that limited the ability of owners of nonconforming housing units to alter those units if a non-fault eviction had occurred within the prior 10 years (the Ordinance). Petitioner argued:

• The adoption of the Ordinance violated the Planning Code because the Board of Supervisors (Board) amended the Ordinance prior to adoption and those changes were not reviewed by the Planning Commission (Commission)
• The City and County’s determination that the Ordinance was not a “project” subject to environmental review violated CEQA
• The Ellis Act preempted the Ordinance

Background for Appeal

The Commission held a hearing to review the Ordinance in September 2013 and voted to approve it. No public comment was offered at that hearing. The Board’s Land Use and Economic Development Committee (Committee) held a hearing to review the Ordinance on December 9, 2013, at which the Committee heard public comment on the Ordinance. The Board voted to approve the Ordinance at its December 10, 2013 meeting and passed the ordinance unanimously on second reading on December 17, 2013. The mayor signed the Ordinance on December 26, 2013. Petitioner then filed a petition for writ of mandate seeking to invalidate the Ordinance. The trial court ruled in favor of the City and County, and Petitioner appealed.

Failure to Raise Planning Code Claim During Administrative Process

First, Petitioner argued that the City and County had violated the San Francisco Charter because the Board modified the Ordinance after the Commission approved it, and the Board did not present those modifications to the Commission for approval prior to adopting the Ordinance. Petitioner argued that it could not have exhausted its administrative remedies on this issue, because the violation did not occur until after the Board had adopted the Ordinance. In actions challenging the adoption of a zoning ordinance, the issues are typically limited to those raised before the close of the public hearing. This applies unless the court finds that a person exercising reasonable diligence could not have raised the issue at the hearing, or that the body conducting the hearing prevented the issue from being raised. Here, the court determined that Petitioner could have objected to the Board’s failure to obtain Commission approval of the amended Ordinance at the December 9, 2013 Committee meeting and December 10, 2013 Board hearing. However, Petitioner failed to raise this issue. As such, the court ruled that Petitioner had waived its Planning Code claim for failure to exhaust its administrative remedies.

Failure to Raise CEQA Challenge During Administrative Process

Next, Petitioner claimed that the City and County had violated CEQA in determining that the Ordinance was not a project subject to environmental review. Petitioner argued that the exhaustion doctrine did not apply, because there was no public hearing or other opportunity for members of the public to raise objections to the determination, due to a defect in notice. The court was not persuaded, noting that Petitioner provided public comment on the Ordinance at the December 9, 2013 Committee meeting, which was clearly an opportunity for members of the public to raise objections to the Ordinance and its review process. Thus, the court ruled that Petitioner had waived its CEQA challenge for failure to exhaust its administrative remedies.

The Ellis Act Preempts the Ordinance

Finally, Petitioner claimed that the Ellis Act preempted the Ordinance, because the Ordinance penalizes the exercise of a property owner’s right to evict a tenant as authorized by the Ellis Act. The Ellis Act prohibits local governments from requiring an owner of residential property to continue to offer accommodates for rent or lease. Courts have previously determined that the Ellis Act completely occupies the field of substantive eviction controls over landlords who wish to withdraw units from the rental market. Here, the court reviewed the effect of the Ordinance and determined that if a property owner exercises its rights under the Ellis Act to remove a unit from the rental market, the property owner would be met with a locally-imposed barrier to making alterations to that unit. The court determined that the waiting period represented an impediment to the exercise of a property owner’s rights, even though the waiting period would occur after the eviction. The court concluded that the Ellis Act conflicts with and preempts the 10-year waiting period for alterations conflicts.

Disposition

Accordingly, the court reversed the trial court’s judgment and remanded the matter, with directions to the trial court to enter an order enjoining the City and County from enforcing the 10-year waiting period.

• Opinion by Justice Miller, with Presiding Justice Kline and Justice Richman concurring.
• Trial Court: San Francisco Superior Court, Case No. CPF14513453.

[i] California court decisions on California Environmental Quality Act (CEQA) related cases can impact business not only in California, but more broadly in other US jurisdictions (e.g., under the US National Environmental Policy Act (NEPA), though statutory provisions may differ). Latham’s case summary series provides a comprehensive archive of both published and unpublished cases, in order to track judicial interpretations of CEQA and new legal developments. Unpublished or “non-citable” opinions are opinions that are not certified for publication in Official Reports and generally may not be cited or relied on by other courts or parties in any filing with California courts in other court proceedings. (see California Rules of Court, rule 8.1115).