Real Estate, Land Use and Environmental Law Blog - Up-to-date information on Real Estate, Land Use and Environmental Law

On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012 into law. Summarized below are highlights of those and other changes to Federal tax laws affecting income, payroll, gift and estate, and generation-skipping transfer taxes beginning in 2013.

By Miriam Montesinos

While ground up development has dried up in many sectors, off-campus student housing is one commercial real estate sector where development is booming. Unlike what other sectors are experiencing, there is both demand and capital for off-campus student housing developments, particularly ground-up development. These market conditions have led many developers to enter the student housing development arena in hopes of catching the wave before it is too late. Before getting in too deep, though, developers should consider various factors that drive the market in order to try and ensure a successful venture. Below are some items to consider when deciding whether to enter into off-campus student housing development.

By James G. Higgins

Prompt payment laws can pose significant risk to owners and contractors.  In S&S Cummins Corp. v. West Bay Builders, Inc. 2008 Cal. App. LEXIS 160, *, a public works general contractor was stung under Public Contract Code section 7107 for delaying retention payments to an electrical subcontractor.

Landale-Cameron Court, Inc. v. Ahonen (Oct. 10, 2007, B190309 [2^nd Dist., Div. 2]), ___ Cal. App. 4th ____; http://www.courtinfo.ca.gov/cgi-bin/opinions

By Thomas B. Snyder and Andriana Ledesma

In Landale?Cameron, the homeowner's association of a condominium complex ("HOA"), discovered various water leaks to the building and subsequently sued the builder-developers Arnold and Helen Kaufman ("Kaufman") and Petri Ahonen dba Riteway Decking and Flooring ("Riteway") for negligence and contract causes of action.  Riteway moved for summary judgment on the grounds that the complaint was barred because it was filed after the expiration of the three-year statute of limitations for actions involving injury to real property under California Code of Civil Procedure Section 338.

Shepard v. Edward Mackay Enterprises, Inc., et al., --- Cal. Rptr. 3d ---, No. C052564, 2007 WL 853456 (Cal. Ct. App. Mar. 22, 2007)

While Section 1298.7 of the California Code of Civil Procedure generally allows homebuyers to pursue defect litigation in court regardless of an agreement to arbitrate, the Third District Court of Appeal recently ruled the Federal Arbitration Act preempts California law and binds homebuyers to arbitration provisions when the transaction involves interstate commerce.  Because homes built in California today likely incorporate at least some construction materials originating outside the state and therefore implicate interstate commerce, the court's ruling may effectively preclude homebuyers from relying on this section of the Code of Civil Procedure to avoid arbitration.

Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) Cal.App.4^th

By Thomas B. Snyder

In this case, Kemp was a prime contractor on two public works projects for the Los Angeles Unified School District ("LAUSD").  It subcontracted the electrical work to Titan Electric on both projects.  Partway through performance, Titan began to struggle with its payroll obligations and Kemp agreed to informally advance payments to Titan to assist in completing the work.  When problems continued, Kemp stopped the advance payments and Titan was unable to meet its payroll.  Kemp then retained another electrical subcontractor who completed the work.  Simultaneously, Kemp requested that the LAUSD approve Titan's substitution as the listed subcontractor under Public Contracts Code Section 4107, arguing that Titan was failing and refusing to perform its work and/or delaying or disrupting the progress of the work.  The LAUSD hearing officer agreed that Titan had been disrupting and delaying the work and therefore determined that Kemp had the statutory right to substitute Titan.

Divers’ Environmental Conservation Organization v. State Water Resources Control Board (Nov. 29, 2006, D046112) __ Cal.App.4th __ http://www.courtinfo.ca.gov/opinions

By Ella Foley-Gannon and Julie Austin

The Court of Appeals held that a permitting agency under the Clean Water Act is not required to conduct a numeric analysis of individual pollutants in industrial stormwater discharges in order to comply with federal regulations.  In addition, even if a discharge will cause the receiving body of water to violate State water quality standards, the agency is not required to impose numeric “water-quality based effluent limitations” (WQBELs) in a National Pollutant Discharge Elimination System (NPDES) permit.  Rather, to comply with the regulations, the agency may conduct more general, non-numeric tests of stormwater discharges and, if necessary, impose Best Management Practices (BMPs) on the discharger.  This decision is significant because the environmental community has recently pressured permitting agencies to impose numeric limitations on industrial discharges, which include construction discharges.  These numeric limitations, if required, would have presented a huge challenge and risk to permittees, who could violate their permits despite the fact that stormwater pollutants are highly variable and may be beyond their control.  Thus, this decision helps protect permittees by clarifying that permitting agencies are not required to use numeric limitations to regulate industrial stormwater discharges.

A Summary of Benson v. California Coastal Commission (2006) 139 Cal. App. 4th 348

By Brenna Moorhead

"Predictions and suggestions from staff may be helpful or misleading to a party with a matter before the Coastal Commission. Therefore a party should take such advice with caution." (Id. at 348.)

John Benson alleged a due process violation by the California Coastal Commission. Benson's project, the expansion of the Baywood Inn in San Luis Obispo County, had been approved by the County's planning commission under a mitigated negative declaration. It was appealed by the Concerned Citizens of Los Osos, first, to the County Board of Supervisors and, upon rejection, to the California Coastal Commission ("Commission"). The Commission sent notice and a copy of the appeal to Benson as well as notice of the hearing date in May 2003. Subsequently, the Commission's staff issued, with a copy sent to Benson, a report on the appeal recommending that that the Commission "open and continue the public hearing to determine whether a substantial issue exists…" (Id. at 351-52.) 

California courts generally should defer judicial review of ballot initiatives until after the election, the state Supreme Court reaffirmed last week in a holding that limits the scope of pre-election review. The unanimous opinion in Independent Energy Producers Ass'n v. McPherson, S135819 (2006), emphasizes that courts should consider the availability and adequacy of post-election relief in deciding whether to resolve a challenge to a ballot measure before the election. Under this approach, the court made it clear that pre-election review will now be limited primarily to procedural challenges, These are cases challenging whether a measure has properly qualified for the ballot, not the underlying validity of the measure.  Pre-election review of procedural challenges remains because courts have been (and evidently should continue to be) reluctant to overturn the results of an initiative election on procedural grounds.

California LLC Fee Unconstitutional

The limited liability company fee imposed under California law recently was held to be unconstitutional according to the court in Northwest Energetic Services, LLC v. California Franchise Tax Board (Super. Ct. San Francisco County, 2006, No. CGC-05-437721). The decision states that the graduated fee imposed on the "total income" of an LLC (meaning gross income plus the cost of goods sold) under Section 17942 of the California Revenue and Taxation Code is illegal for violating the Commerce Clause and the Due Process Clause of the U.S. Constitution. Such fee currently starts at $900 if total income is $250,000 or more but less than $500,000, and ranges upward, topping out at $11,790 if total income is $5,000,000 or more.

With one of the largest and most diverse real estate and development practices in California, Sheppard Mullin represents developers, builders, major landowners, lenders and local agencies on every aspect of development.

Our range of expertise and practical experience includes:

• Site evaluation and acquisition
• Entity formation, including equity and debt financing
• Environmental and regulatory due diligence
• Land use entitlements and related litigation
• Development agreements with public agencies
• Wetlands and endangered species permitting including Section 404 permits, Lake and Streambed Alteration Agreements, Biological Opinions and Habitat Conservation Plans
• Section 401 water quality certifications and waste discharge requirements
• Subdivision map approvals
• CEQA and NEPA environmental documentation and defense
• Contracts with architects, engineers, consultants, and contractors
• California Department of Real Estate requirements
• Real estate purchase and contract litigation
• Construction defect litigation

We have represented clients in many types of residential developments, including:

• Master planned and resort communities
• Active adult communities and senior housing
• Urban infill mixed-use
• Affordable housing
• Redevelopment
• Coastal and urban waterfront development
• "Brownfield" and industrial site reuse
• Military base reuse and closure ("BRAC") projects

Sheppard Mullin's real estate lawyers function as an integrated team. With over 75 real estate, land use and environmental attorneys located throughout California, Sheppard Mullin offers significant depth for representing clients. The breadth of our firm's capabilities and the distribution of the attorneys possessing those capabilities throughout the firm give us an exceptional ability to serve our clients' needs in the real estate field. Our lawyers bring concrete and cost-effective advice in connection with any issue facing our clients. We pride ourselves on our practical problem solving approach.

AUTHORITIES DISPOSITION AND DEVELOPMENT AGREEMENTS

Our attorneys have advised on almost every form of military base clean-up and reuse and the associated privatization process, including project finance, utilities regulation, government contracting and public/private joint ventures. We have demonstrated our ability to negotiate with military agencies to obtain the necessary clean-up by the federal government and/or the economic resources for clean-up by local reuse authorities for our clients.

REAL ESTATE DEVELOPMENT PRACTICE

As part of Sheppard Mullin's Real Estate Development practice, our attorneys have negotiated and drafted documents relating to the construction, management, financing and operation of real estate projects, including grading and other improvement contracts, contracts with architects, engineers and other consultants, contracts with governmental agencies concerning the entitlement and improvement of projects, agreements with other developers and owners concerning matters of mutual interest, covenants, conditions and restrictions, easement agreements and management agreements. We counsel clients on how to structure public financing of infrastructure improvements, including conventional assessment and facilities improvements districts, as well as Mello Roos special tax districts and tax increment financing mechanisms.

Sheppard Mullin has been at the forefront in guiding clients through California's difficult and increasingly complex requirements regulating land development. Our attorneys have frequently served as the leaders of permitting and land acquisition efforts for major development projects, including resorts, golf courses and housing developments. In addition, our Land Use attorneys regularly litigate issues relating to the California Environmental Quality Act ("CEQA") and the National Environmental Policy Act ("NEPA"). We have handled several important cases through the California Courts of Appeal and the federal appellate courts. Our familiarity with CEQA and NEPA enables us to provide efficient, focused counseling in the preparation of environmental impact reports and in the creation of a defensible record in anticipation of CEQA or NEPA litigation.

Complementing the firm's long standing expertise in commercial and residential real estate transactions, Sheppard, Mullin, Richter & Hampton LLP regularly represents its clients in negotiating, mediating, arbitrating, litigating and trying nearly every kind of real property related dispute.

Sheppard Mullin represents owners, investors, developers, lenders, landlords, tenants, receivers and commercial and retail brokers in a wide variety of real property disputes, including those related to purchase and sale, breach of lease, unlawful detainer, title, easements, judicial and nonjudicial foreclosure, partnership disputes, zoning, residential subdivision, soil subsidence, construction and architectural issues, eminent domain, unconstitutional taking and property interference claims, historic landmark and preservation, as well as CEQA and NEPA compliance.
Our Real Estate litigators also represent owners and developers before the California Coastal Commission, City Council planning and building departments, rent control authorities and other public agencies.

We pride ourselves on successfully and economically handling both complex and simple real estate disputes at the trial court and appellate court levels, as well as before the host of alternative dispute resolution panels.

Sheppard Mullin has extensive expertise and hands-on experience in all areas of military closure, cleanup and reuse, including:

• Understanding and applying federal base closure law
• Navigating through and negotiating with the multiple levels of federal and state government and within the Department of Defense (DoD)
• Working with local community groups
• Working with elected representatives, such as the Office of the Governor, U.S. Senators and members of Congress or state senators and assembly persons to ascertain and elicit support for a given project
• Assisting with the development and clear articulation of reuse plans
• Evaluating and facilitating federal and state grant options
• Analyzing feasibility of environmental cleanup and reuse alternatives under federal and state laws
• Obtaining clearances under NEPA, CEQA and other state environmental disclosure laws, including EISs, EIRs, Findings of No Significant Impact and Negative Declarations
• Obtaining project entitlements from local, state and federal jurisdictions
• Marshalling sources of public finance to deal with the myriad of infrastructure issues inevitably confronted in these projects
• Negotiation and documentation of DoD Conveyance Agreements and Local Reuse