These days, developers are being reminded that unless permit applications are submitted before the end of the year, the new California Building Codes - including the new CALGreen Code - will take effect on January 1, 2011.
Although the building permit application submittal date is the important date to note, it is entirely up to your specific jurisdiction to determine what constitutes a building permit application, what constitutes a "complete" application, and what date in 2010 is the last day to submit a permit under the 2007 Building Code.
Nevada County and the City of Berkeley require permits to be filed by December 22nd, otherwise, permit applications filed as of December 23rd are subject to the new requirements. Counties of San Diego and Sacramento seem to take the stance that permit applications submitted (and completed) as of January 1, 2011 will need to comply with the new Building Code. Also, many jurisdictions will allow a phased project, where a majority of it commenced before January 1, 2011, to continue to show compliance under the 2007 Building Codes.
It is therefore very important for developers to contact their local building department and request a clear interpretation of how their local jurisdiction plan to implement the new provisions of the California Building Code.
By Karina Terakura
Thursday, December 9, 2010
Thursday, September 16, 2010
Lawyers Send Vague Construction Defect Notices in Attempt to Subvert SB 800’s Right of Repair
It seemed like such a simple concept. If there are any problems with your new home, you ask the homebuilder to fix the problems. If the builder makes the repair, the problem is solved and there’s no need to go to court. If the builder doesn’t fix the problems, you can go to court to force it to pay for the needed repairs.
That was the common sense idea behind the groundbreaking SB 800 construction defect litigation reform known as the "Right to Repair Law". But since its adoption in 2002, some of the lawyers who were cut out of the process by SB 800 began to devise ways to get back into the action. Instead of telling the builder what is specifically wrong with the home, these lawyers send builders vague and non-specific notices of general defects such as “soils/drainage problems,” “slab efflorescence/peeling/chafing,” structural/framing defects/deficiencies,” window condensation – multiple locations,” “heating/cooling deficiencies,” and “window leaks – multiple locations.”
Imagine the dilemma of the builder who is given this list of repairs. It can’t determine what the problem is or where it is located. How can it fix a defect that is not even described in the slightest detail? If homeowners can assert unknown and speculative claims, there can be no right to repair. The claim will almost certainly go to litigation instead.
In order for the reforms of the Right to Repair Law to have any meaning, homeowners must properly describe the facts that lead them to believe their homes are defective. Only if provided this information, can a builder locate, inspect and repair the defects.
This week we filed an amicus “friend of the court” letter asking the California Supreme Court to take up a construction defect case brought against Standard Pacific. That case arose after the homeowners’ lawyers had given the builder a generic list of unspecific defects, and Standard Pacific was unable to identify, let alone repair, the alleged problems. Standard Pacific asked the homeowners and their lawyers to be more specific, and to make the homes available for inspection, but the homeowners and their lawyers refused. The Supreme Court did not accept the case, but this issue will surely arise again in other litigation if this practice continues.
At some point a court will recognize the game that is being played by construction defect lawyers who yearn to return to the litigious pre-SB 800 era, but until that day homebuilders will need to remain vigilant in upholding the common sense ideas behind the Right to Repair Act.
By Jon Goetz
That was the common sense idea behind the groundbreaking SB 800 construction defect litigation reform known as the "Right to Repair Law". But since its adoption in 2002, some of the lawyers who were cut out of the process by SB 800 began to devise ways to get back into the action. Instead of telling the builder what is specifically wrong with the home, these lawyers send builders vague and non-specific notices of general defects such as “soils/drainage problems,” “slab efflorescence/peeling/chafing,” structural/framing defects/deficiencies,” window condensation – multiple locations,” “heating/cooling deficiencies,” and “window leaks – multiple locations.”
Imagine the dilemma of the builder who is given this list of repairs. It can’t determine what the problem is or where it is located. How can it fix a defect that is not even described in the slightest detail? If homeowners can assert unknown and speculative claims, there can be no right to repair. The claim will almost certainly go to litigation instead.
In order for the reforms of the Right to Repair Law to have any meaning, homeowners must properly describe the facts that lead them to believe their homes are defective. Only if provided this information, can a builder locate, inspect and repair the defects.
This week we filed an amicus “friend of the court” letter asking the California Supreme Court to take up a construction defect case brought against Standard Pacific. That case arose after the homeowners’ lawyers had given the builder a generic list of unspecific defects, and Standard Pacific was unable to identify, let alone repair, the alleged problems. Standard Pacific asked the homeowners and their lawyers to be more specific, and to make the homes available for inspection, but the homeowners and their lawyers refused. The Supreme Court did not accept the case, but this issue will surely arise again in other litigation if this practice continues.
At some point a court will recognize the game that is being played by construction defect lawyers who yearn to return to the litigious pre-SB 800 era, but until that day homebuilders will need to remain vigilant in upholding the common sense ideas behind the Right to Repair Act.
By Jon Goetz
Tuesday, August 10, 2010
California's Favorite Color is Green!
20% reduction in indoor water usage! Reusing or recycling construction debris! Mandatory bicycle changing facilities! "Smart" irrigation systems! California is already a green state and we are getting greener! As of January 2011, new buildings within the state will be required to comply with the applicable provisions of California's new Green Building Code - or "CALGreen". CALGreen is a new section within the state's current Building Code and applies to all new residential, commercial, hospital and school buildings. This kind of "green" building code is the first of its kind in the nation. In 2006, the Governor signed Assembly Bill 32 which required the state to reduce its greenhouse gas emissions to 1990 levels by 2020 - and the CALGreen Code is another way for the state to meet AB 32's "green" goals. CALGreen's mandatory provisions set the "floor" for buildings to go green but also provide two tiers of additional voluntary suggestions if you want your buildings to be extra green. Meeting CALGreen's minimum mandatory provisions will result in your building being labeled as CALGreen certified - and the only cost to be certified is obtaining the certificate of occupancy! Check out the current draft of CALGreen and tell us your thoughts...
By Karina Terakura
By Karina Terakura
Friday, August 6, 2010
The Search Continues for an Arbitration Agreement that a Court Can Love
A court has invalidated another arbitration clause contained in a condo project’s CC&Rs and purchase agreements, as an “unconscionable” violation of the right to a jury trial and as an agreement that was never actually agreed upon. In that case, Pinnacle Museum Tower Association v. Pinnacle Market Development (UC) LLC, the court found that the project’s CC&Rs did not constitute an agreement with the owner’s association to waive a jury trial, and would not enforce the arbitration clause in the condo purchase agreements because they were “unconscionable.” The court suggested that the arbitration clause would be enforceable if approved by the owner’s association after control had passed from the developer to the homeowners.
Since the California Supreme Court ruled in 2005 in the Grafton Partners case that the right to a jury trial was “inviolate,” “fundamental,” and “sacred” under the California Constitution, it has been difficult to get a court’s approval of an arbitration agreement which is signed before a dispute has arisen. The Legislature, on the other hand, has been going the opposite way in construction defects disputes by requiring the elaborate SB 800 dispute resolution procedure before those cases may go to court.
While this may seem to be merely a technical issue of interest only to lawyers, it is actually a big dollar issue in the construction industry. Builders tend to prefer to resolve construction defect claims in the businesslike atmosphere of arbitration rather than the more unpredictable environment of a jury trial. That is why mandatory arbitration clauses are commonly found in purchase agreements and CC&Rs for new homes. Consumer attorneys generally dislike these arbitration requirements, preferring to try their construction defect cases before juries which are more open to emotional appeals and large damage awards.
In the meantime, the construction industry will continue its efforts to find a pre-litigation arbitration agreement that the courts can embrace.
By Jon Goetz
Since the California Supreme Court ruled in 2005 in the Grafton Partners case that the right to a jury trial was “inviolate,” “fundamental,” and “sacred” under the California Constitution, it has been difficult to get a court’s approval of an arbitration agreement which is signed before a dispute has arisen. The Legislature, on the other hand, has been going the opposite way in construction defects disputes by requiring the elaborate SB 800 dispute resolution procedure before those cases may go to court.
While this may seem to be merely a technical issue of interest only to lawyers, it is actually a big dollar issue in the construction industry. Builders tend to prefer to resolve construction defect claims in the businesslike atmosphere of arbitration rather than the more unpredictable environment of a jury trial. That is why mandatory arbitration clauses are commonly found in purchase agreements and CC&Rs for new homes. Consumer attorneys generally dislike these arbitration requirements, preferring to try their construction defect cases before juries which are more open to emotional appeals and large damage awards.
In the meantime, the construction industry will continue its efforts to find a pre-litigation arbitration agreement that the courts can embrace.
By Jon Goetz
Monday, July 26, 2010
Legal Alert July 23, 2010
A Real Estate & Land Use related Legal Alert has been posted to our website and is attached for your information and review.
United States Supreme Court: State Supreme Court’s Decision Regarding Beachfront Property Owners’ Claim Did Not Amount To A Judicial Taking Of Their Property Rights Without Just Compensation
United States Supreme Court: State Supreme Court’s Decision Regarding Beachfront Property Owners’ Claim Did Not Amount To A Judicial Taking Of Their Property Rights Without Just Compensation
Friday, July 23, 2010
Small is the New Big
Downsizing and Creative Financing for Successful Housing Development After the Burst of the Housing Bubble
It’s no secret that housing construction has been hit as hard as any industry by the recession, and obstacles to development of new homes remain formidable. And yet the right kinds of housing projects, built by the right developers, with the right financing, are getting built today. Check out this article by KMTG real estate attorney Jon Goetz discussing how the formula for successful residential development has changed since the boom times, and what it takes to build a successful housing project today in the wake of the recent housing crash. The article looks at the trend toward smaller and more affordable new homes, new forms of construction financing being used by homebuilders, and changes in mortgage practices that have become a major obstacle to new home sales, especially condominiums. The article also looks at ways that redevelopment agencies can assist homebuilding in this new development climate.
By Jon Goetz
It’s no secret that housing construction has been hit as hard as any industry by the recession, and obstacles to development of new homes remain formidable. And yet the right kinds of housing projects, built by the right developers, with the right financing, are getting built today. Check out this article by KMTG real estate attorney Jon Goetz discussing how the formula for successful residential development has changed since the boom times, and what it takes to build a successful housing project today in the wake of the recent housing crash. The article looks at the trend toward smaller and more affordable new homes, new forms of construction financing being used by homebuilders, and changes in mortgage practices that have become a major obstacle to new home sales, especially condominiums. The article also looks at ways that redevelopment agencies can assist homebuilding in this new development climate.
By Jon Goetz
Friday, July 16, 2010
Mindbending Recent Decision of the Department of Industrial Relations
Mindbending in its circularity, a recent decision of the Department of Industrial Relations (DIR) illustrates an absurdity of SB 975, the 2001 legislation that requires the payment of prevailing wages on most projects that receive some sort of financial assistance from a public agency.
A redevelopment agency agreed to sell land to a developer of a large mixed use shopping center/residential project for $1, and pay for city fees and infrastructure required for the project. As originally structured, the developer would be required to pay prevailing wages for the construction of the project, which are roughly equivalent to union-scale wage levels. When it became apparent to the developer that a prevailing wage requirement would make the project infeasible, the agreement was restructured to require the developer to repay the agency for all of the agency assistance. The note for the developer’s reimbursement carried interest at prime plus 1½%. That is a market rate loan, said the DIR, which is not a subsidy under SB 975 and does not trigger the prevailing wage requirement. So far, so good.
But here’s the irony. The revised agreement contained an escape clause that allowed the loan to be forgiven (and another $8 million to be granted to the developer) if the DIR later found that the agreement triggered a prevailing wage requirement. According to the DIR, that escape clause makes this “money loaned …that is to be repaid on a contingent basis,” which is one of conditions under SB 975 that requires prevailing wages to be paid. So while the basic terms of the loan agreement itself do not trigger prevailing wages, the prevailing wage escape clause does! Is your brain spinning yet?
Because of the sparse record of what the legislature was trying to accomplish in SB 975, it’s hard to say whether the DIR is correct in its interpretation of the “repaid on a contingent basis” language of SB 975. But the result is certainly nonsensical. It points out the need to find a more effective way of determining whether prevailing wages are applicable to a project before entering into a multi-million dollar agreement for development.
By Jon Goetz
A redevelopment agency agreed to sell land to a developer of a large mixed use shopping center/residential project for $1, and pay for city fees and infrastructure required for the project. As originally structured, the developer would be required to pay prevailing wages for the construction of the project, which are roughly equivalent to union-scale wage levels. When it became apparent to the developer that a prevailing wage requirement would make the project infeasible, the agreement was restructured to require the developer to repay the agency for all of the agency assistance. The note for the developer’s reimbursement carried interest at prime plus 1½%. That is a market rate loan, said the DIR, which is not a subsidy under SB 975 and does not trigger the prevailing wage requirement. So far, so good.
But here’s the irony. The revised agreement contained an escape clause that allowed the loan to be forgiven (and another $8 million to be granted to the developer) if the DIR later found that the agreement triggered a prevailing wage requirement. According to the DIR, that escape clause makes this “money loaned …that is to be repaid on a contingent basis,” which is one of conditions under SB 975 that requires prevailing wages to be paid. So while the basic terms of the loan agreement itself do not trigger prevailing wages, the prevailing wage escape clause does! Is your brain spinning yet?
Because of the sparse record of what the legislature was trying to accomplish in SB 975, it’s hard to say whether the DIR is correct in its interpretation of the “repaid on a contingent basis” language of SB 975. But the result is certainly nonsensical. It points out the need to find a more effective way of determining whether prevailing wages are applicable to a project before entering into a multi-million dollar agreement for development.
By Jon Goetz
Thursday, July 8, 2010
Lower Median Incomes May Lead to Rent Drops in Some California Counties
As the economy continues to struggle, you wouldn’t think it surprising that California median income figures have dropped. Actually, only eight of the state’s 58 counties had lower median incomes in the 2010 figures published June 17 by the
Department of Housing and Community Development. The largest drops included Santa Clara County, home to San Jose and much of Silicon Valley, which experienced a 1.9% drop. Monterey County had a 1.8% drop, and San Joaquin County, home to Stockton and other cities hit hard by the housing meltdown, had a 0.8% drop.
And yet this is unusual, because median income figures published by the state and federal governments have not dropped in past years, even during recessions. Under HUD’s “hold harmless” policy, published median incomes were not allowed to drop, and as a result rent limits at affordable housing complexes were also prevented from declining.
HUD abandoned the hold harmless policy this year, allowing published median incomes to decline up to five percent per year. HUD was comfortable doing this in part because the Housing and Economic Recovery Act of 2008 (HERA) adopted a statutory hold harmless policy for existing affordable housing projects which receive Low Income Housing Tax Credits or bond financing. Those existing projects will not see any decreases in allowable rents under the regulatory agreements that accompany those forms of financing.
But that new federal policy does not apply to rent limits set under California redevelopment law or most other municipal programs, which set rent formulas based on current HCD or HUD median incomes. This means that locally imposed rent limits will be dropping in places like San Jose and Stockton, possibly jeopardizing the economics of existing affordable housing projects in those cities that counted on rents never declining. It may also reduce the financing available to new tax credit and bond-financed projects, which may now be underwritten with the assumption that rents will go down before the projects are complete and the federal hold harmless protection begins to apply.
Developers will have a better idea in coming months and years whether drops in median incomes actually threaten the viability of their projects. If they do, there will doubtless be calls for legislative reform, or changes to the way that HCD determines median incomes.
KMTG has prepared printouts of the new California 2010 median income figures, affordable rents and affordable housing costs for a number of California counties. Click here to download a free copy for one or more counties.
By Jon Goetz
KMTG Redevelopment and Housing
Department of Housing and Community Development. The largest drops included Santa Clara County, home to San Jose and much of Silicon Valley, which experienced a 1.9% drop. Monterey County had a 1.8% drop, and San Joaquin County, home to Stockton and other cities hit hard by the housing meltdown, had a 0.8% drop.
And yet this is unusual, because median income figures published by the state and federal governments have not dropped in past years, even during recessions. Under HUD’s “hold harmless” policy, published median incomes were not allowed to drop, and as a result rent limits at affordable housing complexes were also prevented from declining.
HUD abandoned the hold harmless policy this year, allowing published median incomes to decline up to five percent per year. HUD was comfortable doing this in part because the Housing and Economic Recovery Act of 2008 (HERA) adopted a statutory hold harmless policy for existing affordable housing projects which receive Low Income Housing Tax Credits or bond financing. Those existing projects will not see any decreases in allowable rents under the regulatory agreements that accompany those forms of financing.
But that new federal policy does not apply to rent limits set under California redevelopment law or most other municipal programs, which set rent formulas based on current HCD or HUD median incomes. This means that locally imposed rent limits will be dropping in places like San Jose and Stockton, possibly jeopardizing the economics of existing affordable housing projects in those cities that counted on rents never declining. It may also reduce the financing available to new tax credit and bond-financed projects, which may now be underwritten with the assumption that rents will go down before the projects are complete and the federal hold harmless protection begins to apply.
Developers will have a better idea in coming months and years whether drops in median incomes actually threaten the viability of their projects. If they do, there will doubtless be calls for legislative reform, or changes to the way that HCD determines median incomes.
KMTG has prepared printouts of the new California 2010 median income figures, affordable rents and affordable housing costs for a number of California counties. Click here to download a free copy for one or more counties.
By Jon Goetz
KMTG Redevelopment and Housing
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