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Land Use/Municipal Law/ Real Estate

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Rebates for Turf Removal Conservation Programs Excluded from Gross Income

Both the Governor of California and the County Board of Supervisors have declared drought emergencies. As a result of the record drought conditions facing California, many local water agencies have established cash for grass or other reimbursement programs aimed at encouraging property owners to replace grass with drought tolerant landscaping.

Many cities, including Arroyo Grande and Grover Beach, have adopted turf removal conservation programs, which offer a rebate for the elimination of turf, which is replaced with drought tolerant plants or mulch. Arroyo Grande estimates that approximately 60% of the City’s water is used for irrigation, largely for turf areas.

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How Does One Acquire an Easement by Prescription?

While many people have heard about acquiring easements by prescription, they may not be readily familiar with the required elements. For starters, a prescriptive easement isn’t available at a pharmacy.

A prescriptive easement arises when one person unlawfully infringes on the rights of another property owner. If the property owner fails to interfere with the person’s use of his or her property, a prescriptive easement may be created. In order to acquire a prescriptive easement, a claimant must

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California Supreme Court Upholds Charter Cities’ Exemption from Prevailing Wage Requirements

Under California law, cities may be organized under either the general laws of the State or under a charter adopted by the local voters. The charter is a written document that operates as the city’s “constitution.”  Cities that adopt their own charter may adopt their own procedures for matters that are considered “municipal affairs.” Just as the California Constitution controls the actions of the State, a city’s charter operates as the constitution of the city.

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Appointments of Public Officials to Compensated Positions

Members of public agencies such as counties, cities and special districts frequently appoint members of their governing bodies to serve as an officer of the body of which he or she is a member, or to a committee, board or commission of a public agency, special district, joint powers agency or authority, or a metropolitan planning organization. Many times the appointment includes a salary or stipend for the appointed public official.

Until just recently, public officials were prohibited by the Political Reform Act from participating in decisions to appoint themselves to positions on boards where they would be compensated by more than $250 in a 12 month period. The rationale behind the prohibition was that a conflict of interest was created as it was reasonably foreseeable that the appointments had a material financial effect on the public official’s personal finances.

In March of this year, the Fair Political Practices Commission (“FPPC”) voted to adopt an amendment to California Code of Regulation, Title 2, Section 18705.5. The new regulation now clearly authorizes public officials to vote on their own appointments to compensated positions on various types of boards as long as certain conditions are met.

Before a public official may participate in a decision to appoint him or herself to a compensated position, Section 18705.5 requires a new Form 806 be adopted by the public agency and posted on its website. Form 806, adopted by the FPPC in May, requires the public agency to list the following: (1) each appointed position for which compensation is paid; (2) the salary or stipend for each appointed position; (3) the name of the public official who has been appointed to the position and the name of the public official, if any, who has been appointed as an alternate; and (4) the term of the position.

The FPPC recommends that each public agency prepare and adopt a Form 806 identifying all of the current paid appointments as soon as possible. Public officials may not be able to participate in a decision to appoint him or herself to a compensated position until the Form 806 is adopted and posted. In addition, the Form 806 will need to be updated from time to time to reflect new appointments.

Form 806 is a public record available for inspection and reproduction by members of the public.

Heather Whitham
hwhitham@carnaclaw.com

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Landlords Must Allow Tenants to Post Political Signs

California Civil Code section 1940.4 was added this year to prohibit landlords from forbidding a tenant from posting or displaying political signs. Senator Christine Kehoe (D-San Diego) introduced the legislation to enhance the ability of tenants to participate in the political process. In advocating on behalf of the legislation, Senator Kehoe stated, “[r]enters deserve the right to participate in our democracy and express their views just as much as homeowners.”

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Fast Tracking Lawsuits Challenging Large Construction Projects

In an effort to address the State’s alarming unemployment rate, certain large construction projects which implement innovative measures to reduce environmental impacts will be processed under new procedures designed to fast track such projects.

The Jobs and Economic Improvement through Environmental Leadership Act (the “Leadership Act”) was signed by Governor Brown last year and took effect January 1, 2012. The Leadership Act establishes an expedited process for judicial review of lawsuits challenging a project’s compliance with the environmental review required by the California Environmental Quality Act (“CEQA”) for certain large projects.

In order for a project to qualify, the project must (1) be related to the clean energy industry or non-industrial development projects that comply with LEED (Leadership in Energy and Environmental Design) energy-efficiency standards and are located on an infill site; (2) result in a minimum investment of $100,000,000; (3) create high-wage, highly skilled jobs that pay prevailing wage and living wages and provide construction jobs and permanent jobs for Californians; and (4) not result in any net additional emission of greenhouse gases.

In addition, the project applicant must enter into a binding and enforceable agreement that all mitigation measures will be conditions of approval and will be fully enforceable by the lead agency. Further, the project applicant must agree to pay the costs of any hearing challenging the project.

The Governor must certify each project individually for streamlining under the Leadership Act. If the Governor determines that a project qualifies, that determination must be submitted to the Joint Legislative Budget Committee for their review which must make a determination within thirty days of receipt of the determination.

The draft and the final environmental impact report for a project that has been deemed to qualify under the Leadership Act must include a notice that the environmental impact report is subject to the procedures set forth in the Leadership Act. The lead agency processing the project application must prepare the administrative record concurrently with the administrative process and certify the administrative record within five days of its approval.  This ensures that if the project is challenged the administrative record will already be prepared and available.

If the environmental review of a project that qualifies under the Leadership Act is challenged, the action will go directly to the California Court of Appeal. The Court of Appeal will have 175 days to issue its decision. This will greatly decrease the time within which CEQA challenges are typically resolved. Such challenges usually are commenced in the superior courts and may take several months to one year to resolve. This expedited judicial process will allow project applicants to receive a final determination sooner, which will allow construction to commence sooner.

The Leadership Act is scheduled to sunset on January 1, 2015.  The legislation states the purpose of the Leadership Act is to provide unique and unprecedented streamlining benefits for a limited period of time to put people to work as soon as possible.

The full text of the Leadership Act can be accessed at: http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0851-0900/ab_900_bill_20110927_chaptered.html

Carmel & Naccasha has lawyers who are familiar with the California Environmental Quality Act and the new Leadership Act, should you desire any additional information.

Heather K. Whitham

hwhitham@carnaclaw.com

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Managing Multiple Beneficiaries on Trust Deeds

Nearly all real estate loans in California are secured by a trust deed. A trust deed is a device wherein a borrower transfers legal title to property to a trustee which holds it as security for a debt between a borrower and a lender. Most real estate loans have only one lender (at any given time) such as a bank, however, some real estate financing arrangements have multiple lenders (or beneficiaries) for a single trust deed. Often, these beneficiaries will be several private individuals who come together and lend on a single loan. When things are going well and everyone is getting paid, ownership and management of the trust deed is a simple from the beneficiaries’ end…they sit back and get paid in accordance with the terms of the loan. However, if the loan is in default, the different beneficiaries may not agree on how best to move forward.

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The City of San Luis Obispo’s Measures A and B- A Look at How the City’s Charter May be Amended

The City of San Luis Obispo is governed by a Charter adopted by the local voters. The provisions of the city’s Charter may be amended from time to time or repealed by subsequent votes of the voters. An amendment to the Charter may be proposed either by the City Council or by an initiative submitted to the City Council by the voters.

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Walking Away When Your House is Underwater

In this blog, I’ll provide a simple explanation of California’s mortgage and anti-deficiency laws which allow individuals to walk away from their homes. In addition, I will touch on some of the issues that borrowers need to be aware of in making any sort of financial decision concerning their mortgage.

We’ve all heard that individuals and families today are “walking away from their mortgages” when their house is “underwater,” but many don’t know what this means. A house is “underwater” when its fair market value is less than the outstanding mortgage. Many individuals who are in this position see their mortgage payments producing no equity and feel it is imprudent to keep throwing good money after bad. Thus the question becomes, “Can I get out of this mess?” In answering this question a borrower must consider two primary considerations: 1) Is the lender foreclosing judicially or by trustee’s sale; and 2) is the loan a purchase money deed of trust?

Is the lender foreclosing judicially or by trustee’s sale?
California law allows lenders to foreclose on properties judicially (i.e. by filing a complaint with the court) or by power of sale (otherwise known as a trustee’s sale). The vast majority of foreclosures performed in California are by trustee’s sale. California law allows lenders who judicially foreclose on property the ability to seek a “deficiency” judgment, which is the amount of the outstanding mortgage less the fair value of the property. For example, if the outstanding mortgage is $350,000 and the fair market value of the property is currently $225,000, the deficiency judgment would be $125,000. If the lender forecloses judicially, the borrower is allowed to remain in possession and possibly redeem (“buy-back”) the property for up to one year after the foreclosure sale for the price the lender received at the foreclosure sale.

If, on the other hand the lender forecloses by trustee’s sale, California law statutorily prohibits the lender from seeking a deficiency judgment. However, under this foreclosure procedure, the borrower is likewise prohibited from redeeming the property or possession of the property. As you can see, the statutes work a “give and take” with lenders and borrowers.

Is the loan a purchase money deed of trust?
There are generally two kinds of purchase money deeds of trust which are subject to anti-deficiency laws. In the first, a note and deed of trust is executed by a buyer and payable to the seller for the purchase price of the home. This is generally known as “seller financing.” In the second, a note and deed of trust is given by a buyer to a third party lender (a bank) for part of the purchase price of an owner-occupied residential property containing four or fewer units. This is the more commonly understood method of financing.

Under California law, these two methods of financing prohibit the lender or seller from seeking a deficiency judgment. However, purchase money anti-deficiency protections could be lost if the loan is not a “standard” transaction, such as a construction loan or in some cases of refinancing.

How do these protections relate to people walking away from their homes?
Banks are generally unable to obtain deficiency judgments from foreclosures who walk away from their homes because the loans made were for purchase money. Because the bank cannot seek a deficiency, there is no reason for them to go through the more cumbersome process of judicial foreclosure. These individuals may walk away knowing that their lender can’t go after them for anything more than the property itself.

However, walking away will impact the borrower’s credit since the bank will eventually foreclose on the property. In addition, individuals need to be aware that these actions could trigger “cancellation of debt” income, which could mean that they would need to pay income taxes on the amount of debt that has been forgiven. Forgiveness of non-recourse debt is not subject to cancellation of debt income and the 2007 Mortgage Forgiveness Relief Act provides taxpayers with additional protections for up to $2 million dollars (expires in 2012). It is a good idea for homeowners to know exactly what kind of debt their mortgage represents before making any decision.

Before deciding to walk away, homeowners need to be aware of their options and understand their ramifications. We encourage all individuals who face any sort of mortgage difficulties to seek the assistance of an attorney who is experienced in the real estate field. By being informed, individuals can make their own path through the mess instead of allowing the path to make itself.

Jon Ansolabehere
jansolabehere@carnaclaw.com

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Use Permits Allow Flexibility in Zoning

Zoning is the separation of a municipality into districts and the application of different regulations in each particular district. Zoning regulations are generally divided into three types: those that divide a municipality into various land use designations; those that list the permitted uses within those designations; and those that regulate development standards.

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