The Supremes Sing the Banks’ Song: Guarantors Can’t “Stop (Paying) in the Name of Love”

Concept of penalty. Wooden cravel and dollars with coins.As a longtime fan of Motown music and former Washington Supreme Court law clerk and now practicing lawyer, it’s hard to resist a mischievous overlap in nomenclature between our highest legal panel and Diana Ross and the Supremes.  Once in a while our Court also inspires litigants and court watchers to burst out in song.  Perhaps this is such a moment.

The Washington Supreme Court is made up of nine justices with a wide range of legal experience, most of whom have been trial lawyers and judges before being elevated to the state’s highest court.  They are individually and collectively respected as smart and hardworking.  However, it appears that notwithstanding their varied backgrounds, none of the justices has much experience with the Washington Deed of Trust Act.

I reach this conclusion after reading the recent 9-0 decision of the Court in Washington Federal v. Harvey, No. 90078-7(January 8, 2015).  In that case, the Court sided with the unified legions of banks against commercial loan guarantors seeking to avoid liability for loan deficiency judgments after non-judicial foreclosures.  In the wake of the “Great Recession,” during which more real estate loans went into default than at any time since the Depression, it became tragically commonplace that foreclosure sales did not yield proceeds sufficient to pay what were once well-secured loans.  That resulted in large loan deficiencies, and banks looked to whatever source was available to help them repay loan losses, including to loan guarantors.

In Washington, the Deed of Trust Act bars deficiency judgments except in certain narrow circumstances involving commercial loans.  While deficiency actions after trustee’s sales are generally prohibited, RCW 61.24.100(10) provides that a,

“trustee’s sale under a deed of trust securing a commercial loan does not preclude an action to collect or enforce any obligations of a borrower or guarantor if that obligation, or the substantial equivalent of that obligation, was not secured by the deed of trust.”  (emphasis added)

In the cases before the Court, the banks used loan documents which said that the foreclosed deeds of trust secured not only the borrowers’ original notes, but also the loan guaranties.  It’s not clear if the inclusion of the guaranties in the documents secured was intentional, or if the banks did not contemplate that the Washington Deed of Trust Act seemed to prevent actions against guarantors after a non-judicial foreclosure of the deed of trust, as the language quoted above suggests.

But with the ease of a footnote, the Court dismissed the language quoted above, or added its own additional qualification on the exception, in footnote (2) of that opinion:

“. . .  Subsection (10) is clear; it provides clarity about when a deficiency judgment may be brought, but does not protect a guarantor of a commercial loan from deficiency judgments solely because the guarantor’s guaranty is secured by a deed of trust regardless of who granted such deed of trust.  Accordingly, here, even if the borrowers’ deeds of trust secured the guarantors’ guaranties, subsection (10) would not preclude deficiency judgments against the guarantors because the guarantors did not grant such deeds of trust.”

Notwithstanding that footnote, there is no such limitation in the language of RCW 61.24.100(10).  It refers to a guarantor whose guaranty “was not secured by the deed of trust (foreclosed)”.   The Court, in effect, re-writes RCW 61.24.100(10) to read that a,

 ”trustee’s sale under a deed of trust securing a commercial loan does not preclude an action to collect or enforce any obligations of a borrower or guarantor if that obligation, or the substantial equivalent of that obligation, was not secured by the deed of trust granted by such borrower or guarantor against whom a deficiency action is sought.”  (the author’s additional language is in bold)

Without the additional language, the statute would apply to both deeds of trust granted by the borrowers, as in the cases decided by the Court, and deeds of trust granted by the guarantors.  Without that language, there is no basis for making the critical distinction made by the unanimous Court!

The Court pointed to no evidence in other portions of RCW 61.24 or the legislative history to suggest that it is only when the guarantor is the “grantor” under the deed of trust foreclosed that the guarantor is then protected against a deficiency judgment.  In effect, the Court decided the entire case on a limitation to the prohibition on deficiency actions which is not mentioned in the statute.

After reading the opinion, I’m sure bankers across Washington started singing that old Supremes hit, “I Hear a Symphony,” while those unfortunate guarantors were shaking their heads and humming, “You Keep Me Hanging On”.

No Collateral Estoppels Defense to Removal of Unconstitutional Condition Says California Appellate Court

Beach sceneBowman v. California Coastal Commission, 2014 WL 5390057 (Cal. App.), involved a now-deceased landowner’s attempt to rehabilitate and improve real property within the California coastal management zone.  The landowner applied to the local County for an “over-the-counter” permit for repairs (which were exempt from Coastal Commission review under the California Coastal Act of 1976), but later added a septic tank repair and rehabilitation of a dilapidated house to that permit application, which were subject to such review.  After beginning the work on the over-the-counter permits, the landowner was told by the County to stop work until a final permit had issued.  He did so but had not done any work on the septic tank or the rehabilitation of the house.  He then passed away and a family trust assumed ownership.

Much later, the County approved the permit but added a condition of approval to require a lateral easement along the shorefront of the property, stating that the building had not been in use for some years and the occupation facilitated by the permit would increase the intensity of the use.  Later that year, the family trust applied for an amended approval and requested removal of the condition, which the County did.  However, the amended permit was appealed to the Defendant Commission under California law regarding the removal of the condition.  The Commission ultimately determined that the condition was binding and its removal would violate a public policy in favor of public access to coastal resources and took action to restore the condition.  A co-trustee of the family trust appealed that determination.

The court said it would review the Commission’s order for abuse of discretion.  Plaintiff contended the exaction was unlawful under Nollan and Dolan, because there was no “rough proportionality” between the impacts of the development and the condition imposed.  Defendant Commission argued that it did not create the condition and that it was final and binding.  The court responded that normally the failure to appeal a condition gives rise to collateral estoppel in a subsequent challenge.  However, the court recognized an exception to this rule:

“But under the facts here, application of collateral estoppel gives primacy to a procedural rule that creates an unjust result and subverts the fair application of the California Coastal Act of 1976.  (Pub Resources Code, § 30000 et seq.) Inherent in collateral estoppel are met when its application comports with fairness and sound public policy.”

In this case, the court noted that the repairs that were made were exempt from the Coastal Act and were done on an “over-the-counter” basis and could not be the subject of a rough proportionality analysis, noting that the County recognized that fact by removing the condition from its permit.  Moreover, the facts also belie the Commission’s acquiescence argument as neither the land owner nor the family trust took the benefits of a permit.  The court reversed the Commission’s action and struck the condition.

The use of equitable principles in review of the land use decision is fraught with peril.  However, the lack of the constitutionality of the condition left the court with an all-or-nothing proposition in which the unconstitutionality of the condition weighed more heavily then the stability of the decision making process.

Bowman v. California Coastal Commission, 2014 WL 5390057 (Cal. App.)

U.S. Supreme Court Gives Life to the “In Writing” Requirement of the Federal Telecommunications Act

Optical fibres around earthT-Mobile South, LLC v. City of Roswell (United States Supreme Court, January 14, 2015), was a case brought by a “personal wireless service provider” under the Telecommunications Act of 1996 (TCA) which, among other things, supported rapid deployment of personal communications devices (e.g., cell phones) by requiring that land use decisions on matters relating to such things as cell towers be “in writing” and supported by substantial evidence from a written record.

In this case defendant City denied plaintiff’s cell tower application by letter, informing plaintiff that it could find the reasons for the denial in the City Council minutes.  There was a 30-day appeal period under the TCA; however, the City’s draft minutes were not approved until four days before the appeal period ran.   Nevertheless, plaintiff challenged the denial in federal court on the “in writing” requirement and also alleged the denial was not supported by substantial evidence.  The trial court found for the plaintiff but the Eleventh Circuit, following a majority of circuits, found the letter and reference to the minutes to be sufficient.  The Supreme Court granted certiorari.

Justice Sotomayor wrote for the court and interpreted the “in writing” and “substantial evidence” requirements to require reasons to be given for judicial review purposes. Not requiring reasons would make the judicial task much more difficult. The use of “substantial evidence” in the TCA was a “term of art,” describing how an administrative record was to be reviewed by a court under the TCA.  The court inferred that Congress required findings to be derived from the administrative process, rejecting the City’s contention that this requirement would deprive it of its local zoning authority, finding that Congress meant to interfere with local zoning processes to this extent, but stressing that the reasons need not be elaborate – just sufficiently clear to enable judicial review.

Moreover, the court determined that the TCA did not require that the reasons be found in the decision or be in any particular form, as the TCA stated it did not otherwise affect the authority of a local zoning authority noting that FCC rules allowed 90 or 150 days for local governments to make decisions on complete applications.  While it may be a plausible interpretation of the TCA for the reasons to be in the decision, the Act did not specifically require this to occur and the court would not infer it.  However, the court did require that the reasons be given either in the decision or essentially contemporaneous with the same.  By waiting until 26 days after its decision to issue detailed approved minutes, the City failed its statutory obligations and the decision of the Eleventh Circuit was reversed.

Justice Alito concurred, adding that it would be sufficient for the City to state simply that the proposal was “esthetically incompatible with the surrounding area,” that plaintiff was not injured by the City’s delay in providing the final version of the minutes (which he viewed as harmless error) and that this procedural error can easily be corrected.

Chief Justice Roberts authored a dissent, in which Justices Ginsburg and Thomas joined, stating that, while findings or reasons for the decision were required, they need not be issued “essentially contemporaneously” with the decision, as such a requirement was not in the TCA, noting that Congress has in other legislation, such as the Administrative Procedures Act and other sections of the TCA itself, made such a specific requirement.  Moreover, the dissent observed that the “sole issue” before the court was the “in writing” requirement and not the timing of the findings, an issue not raised below.  While agreeing that findings were implicitly required by the use of the “substantial evidence” standard, if they were not given or are inadequate, remand would be justified, rejecting the contention that plaintiff needed to see the reasons in order to decide whether to appeal:

“This concern might have force if towns routinely made these decisions in secret, closed-door proceedings, or if applicants were unsophisticated actors. But the local zoning board or town council is not the Star Chamber, and a telecommunications company is no babe in the legal woods.  Almost invariably in cases addressing [land use decisions under the TCA], the relevant local authority has held an open meeting at which the applicant was present and the issues publicly aired.  In this case and others, T-Mobile has brought its own court reporter, ensuring that it has a verbatim transcript of the meeting well before the town is likely to finalize its minutes.  I strongly doubt that a sophisticated, well-lawyered company like T-Mobile – with extensive experience in these particular types of proceedings – would have any trouble consulting its interests and deciding whether to seed review before it had received a written explanation from the town.”

Finally, the dissent suggests that impacts of this case on local governments will be “small” – they need only hold back the final decision until the minutes be transcribed or reasons given — also suggesting that the delay in making the final version of the minutes available may be harmless error.

It appears the entire court would conclude that the TCA requires reasons for a land use decision involving cell towers; however the justices disagree on the required timing of those reasons.  This result may come as a surprise for some local governments.

T-Mobile South, LLC v. City of Roswell (United States Supreme Court, January 14, 2015).

“With Friends Like These…” – President Obama’s Law School Mentor Takes Aim at EPA’s Clean Power Plan

CO2When Barack Obama was a law student at Harvard University, his constitutional law professor was Lawrence Tribe. A distinguished legal scholar and teacher, Professor Tribe has also been counsel in a number of high profile cases such as Bush v. Gore (Tribe represented former Vice President Al Gore). President Obama and his former professor appear to have maintained a cordial relationship (e.g., Tribe has described the President as “the best student I ever had” and he served as a judicial adviser to Mr. Obama’s 2008 presidential campaign; in addition, during President Obama’s first term Tribe was “Senior Counselor for Access to Justice” in the Department of Justice). Despite his apparent goodwill toward the President, last month Tribe filed rulemaking comments suggesting that the U.S. Environmental Protection Agency should scuttle its proposal to establish first-time restrictions on greenhouse gas (carbon dioxide – CO2) emissions from existing coal-fired power plants. EPA’s proposal, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 79 Fed. Reg 34830 (June 18, 2014), which is often referred to as the Obama Administration’s “Clean Power Plan,” is intended to reduce CO2 emissions from the electric power sector by 30% through various means including shifting a significant portion of coal-fired generation to natural gas and increased reliance on renewable energy. Tribe’s comments, filed on December 1st in conjunction with Peabody Coal Company, take direct aim at the Clean Power Plan as a “remarkable example of executive overreach” that violates the Constitution’s bedrock principle of “separation of powers” (“separation of powers” is an important aspect of the curriculum for constitutional law, and one could conclude from Mr. Tribe’s comments that he must think his former student missed class on those days!).

Attempts at humor aside, Professor Tribe’s comments have received considerable attention. Among other things, he argues that the Clean Power Plan’s downgrading of coal-fired electricity contradicts many decades of federal government encouragement of – and financial support for – producing electricity from coal, and results in an unconstitutional “taking” of private property. That argument seems questionable (a “taking” in the regulatory context assumes that the government action at issue deprives the injured party’s property of essentially all value, which is not the case here). In addition, Tribe challenges EPA’s interpretation of the statute that is the underlying legal basis for the Clean Power Plan, section 111(d) of the Clean Air Act. This relates to the fact that when section 111(d) was modified as part of the Clean Air Act Amendments of 1990, the Senate and House each approved different and somewhat conflicting versions of the statute. Although the conflict should have been addressed in a House-Senate conference, that did not happen. Instead, the legislation signed by President George H.W. Bush and recorded in the U.S. Statutes at Large included the two different versions of section 111(d). In the Clean Power Plan EPA refers to the conflict as an ambiguity that the agency reconciles by interpreting section 111(d) in a manner that authorizes EPA to regulate CO2 emissions from existing power plants and other industrial sources. Professor Tribe, on the other hand, says there is no ambiguity and he treats the House version of section 111(d) – which would not authorize EPA regulation of power plants’ CO2 emissions – as controlling. He adds that even if there is an ambiguity, EPA’s attempt to reconcile the two provisions violates separation of powers because “choos[ing] which of two competing versions of a statute . . . to make legally operative” is “the exclusive responsibility of the legislature.”

While Professor Tribe’s role in challenging the Clean Power Plan initiative by his former student is an interesting irony, the more important point is the virtual certainty that the Clean Power Plan will be challenged in court. The Clean Power Plan is widely acknowledged by stakeholders across the spectrum (industry, state and local government, environmental organizations, etc.) as one of the most far reaching proposals in EPA’s 45-year history, and how courts interpret section 111(d) (which will include interpretive questions beyond those noted here) will be very important to the Clean Power Plan’s success or failure. If President Obama’s CO2 reduction initiative is upheld, it is likely to be the President’s signature environmental achievement. EPA is expected to take final action on the Clean Power Plan by mid-summer.

Housing Land Advocates and the American Planning Association file Amicus Brief in U.S. Supreme Court Case Texas Dept. of Housing and Community Affairs v. The Inclusive Communities Project

HousingAs President of Housing Land Advocates (HLA), I am pleased to announce that HLA and the American Planning Association have filed a joint amicus brief in the latest case to challenge the Fair Housing Act’s (FHA) disparate impact standard.  The Texas Dept. of Housing and Community Affairs case questions whether state administrators of federal low income housing tax credits (LIHTC) programs must consider the location of the housing and whether the location has a disparate impact on protected classes.  Ed Sullivan, HLA Board Member and APA Amicus Committee member submitted the brief on behalf of the amici.

Here is an excerpt of the summary of the argument:

From the perspective of professional planners engaged in development efforts across the United States, the benefits of continued recognition of a disparate impact-standard under the FHA substantially outweigh the minimal costs that the standard imposes.  Decades of operation under a legal framework that has uniformly recognized disparate-impact claims has taught the institutions and professionals engaged in development to work within the standard’s requirements.  Those requirements have proven to be fully consistent with efficient project planning and execution efforts.  Reversing course at this point would be disruptive to established practices and, ultimately, would thwart just and effective planning efforts.

The benefits that flow from compliance with the FHA’s disparate-impact standard have been substantial.  The legitimacy of public institutions depends, in significant part, on transparent decision making.  In the context of urban and rural development efforts, it is inevitable that certain projects will affect some groups of persons more than others.  Responsible planners consider the unintended consequences of development projects, explain to the public why a project is necessary and beneficial notwithstanding its disadvantages, and engage in dialogue with affected community members to minimize a project’s drawbacks.  Institutions that properly explain the reasoning behind their decisions enjoy greater public support for and participation in their long-term objectives.

The FHA’s disparate-impact framework furthers transparency and legitimacy by committing planning professionals and public institutions to a dialogue with those affected by their actions.  Under the most pervasive articulation of the standard, housing plans must serve legitimate, nondiscriminatory interests through the least discriminatory means available.  This includes development efforts that are part of the federal low income housing tax credit (LIHTC) program.  Over the course of decades, that norm has become an accepted component of the planning process.  Today, responsible developers share their objectives with potentially disadvantaged persons and groups and together develop plans to minimize projects’ adverse effects.  This kind of transparency makes affected groups more apt to lend their support to projects, view such projects as fair, and regard planners and public institutions as legitimate actors in the public space.

The costs, meanwhile, of the disparate-impact framework have proven to be minimal.  Over the course of four decades, complying with the existing legal regime has not thwarted economically beneficial development efforts, including those made as part of the LIHTC program.  That is because, properly understood, the possibility of a disparate impact does not make a development project unlawful—it simply requires that institutions provide and articulate nondiscriminatory justifications for projects that adversely affect protected groups.

In sum, the FHA’s disparate-impact standard has promoted just and efficient planning and development efforts for decades.  Overturning that standard now would decrease the legitimacy of public institutions and the planning profession, disrupt practices that have advanced under the standard, and ultimately disadvantage the public interests that development projects are designed to serve.

You can read the entirety of the brief here.

What Does “Bias” Mean in a Land Use Hearing?

One of the Selective focus on the word "fair". Many more word photos in my portfolio...most common concerns about land use hearings is whether a decision maker is “biased,” or whether they can make a fair decision.  In Columbia Riverkeeper v. Clatsop County, ___ Or App ___, ___ P3d ___ (2014), the Oregon Court of Appeals expressed their view of bias and it likely does not match what most people think of “bias.”

Oregon was one of the leaders in requiring more process and elements of fairness in land use decision-making.  As far back as Fasano v. Washington Co. Comm., 264 Or 574, 588, 507 P2d 23 (1973), the Oregon Supreme Court noted that participants to a quasi-judicial proceeding are entitled to a “tribunal which is impartial in the matter.”  However, the courts have also long recognized that the role county commissioners play in land use is not the same as a judge:

“A judge is expected to be detached, independent and nonpolitical. A county commissioner, on the other hand, is expected to be intensely involved in the affairs of the community. He is elected because of his political predisposition, not despite it, and he is expected to act with awareness of the needs of all elements of the county, including all government agencies charged with doing the business of the people.”  Eastgate Theatre v. Bd of County Comm’rs, 37 Or App 4 745, 588 P2d 640 (1978).”

In the case decided last week, LUBA had remanded a decision because of what it saw as bias on the part of one of the county commissioners, Peter Huhtala in reviewing an application to site a liquid natural gas (“LNG”) facility.  The commissioner had run for office largely on his opposition to LNG facilities, and the record was replete with his opposition to the concept and to some particular applications.  LUBA looked at that record and found Huhtala disqualified because of his bias.

The Court of Appeals focused on the “matter” before the county commission and the Commission’s role in applying the applicable land-use laws to a discrete set of facts and evidence.  The Court of Appeals was not troubled about the commissioner’s opposition to other aspects of LNG facilities, noting that these were “political predispositions.”  The only actions Huhtala had taken with reference to the pending application did not demonstrate any bias and, therefore, the Court of Appeals found Commissioner Huhtala to not be disqualified on the basis of bias.

Fifth Circuit Deals with Viewpoint Discrimination in Texas License Plate System

state license platesTexas Division, Sons of Confederate Veterans v. Vandergriff, 2014 WL 3558001 (5th Cir.) involved the rejection of Plaintiff’s specialty license plate design application (which includes the Confederate Battle Flag) submitted to Defendants, the Chair and Motor Vehicle Board of Texas. In addition to publicly-issued license plates, Texas allows private vendors to propose plates to the Board and specifically allows nonprofit organizations to propose plate designs.  The Board may deny the design if it “may be offensive to any member of the public.”  The Sons of Confederate Veterans (SCV) had its license plate design rejected because of the association of the Confederate flag with hate and hate groups.  The Federal District Court found the Texas specialty license plate program was a non-public forum, that the denial was content-based rather than viewpoint based, and that the rejection was reasonable under the circumstances, so that a First Amendment violation did not occur.

On review, the Fifth Circuit turned first to jurisdiction, and it had previously denied relief in Henderson v. Stalder, 407 F.3d 351 (5th Cir., 2005), pursuant to the Tax Injunction Act in a case in which pro-choice advocates alleged Louisiana was engaged in allowing pro-life license plates inimical to its views.  The court distinguished Henderson and like cases when the license fees imposed were not a tax, a party (other than a taxpayer) is the plaintiff and the result will be to enrich, rather then to deplete, public coffers.  Here, SCV is not a taxpayer and the result of the litigation, if successful, would raise state revenues.  The Fifth Circuit then proceeded to review the grant of summary judgment by the trial court on a de novo basis.

The court saw the issues on appeal as: whether the speech at issue was public or private and, if private, whether the denial constituted a permissible content-based regulation or impermissible viewpoint discrimination.

The First Amendment does not regulate government speech but prohibits most government regulations of private speech.  The difference between public and private speech is determined whether a reasonable spectator would believe that the government was speaking to them.  In this case, unlike a permanent monument in a park, a license plate is temporary expression and, in this case, open for diverse expressions of viewpoints by the public agency and nonprofits.  Few would classify vanity license plates or the 350 existing specialty plates in Texas as government speech.

Having found the speech to be private, the court turned to whether the action was content, regulation or viewpoint discrimination, the latter of which is “presumptively impermissible” and, in reality, an egregious form of impermissible content discrimination.  SCV argued the views of those offended by the Confederate battle flag is no different then the many number of veterans license plates available in Texas for those who have fought in our country’s wars and the only reason the subject design was rejected was because of the viewpoint it represents.  The First Amendment was designed to protect speech from coercion over its viewpoint.  The standard used in this case “might be offensive to any member of the public” lacks any limiting sideboards and gives unbridled discretion to the Board.  The First Amendment is not met when a public entity suppresses all viewpoints on a particular subject.  A public agency may not shield the public from minority views that might be offensive to some.  Accordingly, the trial court decision was reversed.

Judge Jerry E. Smith dissented, finding no “reasonable observer” standard in the United States Supreme Court case law.  The dissent agreed that SCV had standing, notwithstanding the Tax Injunction Act and that the case could be classified as viewpoint discrimination, but the dissent also thought that the design constituted government speech.  Because the reasonable observer test was not appropriate (in large part because that standard was derived from a concurring opinion of Justice Souter in Pleasant Grove City, Utah v. Summum, 555 U.S. 467 (2009), which the rest of the court did not adopt and which the dissent felt was contradicted by other Supreme Court precedent).

The dissent agreed that four or five of the other circuits had found similar licensing programs were not “government speech” but suggested that none of the decisions deals adequately with Summum (in which the United States Supreme Court found the placement of monuments was government speech, to which the First Amendment was not applicable).  Whether the monument were financed publically or privately and installed with government permission was irrelevant.  In that event, license plates (which are mandatory) could have a program under which private persons or nonprofit organizations could engage an alternative design, subject to Board approval.  The court added:

* * *The reasoning in Summum informs that if Texas license plates would constitute government speech only if Texas has designed the plates itself, they do not lose their governmental character just because Texas accepted a privately designed message, endorsed it, and then placed it on its plates.  [Footnote omitted.]

As with monuments in public places, license plates are identified with the state governments that issue them and specialty license plates cannot exist without the state’s cooperation and offer to manufacture and sell them.  Thus the law allows Texas to choose whether it wishes to be associated with the Confederacy by others.  SCV has other means to advance its message and the state is not required to have the state embrace that message.  Confederate flags may be displayed as bumper stickers or other appendages on cars, houses, etc.  The proper analogy in this case is to monuments in public parks, rather then leafleting.

The dissent rejected the binary choice of the majority that the distinction is between government and private speech and that, if the speech be private, there can be no viewpoint discrimination so that if a driver sees an offensive license plate design, she would naturally attribute that design to the driver, rather than the state.  But in Summum, the United States Supreme Court found the government had the right to speak and express its own views in monuments, regardless of how those monuments were financed.  The association that public and private persons present at events (such as sponsorships in football games) is voluntary and meant to promote that association in the public mind.  Summum says that government need not be forced to associate with all viewpoints because it has associated itself with one.  The government may not force someone to disseminate its message (so that a state could not force a driver to have a “choose life” or “support choice” license plate), and it need not accommodate all views in license plate designs.

While this case does not, strictly speaking, relate to land use it does have importance in dealing with uses and public spaces as well as with messages that are regulated under land use law.  The dissent in this case appears to have the more cogent argument.

Texas Division, Sons of Confederate Veterans v. Vandergriff, 2014 WL 3558001 (5th Cir.)

News Update! The United States Supreme Court has granted cert in this case, now referred to as Walker v. Texas Division, Sons of Confederate Veterans. 

 

ALL THOSE YEARS

Ed Sullivan One of your faithful columnists, Ed Sullivan, is retiring after forty-five years of law practice at the end of 2014.  While he will continue to write this column for a little longer, he shares his thoughts on the evolution of Oregon land use law over that time.

I graduated from Willamette University College of Law in 1969, having come to Oregon only three years previously and knowing no one when I arrived.  Fortune directed me to Washington County, a very different place than it is now, to become an Assistant County Counsel, and in less than 18 months, County Counsel.

Fortune also smiled in giving me the Fasano v. Washington County case to brief and argue.  This case involved approval of a manufactured home park in a suburban residential area now part of Tigard.  But the case was a vehicle to ponder the way that Oregon views small area rezoning and the relationship of the comprehensive plan to land use regulation.  While the County lost the case in 1973 because the findings (which I did not write) were inadequate, the case formed a solid basis for Oregon land use planning by requiring county land use regulations and actions to “carry out” a required comprehensive plan and treating small tract rezoning as “quasi-judicial” actions, requiring hearings officers or bodies to allow the presentation and rebuttal of evidence, to avoid or reveal ex-parte contacts, and to justify their decisions by findings.  A similar case in 1974, Baker v. City of Milwaukie, required that cities align their regulations and actions to their plans as well.  I was fortunate enough to appear as an amicus curiae before the Oregon Supreme Court on behalf of the predecessors to the American Planning Association and even more fortunate to be allowed to present oral argument to the court.  These cases aligned well with the emerging Oregon planning system enacted in 1973 by SB 100.

After receiving my LL.M. in London, I entered private practice and represented applicants, opponents and local governments in many hearings and appeals.  Among those cases were persuading Clackamas County to deny its own permit for gravel mining, getting approval of the Lake Oswego water system expansion from West Linn, getting the Douglas County plan and regulations acknowledged by LCDC, and assisting Cannon Beach in the adoption of its short term rental ordinance.  I’ve also represented a number of local governments, including Oregon City for the last 25 years.

Perhaps my most unusual task was dealing with the Rajneesh sect, which came to Oregon in 1981 and sought to establish a city on the “Big Muddy Ranch” in Wasco and Jefferson Counties and managed to antagonize just about everyone.  While the land use efforts were generally successful, the other activities of that group in taking over an adjacent city, poisoning salad bars and bringing in homeless people to register to vote in sparsely populated areas, resulted in its downfall.  The offensive tactics of that group, and the reaction to them, tell us a lot about Oregon.

Besides the cases and controversies, I have been able to watch new planners and lawyers grow for over 40 years, teaching at the Portland State University School of Urban and Public Affairs and at the Lewis and Clark and Willamette law schools.  In addition, I have been privileged to serve as Chair of the Section on State and Local Government Law of the American Bar Association, Regional Vice President of the International Municipal Lawyers Association,  and have done many presentations on land use in the United States and internationally.

It has been a good run with fascinating people, places and events.  While I will end my law practice, I hope to continue to teach, write and speak, especially on land use planning issues, for as long as those efforts are useful.  Thanks for reading and commenting on this column.

Edward J. Sullivan has specialized in land use law for over 40 years and is an owner in the Portland Office of Garvey Schubert Barer.  Mr. Sullivan is a Past Chair of the State and Local Government Law Section of the American Bar Association and may be reached at 503-228-3939 or at esullivan@gsblaw.com.

 

Grab a Bowl of Popcorn and Watch the Next Segment of the Great Measure 49 Debate – Transferrable Development Credit Rules in the Works

In 2007 the voters approved Measure 49 with the effect that certain property owners were authorized to develop additional home sites on land that many thought would see no new development.  Now, DLCD is trying to breathe new life into the home approval authorizations through a transferrable development credit (TDC) program authorized under subsection 11(9) of Chapter 424, Oregon Laws 2007 (Measure 49) and ORS 94.531. According to the purpose of the draft regulations, this will enable landowners to realize the value of their Measure 49 authorizations without developing the property from which the claim arose. These programs will permit landowners, on a voluntary basis, to transfer their development interest under Measure 49 from one property (sending) to another property (receiving) at a more suitable location.  DLCD hopes these programs will reduce the adverse impact of scattered residential development on farm and forest and other resource land.

Under the proposed regulations, each county can establish its own program and DLCD will provide a model ordinance.  The new ordinance will require counties to amend their comprehensive plans to designate sending and receiving areas for the TDCs.  The regulation will require identification of approved holders of conservation easements and allow some form of third party enforcement – likely by the county or DLCD.

TDCs will be measured as one credit for each new dwelling authorized under the Measure 49 Final Order from DLCD.  But, what TDC program would be complete without a bonus provision?  Density bonuses may be available for sending properties that agree to some form of protection based on size – where a conservation easement for sending areas greater than 20 acres or a deed restriction for smaller sending areas may qualify for bonus TDCs.  Notably, a conservation easement would still allow for agricultural, forest, public parks, and conservation uses, as well as any lawyer’s favorite undefined use – “low intensity uses.”  TDC bonuses may also be available by virtue of the sending land being designated resource land, including high value farmland, high value forestland, natural areas and historic sites.

The draft regulations identify a few areas that county ordinances can designate to receive TDCs.  These include rural residential areas zoned with 5 and 10 acre minimums that would be allowed densities with minimum lots sizes of 2.5 or 5 acres, respectively.  Also, substantially developed subdivisions in resource zones could benefit from increased density.  Last, in EFU zones, TDCs could be used for the purpose of allowing a lot or parcel with two dwellings to be partitioned, subject to some limitations.  Receiving areas are to be selected to minimize conflicts with agriculture and forest operations.

DLCD will be required to sign off on an Amended Measure 49 Final Order for property owners entering into a TDC arrangement.  But, if you hold a Measure 49 authorization, beware – some Measure 49 properties may still not be eligible for designation as sending properties if they are unbuildable.  TDCs are fully transferrable but will be subject to a 10 year development clock measured from when the TDC is issued by DLCDs Amended Final Order.  Last, some regional transfer of TDCs may be allowed along the typical division – Metro, Willamette Valley, Coastal, Southern and Eastern counties of the state.

Based on DLCD’s efforts with these draft regulations, the Measure 49 debate is being rekindled and those who thought they had some certainty will again be thrown into a planning process that could include a variety of outcomes.  Perhaps resource lands will be protected, but those in rural residential areas might not be too excited to be receiving the gift.  Moreover, the bonus TDCs are certainly an enticement, and those who worked so hard to limit Measure 49 rewards may not be inclined to support additional development rights to holders of Measure 49 approvals and related TDCs.  DLCD staff’s tentative plan is to bring a recommendation for the new rules to LCDC at the January 22-23 meeting in Portland.

 

RESIDENTIAL BROKERAGE COMMISSIONS – FURTHER UPHEAVAL

HUD housing and urban developmentRecent editions of the The Seattle Times (Sunday, November 16, 2014) and the Puget Sound Business Journal (November 13, 2014) discussed a new local “disruptive” company on the residential real estate brokerage scene, Surefield.com.  The Pacific Northwest, home to Zillow.com as well as Redfin.com, is known as an innovation hub in this industry.  Surefield is an online residential real estate brokerage, which plans on dramatically undercutting the traditional 6-5% real estate commission paid by sellers (usually divided 3 or 2.5% for the listing agent and 3 or 2.5% for buyer’s agent), charging only 1.5% to sellers.

As quoted in the piece by Ben Miller, Contributing Editor of the PSBJ, David Eraker, Surefield CEO said:  “The U.S. real estate industry has been operating as a quasi-cartel for far too many years, just look at the high commission rates as proof of tacit collusion.”   While commissions have been negotiable in theory, in practice, it has been challenging to find a good broker to vary greatly from the general price range and format.

Zillow primarily provides online property information rather than brokerage services, like Redfin, which allows property listings and has its own stable of agents to work on a seller’s or buyer’s behalf.  Redfin charges 1.5% for a listing (as opposed to the traditional 3 to 2.5%) and provides full service brokerage services accompanied by its online tools.  The commissions charged buyers are less than the traditional model, and based on the price of the property.  Redfin, like some other new firms in the space, pays its agents a salary rather than a share of the broker commission.

Other entrants into the tech brokerage market include UpNest.com, which allows residential real estate brokers to bid for a listing, competing by marketing proposal and commission rates.  There are also on line brokers like Shopprop.com, which have a set discounted listing fee, less than the traditional 2.5 to 3%, and a graduated buying commission based on the number of services provided and the price.  Seattle-based Findwell.com is another entrant into the growing online brokerage field.

What’s the future of these and other online services, and how do you compare them to the traditional brokers?

In the past, one of the most important roles of the real estate agent was as gatekeeper to information about the market.  That is the most significant change.  Instead of asking your agent to locate and screen properties in the your price range and which otherwise meet your requirements, online tools now allow a buyer to view listings, filtered by price, bedrooms, location and amenities, often with interactive virtual home tours available.  The new portals, such as zillow.com, as well as sites from traditional brokerage firms, like windermere.com or johnlscott.com, have made the property search and identification process much more efficient.

Technology can also help foster competition and efficiency in selecting the agent who can assist you in the sale/purchase process.   One aspect of technology that I appreciate when I go out to dinner, stay in hotels or hire a contractor is the customer feedback/rating process.   Companies like Redfin and UpNest have internal ratings based on customer feedback.  I understand Redfin financially compensates agents who get great customer feedback.   I like that.  This screening function is helpful, but is not entirely new.   Brokers at good traditional agencies also screen agents working for them, a process I know takes place at Windermere and John L Scott.  Those that don’t perform well aren’t retained.  And as a real estate lawyer, I often get asked for and check with my colleagues about agent referrals.  It may be that with the right tools, quality will rise to the top even faster than in the past.

Is it good that there is a wider range of commissions offered?  Yes, unless you’re on the receiving side of the equation.  There are times when a property will sell itself. In those situations, having the option of selling through a low cost brokerage with minimal agent involvement makes sense. More commonly, however, the process of properly pricing, staging and marketing/showing are as important as ever for a seller.  From the buyer’s perspective, a skilled agent’s advice about the nuances of value, building issues, neighborhoods, negotiation and the buying process is also critical.   Working with smart, hard-working agents is as important as ever.   But from an agent’s perspective, commissions are coming down.   The best agents will learn to use the technological tools to become more efficient, and will find platforms which cost less from which to deliver their services.  In residential real estate, as in most of the economy, the ground rules are rapidly changing, and for the most part, consumers benefit.   Here’s to the future!

 

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