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!

 

FLORIDA APPELLATE COURT FINDS NO TAKING OF ONE OF TWO SEPARATE TRACTS ZONED WHILE IN SINGLE OWNERSHIP

FloridaOcean Palm Golf Club Partnership v. City of Flagler Beach, 2014 WL 2217255 (Fla. App.) was an inverse condemnation act involving two tracts—one of 34 acres on which a 9-hole golf course existed and the other consisting of 2.94 acres completely surrounded by the first.  At one time, these tracts were in common ownership and used as a golf club with the smaller tract being used as a driving range.  The former owner threatened the City with a taking suit because the land use designations, in the owner’s view, were insufficient to provide a viable economic use.  To resolve the dispute, the owner entered into a Development Agreement with the city in 1989, whereby the golf course use would remain on the larger tract, which would be designated as open space, and the smaller tract would be used for condominium development for 84 units.  By its terms, the Development Agreement would remain in force until 2003.

In 1999, before any development applications were made, the original owner sold both tracts to different corporate entities in which there was the same principal.  The design of the condominium development uses were rejected on two occasions by the City.  That tract was then sold to different owners, but the purchasing entity contained many of the same principals as had an interest in the golf course property.  After the second proposal was denied in 2002 for the development of the condominium tract, the current Plaintiff, as purchaser, sought a further approval and an extension of the Development Agreement.  While the city approved the design of the proposal, it denied an extension.  The conditions placed on the design approval would not accommodate the applicant’s restaurant, pro shop and other amenities it was required to undertake according to the Development Agreement.  When the Development Agreement expired, the owners of the condo tract sought approval of yet another plan, which required the owner to purchase a 1-acre piece of land from the golf course site, which they were unable to do, so the plan lapsed.  The owners of the property originally designed for condominium development then sought to change the designation on both tracts to allow for a single-family development on both tracts to single-family residential.  The City denied the proposal and, on appeal, that decision was affirmed.

The owners of the condominium tract brought a takings claim, alleging no viable economic use of that tract could occur and that the City’s actions resulted in a partial or total taking.  At trial, Plaintiff introduced evidence to the effect that the golf course could not operate without the development of a condominium tract to support it, noting that the original golf course use never realized profit.  The golf course had closed in 2008 and the owners of that tract were unable to meet its mortgage payments so that tract was foreclosed upon and there was a $1.6 million mortgage outstanding.  As to the condominium property, there was testimony that it could not yield sufficient return that was economically feasible in the current condominium market.  The owners of that tract accused the City of rejecting its proposals as a way of “running out the clock” on the Development Agreement.

The expert testimony before the trial court focused on the economic viability of the tracts either together or separately.  Plaintiff addressed the two tracts separately due to the different ownership and uses.  Plaintiff’s expert testified that the economic viability of the golf course was untenable as it was too small to compete with nearby 18-hole golf courses, especially in such a small local market and valued the golf course tract at $170,000, assuming that the City would never re-designate that tract.  However, Plaintiff’s expert also said that if that tract were re-designated as low-density residential, it would be worth $8.125 million (as the resulting lots could be proximate to the ocean and near coastal waterway).  However, Defendant’s appraiser valued the golf course tract at $560,000 under current zoning regulations.  That appraiser admitted he had not considered whether it were economically feasible to rehabilitate and operate the now closed golf course and had no opinion as to what the difference in value would be if that tract were developed for single family use.  Defendant also presented evidence on the economic viability of the two tracts combined, notwithstanding objections to that evidence by Plaintiff.  That testimony concluded there was no appreciable difference between the two tracts as currently zoned and as zoned in the matter requested by Plaintiffs.  That appraiser also testified that a higher value would result if the owners of the two tracts would work cooperatively.  On cross-examination, the City’s expert testified the most likely development scenario was that the owners of the residential property would acquire the golf course and operate it as a loss but as an amenity to the residential use, adding that it made no economic sense for the golf course to sit idly otherwise.  That expert also testified that, given the costs already incurred, it was unlikely that the golf course would ever generate a profit.

In this non-jury trial, the judge found for the City and concluded that, whether the property was treated as a single or dual tracts, there was an economically beneficial use as a golf course, finding the losses for the last ten years were the result of the use of basis costs, which would be omitted in calculating economically beneficial use— thus, deducting interest and depreciation costs, there was a viable economic use of this tract.

Plaintiff contended the refusal to amend the plan in 2008 constituted a total taking of the golf course tract and that there was no competent substantial evidence to support a contrary conclusion because Defendant’s appraiser treated the two tracts as a single unit.  The Court turned first to the “relevant parcel,” i.e., to determine of the two tracts in this case should be treated as a single economic unit.  The Court used three factors to make that determination: physical contiguity, unity of ownership, and unity of use.  In addressing the unity of use issue, the Court considered

(1) intent of the owner, (2) the adaptability of the property, (3) the dependence between parcels, (4) the highest and best use of the property, (5) zoning, (6) the appearance of the land, (7) the actual use of the land, and (8) the possibility of tracts being combined in use of the reasonably near future.

(citing Town of Jupiter v. Alexander, 747 So. 2d 395, 400 (Fla. App. 1998)).

While the condominium and golf course tracts are two legally distinct lots and were both now undeveloped and unoccupied, there was a rebuttable presumption of separateness.  However, in this case, the unity of use rebutted that presumption, noting that the two tracts were one historically until 1989 when the Development Agreement first treated them as two tracts.  For development purposes, even after they were made separate, the two tracts were developed symbiotically.  The Court also noted that though the two tracts were in different ownership, principals in both had a substantial overlap.  Finally, there is a physical contiguity of the two tracts (the residential tract being within the golf course).  The presumption of separateness that thus has been rebutted and the Court upheld the analysis by Defendant’s appraiser which treated the tracts as one in concluded that Plaintiff was not deprived of all viable economic use.

The Court agreed that a regulatory taking could result from a public agency refusal to reclassify property, particularly in the light of changed conditions, but noted that the character of the area surrounding these uses has not changed.  All that changed was the real property market for golf courses.  There is no requirement that a public agency guaranty a profit for a landowner faced with a changing market.

Nor did the Appellate Court find grounds for a partial takings claim in the application of the three-factor test of Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).  Plaintiff admits it did not meet the investment-backed expectations factor as it had purchased the tract with knowledge of its land use designation, but argued that the other two Penn Central factors weighed in favor of a partial taking.  The Court disagreed, for while the third factor, the character of the governmental action, favored Plaintiff because the burden of the regulation fell disproportionately on Plaintiff, the first factor, the economic impact of the regulation, was not met because, as the Defendant’s appraiser concluded, the two tracts, taken together, retained an economically beneficial use.  Thus, the Trial Court dismissal of the inverse condemnation claim is affirmed.

This case illustrates the point that a Court will not find a regulatory taking by focusing on a single tract if that parcel is really part of a larger parcel and no regulatory taking exists against the parcel as a whole.

Ocean Palm Golf Club Partnership v. City of Flagler Beach, 2014 WL 2217255 (Fla. App.)

 

New FCC Rules on Modifications to Wireless Facilities

Wireless TowerOn October 21, 2014, the Federal Communications Commission (the “FCC”) issued new rules addressing modifications of “wireless facilities.”  The new rules have not yet been published in the Federal Register and will not become effective until 90 days after they are published, so there is some time before they take effect, but wireless providers, neighborhood activists and local governments should be aware of the impact of the new rules.

The entire order is over 150 pages long (although the rules themselves only extend for 10 pages) and is intended to implement a 2012 Federal statute that required the following:

“A state or local government may not deny, and shall approve, any eligible facilities request for a modification of an existing wireless tower or base station that does not substantially change the physical dimensions of such tower or base station.”

The statute provided little further guidance, leaving that to the FCC, which has now set out how local governments must address modifications to existing wireless facilities.

There are several pieces to the rules, but generally, local governments must approve collocation, replacement or removal of wireless facilities, so long as the request does not propose a “substantial change to the physical dimension” of the facility.  For cell towers, “substantial change” is defined to exclude modifications that increase the height by less than 20 feet or 10% of the existing tower height.  For “support structures,” substantial change does not include installation of the “standard number of new equipment cabinets for the technology involved” or, if there are preexisting cabinets, cabinets that are less than 10% larger in height or volume than any other ground cabinet.

The new rules also address the review process and put in place a new “shot-clock” rule, limit local governments ability to request documentation and specifically prohibits a local government from requiring any documentation regarding the business need for the modification.

There is a chance that reconsideration of the rules will be sought or that the rules could be appealed.  But unless that happens, all involved in siting wireless facilities should begin thinking about implementing the new rules.

SECOND CIRCUIT DISMISSES ZONING CHALLENGE FOR FAILURE TO EXHAUST LOCAL REMEDIES

Ed Sullivan Holt v. Town of Stonington, 2014 WL 4251291 (2nd Cir.) involved the application of Defendant’s zoning requirements which allowed an exception to certain single-family minimum lot size requirements for undersized lots created before the adoption of the current zoning regime.  Plaintiff purchased her lot in 2005 after receiving a letter from the town’s zoning enforcement officer stating that the lot qualified under this exception.  On that basis, Plaintiff purchased the lot.  However, the zoning enforcement office overlooked a 1981 land sale of a 10-foot strip to an adjacent property owner, which disqualified the remainder of the lot from the exception.  The town’s zoning board of appeals overturned the enforcement officer’s letter interpretation and Plaintiff attempted to appeal the decision to state court.  The state court found the letter was a “preliminary, advisory opinion and not a decision subject to appeal.”  Plaintiff then filed suit in federal court inter alia to estop the Town from preventing construction of the single-family home on her property.  The trial court entered an injunction estopping the Defendant Town from declaring that the subject site was “unbuildable under the Town’s zoning regulations.”  The Town appealed from that decision.

The Second Circuit dismissed the case because Plaintiff failed to exhaust her remedies and stated that exhaustion was jurisdictional and therefore not waivable.  The court added that the exhaustion requirement is grounded in a policy of fostering an orderly process of administrative adjudication and that the doctrine facilitates judicial review because a reviewing court will have the benefit of the Town’s findings and conclusions.  Additionally exhaustion avoids premature decisions in questions entrusted to an administrative agency, allows that agency to develop a factual record, and to exercise its discretion and apply its expertise.

The Second Circuit recognized exceptions to the exhaustion requirement under Connecticut law – i.e. when the administrative remedy is futile or inadequate.  A remedy is adequate when it can provide a plaintiff with all the relief sought and contains a mechanism for judicial review of that decision.  While Plaintiff did seek review of the action regarding the zoning enforcement officer’s interpretation, she withdrew her actual zoning permit application – an action that could have determined the issue now sought to be litigated.  To be reviewable, there must be a final decision to grant or deny an application for a certificate of zoning compliance.  Here, the Plaintiff withdrew that application and thus never completed the very proceedings necessary to exhaust remedies, although those mechanisms existed.  Moreover the possibility of denial is an insufficient basis to demonstrate futility.  In order for the futility defense to operate, Plaintiff must show that the available remedy mechanism could not result in a favorable decision.

The court rejected Plaintiff’s further justification for use of a federal court in that the zoning board of appeals could not give her the specific relief she sought – i.e. estoppel of the Town to deny any prospective single-family home building permit.  The court stated that it was not the type or label attached to the relief that had to be unavailable, but the relief itself, i.e. the issuance of building permit for a single-family home.  If a remedy exists, it must be used before resort to the courts is had.  If not, the courts lack jurisdiction to consider the matter.  The trial court decision in this case was thus reversed.

This case is another object lesson for the need to complete local proceedings before resorting to the courts, especially the federal courts.  One can just imagine the report of the lawyer for the landowner in this case when not prevailing after a great deal of now shown to be fruitless litigation.

 

 

 

STILL NO COMPENSATION FOR LOST OR RESTRICTED ACCESS RIGHTS IN OREGON CONDEMNATION ACTIONS

Eminent DomainState v. Alderwoods (Oregon), Inc., 2014 WL 4823607 (Or. App. Sept. 17, 2014)

The issue of whether a property owner is entitled to compensation for the taking of abutter’s rights of access to a public highway was again taken up by the Court of Appeals in State v. Alderwoods (Oregon), Inc.  The case involved an eminent domain action relating to the recent improvements to Highway 99W near its intersection with Highway 217.  The State filed an eminent domain action seeking to take a temporary construction easement in order to improve the sidewalk and to remove the curb cuts and driveways that allowed access to the Alderwoods (Oregon), Inc.’s property from Highway 99W.  The property retained indirect access to Highway 99W from Warner Road. In its Complaint, the State alleged that, in addition to the temporary construction easement, it was seeking to acquire “[a]ll abutter’s rights of access, if any” to Highway 99W.  After the Complaint was filed but before trial, ODOT exercised its regulatory authority to remove the property’s access to Highway 99W through a separate administrative action.  Prior to trial, the trial court granted the State’s motion in limine to exclude all evidence of diminution in the value of Alderwoods’s land resulting from the loss of direct access to Highway 99W.  The parties stipulated to a general judgment awarding just compensation for the temporary construction easement and Alderwoods appealed the trial court’s ruling on the motion in limine.

The Court of Appeals heard the appeal en banc and an equally divided Court issued a per curiam decision affirming the trial court’s ruling. Judge Armstrong wrote the concurring opinion in favor of affirming the trial court’s decision.  Judge Sercombe wrote a separate concurring opinion.  Judge Wollheim wrote the dissent. All three opinions agree that, generally, “there is no right to compensation for a loss or restriction of access to an abutting street if access to the property is not completely eliminated by the project for which the other property is being condemned.” Id. at *8. Although a property owner has a common law right of access to an abutting public right of way, that access right is subservient to the public’s right of free use of the streets.  The state may protect that right through the exercise of its police powers.  Thus, if the state exercises its police power to eliminate or restrict property’s access to an abutting public right of way (so long as all access is not eliminated), the property owner is not entitled to compensation regardless of the diminution of value caused by the loss or restriction of access.

The three opinions differ on whether the State is required to pay just compensation where it seeks to take or restrict a property owner’s right of access through an eminent domain action as opposed to an administrative action exercising its police powers.  Judge Armstrong in his concurring opinion reasoned that Alderwoods had a common law right of access to Highway 99W.  However, because that right of access was lost by administrative action “the property has no lawful access to Highway 99W irrespective of the condemnation of the access to the highway.” Id. at *7 (emphasis in original).  Therefore, Judge Armstrong concluded that the evidence of diminution of value was irrelevant and properly excluded by the trial court.

Judge Sercombe in his separate concurring opinion finds that an abutter’s common law right of access is general and unfixed.  Judge Sercombe reasons that compensation is only required if the state takes both the direct and indirect access to the public right of way. Id. at *9.  Judge Sercombe concludes that Alderwoods was not entitled to compensation for the loss of direct access to Highway 99W in the eminent domain action because the State did not also seek to take Alderwoods’s indirect access.  The fact that the State also took Alderwoods’s right of access through an administrative action did not factor into Judge Sercombe’s opinion.

Judge Wollheim’s dissent concludes that Alderwoods should have been allowed to present evidence of damages resulting from the State’s taking of its abutter’s right of access to Highway 99W in the eminent domain proceeding. Judge Wollheim does not dispute that the State has the right to take or restrict access through its regulatory authority without compensation (so long as all access is not eliminated).  However, because the State chose to take the access through its eminent domain under the authority granted by ORS 374.035, the State was statutorily required to pay just compensation in the eminent domain proceeding.  Judge Wollheim did not consider the administrative action eliminating access, in part, because the State did not argue that the regulatory action eliminated Alderwoods’s right to compensation.

It is anticipated that Alderwoods will file a petition of review with the Oregon Supreme Court.  Until the Supreme Court weighs in on the issue, the primary take away from the Court of Appeals per curiam decision is that the condemner should exercise its regulatory authority to eliminate or restrict a property’s abutter’s rights of access before it files an eminent domain action.  It is clear under all three opinions that a property owner is not entitled to just compensation for a restriction or elimination of abutter’s right of access through the state’s regulatory authority (so long as all access is not eliminated).

 

SECOND CIRCUIT REMANDS AND AFFIRMS TRIAL COURT IN RLUIPA HISTORIC PROPERTY CASE

coexist_orig   Flickr   Photo SharingChabad Lubavitch of Litchfrield County, Inc. v. Litchfield Historic District Commission. United States Court of Appeals, Second Circuit, Case Nos. 12-1057-cv and 12-1495-cv, (September 19, 2014) involves the purchase of property in a historic district by plaintiff religious organization, led by plaintiff Rabbi Joseph Eisenbach in order alter the principal building and expand it for use in the religious mission of the organization. Defendant Historic District Commission (HDC) denied the application with leave to reapply. Plaintiffs, the religious organization and its Rabbi, contest the denial under the Religious Land Use and Institutionalized Persons Act (RLUIPA) and Connecticut statutory law, seeking an injunction and declaration, damages, attorney’s fees and the appointment of a federal monitor.

The trial court dismissed the claims of the Rabbi for lack of standing for want of a sufficient property interest and the failure to distinguish his claims from that of the religious organization. The trial court found that Connecticut’s historic district law was facially neutral and generally applicable and thus none of the plaintiffs as a matter of law could be subject to a “substantial burden” on their religious exercise. The trial court also denied plaintiffs’ discrimination claims for failure to identify a sufficient comparator against which to measure the discrimination alleged. Because Defendant asserted that RLUIPA was unconstitutional, the United States intervened to defend the constitutionality of the act; however, that defense was not raised on appeal.

The Second Circuit concluded that the trial court erred in dismissing the Rabbi’s claims on standing and remanded that case for a determination of the merits of certain of the claims while also affirming a dismissal of the remainder for his failure to brief them. As to the claims of all parties, the Second Circuit concluded that the proceeding before the Historic District Commission resulted in an “individual assessment” of plaintiffs’ land use which was subject to RLUIPA’s substantial burden provisions and that plaintiffs need not show an identical comparator under RLUIPA’s nondiscrimination provisions.

The facts showed that the religious organization spent great sums of money to rent space to fulfill weekly and other religious services to its members and had brought the Litchfrield property, which was located in a historic district and had significant historic components, and thus was subject to the Historic District Commission’s authority for any modification of structures. Plaintiffs’ proposed changes that were significant (a 17,000 sq. foot addition to the existing house, a 5,000 sq. foot residence for the Rabbi and his family, and a new clock tower with a Star of David on top). Defendant divided its review of the project into two pieces – one to deal with the modification of the historic structures and the other to determine whether any denial would place “substantial burden” on plaintiffs’ religious exercise. Plaintiffs continued to modify the proposed design and asserted its need for a larger structure but did not provide certain data, such as the size of its congregation or the number of students that would attend its religious classes. Defendant denied the application, but added that if certain changes were made, the application could be approved. Plaintiffs did not take any administrative appeal but rather filed this suit in Federal District Court.

As to the Rabbi’s standing, the court undertook a de novo review to determine whether the factual allegations of the complaint allows a court to draw a reasonable inference that defendants are liable for the alleged misconduct, drawing all inferences in favor of the non-moving party in reviewing the grant of summary judgment to Defendant.

Turning first to the substantial burden claim of the religious organization, the court looked to whether there were any individualized assessment in the evaluation of the proposed use of property under the town’s land use regulations. If a substantial burden be found, the public agency must show a compelling governmental interest applied in the least restrictive manner. The court noted that if there were no such assessment required, there would be no RLUIPA liability; however, it found such an individualized assessment required under the Connecticut statute and the Litchfield code. The Connecticut statute relating to historic districts necessarily involves application of subjective criteria by the local governments implementing the same. The District Court had found that there were individualized assessments, but also found that RLUIPA was inapplicable because the statutory scheme was of general applicability. In doing so, the trial court erred in applying RLUIPA, particularly its substantial burden provision.

The Second Circuit made an analogy of the substantial burden provision in RLUIPA to the disparate impact analysis used in employment discrimination cases. The court had used such an analysis in Westchester Day School v. Village of Maronek, 504 F3rd 308 (2007). On remand, the trial court was instructed to apply these factors which the court summarized as follows:

whether the conditions attendant to the HDC’s denial of the Chabad’s application themselves imposed a substantial burden on the Chabad’ s religious exercise, whether feasible alternatives existed for the Chabad to exercise its faith, and whether the Chabad reasonably believed it would be permitted to undertake its proposed modifications when it purchased the property at 85 West Street. The district court should also consider, of course, whether the proposed modifications shared a “close nexus” with and would be consistent with accommodating the Chabad’s religious exercise.

As to the equal term’s claims under RLUIPA, plaintiffs bear the initial burden to make a prima facie case of unequal treatment, after which the government bears the burden of persuasion. The court noted a division among Federal Appeals Courts as whether evidence of a secular comparator must be shown to evaluate similarly situated structures of a religious or non-religious nature to religious use and on what grounds the comparison is made. However, the court found it unnecessary to deal with this issue as there was no evidence to establish a prima facie case under any equal terms standard. However, the court said that different treatment by different zoning regimes is not necessarily equivalent to unequal treatment. An HDC decision regarding the Wolcott Library, another secular historical structure in the historic district, under which a permit was granted to make a substantial addition to its historic structure, was done under a different land use scheme and a different land use authority and thus was an insufficient comparator in any event.

As to the non-discrimination claims under RLUIPA, plaintiff again bears the initial burden of proof to establish a prima facie case, after which the government bears the burden of persuasion. The Second Circuit, as a matter of first impression, required intent to target to the religious use and found the United States Supreme Court’s decision in Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520 (1993) pertinent. In that case, the Supreme Court used an equal protection analysis applicable to a religious discrimination claim now used under RLUIPA, looking at both direct and circumstantial evidence of discrimination. Three types of equal protection violations were possible in such case: (1) a facial discrimination; (2) a facially neutral law adopted and applied in a discriminatory manner; and (3) a facially neutral law applied in a discriminatory manner. The trial court erroneously required an identical comparator in lieu of the required “sensitive inquiry” into the direct and circumstantial evidence of intent to discriminate. The trial court thus overlooked that evidence, instead focusing upon an identical comparator. However, RLUIPA’s non-discrimination provisions prohibit facial or as applied discrimination on the basis of religion or religious denomination. The Second Circuit thus remanded this claim to determine whether there was discrimination on the basis of religion in the Historic District proceedings.

The court also determined that the remainder of the religious organization’s claims was waived by failure to brief them adequately. The federal claims were called out and the trial court’s ruling identified, but no more. Two other claims before the trial court were not even raised on appeal.

As to the Rabbi’s claims for standing, the Second Circuit found that a property interest was not required for these claims to be made. The issue is whether a particular statute confers standing, which thus required statutory interpretation. The court concluded that the Rabbi met Article III standing requirements – he and his family proposed to live at the facility, so that denial and the proposed conditions deprived him of the ability to do so – an injury that may be redressed by the court. The case was remanded to allow the trial court to determine whether the Rabbi had standing under RLUIPA and the claims that were made. However, the court affirmed dismissal of most of the Rabbi’s federal and state claims as those claims merely involved assertions made in a conclusorily manner and without record citations, to support the Rabbi’s conclusion that there were “independent constitutional claims” clearly expressed in the complaint. Without more, the claims were waived.

The court also remanded defenses of immunity to the trial court for resolution in the first instance. The trial court decision was thus affirmed in part and remanded in part.

This case demonstrates the necessity of careful pleading of both RLUIPA claims and defenses and the preservation of error. There is no doubt that RLUIPA will be interpreted in a fairly broad manner, but much will depend upon the facts alleged and pleading of adequate facts.

Chabad Lubavitch of Litchfrield County, Inc. v. Litchfield Historic District Commission. United States Court of Appeals, Second Circuit, Case Nos. 12-1057-cv and 12-1495-cv, (September 19, 2014).

An Ill Wind for PURPA: the Fifth Circuit’s Recent Exelon Wind Decision

Wind EnergyThe Public Utility Regulatory Policies Act of 1978, 16 U.S.C. §§ 824a (PURPA), requires utilities to purchase electricity from renewable and other alternative energy facilities (referred to in PURPA as “qualifying facilities” – or “QFs”) at the utilities’ avoided cost.  A recent decision by the U.S. Court of Appeals for the Fifth Circuit, Exelon Wind 1, LLC v. Nelson, No.12-51228 (September 8, 2014), involves a Texas Public Utility Commission regulation (Texas PUC Rule 25.242) adopted in connection with PURPA’s mandatory purchase provision.  A sharply divided three-judge panel ruled that the Texas PUC regulation trumped a conflicting PURPA regulation adopted by the Federal Energy Regulatory Commission, the agency charged by Congress with administration of PURPA.  A petition for rehearing by the full Fifth Circuit has been filed, and Exelon Wind raises important principles of administrative law with potential implications for a broad array of federal regulatory laws in addition to PURPA.

The objective of PURPA’s mandatory purchase provision is to encourage the development of alternative energy sources such as QFs.  The applicable FERC regulation, 18 C.F.R. § 292.304(d), establishes two alternative means to implement the purchase requirement, both of which are at the option of the QF, that is, the seller.  One alternative is for the QF to rely on the spot market and sell its electricity for immediate delivery at the then-current market price (i.e., the buyer’s avoided cost at the time of delivery).  The other alternative is for the QF to enter a contract (the regulation uses the term “legally enforceable obligation”) to deliver electricity over a specified period based on the buyer’s avoided costs at the time of delivery or when the contract is entered.  Texas PUC Rule 25.242, on the other hand, restricts the options that FERC’s regulation provides for the QF.  More specifically, the Texas rule confines the second alternative, supra, only to QFs that sell “firm power,” i.e., power that is available 24/7, which generally excludes wind and solar power QFs.  Since nothing in 18 C.F.R. § 292.304(d) authorizes such a restriction, FERC issued a declaratory order finding that Texas PUC Rule 25.242 contradicts the federal regulation.

The immediate issue in Exelon Wind is whether the Texas PUC’s regulation impermissibly conflicts with the underlying federal regulation, as FERC determined.  Although the Fifth Circuit majority found no conflict, a vigorous dissenting opinion says the majority disregarded the regulation’s plain meaning.  See slip op. at 37-40.  In addition, the dissent concludes (id. at 50) that the majority improperly “minimizes the effect of” FERC’s declaratory order, which the majority characterized as only “an informal guidance document” that is not entitled to judicial deference. See id. at 18. As the dissent emphasizes, “the majority does not provide a good reason to refuse to give controlling weight to FERC’s interpretation of its own regulation,” id. 57, and, as a consequence, “contravenes established principles of interpretation and administrative law and disrupts the scheme that Congress intended.”  Id. at 34.

The majority opinion in Exelon Wind appears to be in tension with Supreme Court precedent that requires agency deference under circumstances similar to those in this recent Fifth Circuit case.  See, e.g., Auer v. Robbins, 519 U.S. 452, 462 (1997); NationsBank of North Carolina, N.A. v. Variable Annuity Life Insurance Co., 513 U.S. 251, 256-57 (1995).  Given the increasing national focus on development of alternative energy, as well as the fundamental principles of federal administrative law that Exelon Wind implicates, future developments in the case will be important to monitor.

The Supreme Court Reviews the “In Writing” Requirement for Cell Towers

Wireless TowerLand use decision making in Oregon is highly structured; many complain that the formal structure delays increases the cost of decision-making.  State law has long mandated that the approval or denial of a land use application must be in writing.   All such written decisions must include written findings of fact, be based on consideration of the applicable standards and criteria, and be supported by substantial evidence in the record. All these requirements find their roots in typical state or federal administrative procedures act.  Failure to comply with these requirements provides a basis for remand of a decision for reconsideration.  This obligation applies to all local governments regardless of population or the number or qualification of local planning staff, from the City of Brooks to Wheeler County.  Although these requirements may make land use decision-making more expensive and time-consuming for those who seek approvals, cases arise every now and again that cause Oregon to appreciate its state land use system.  T-Mobile South, LLC v. City of Roswell, Georgia, currently pending review before the U.S. Supreme Court, is such a case.

T-mobile South, LLC (T-mobile) submitted an application to construct a 108–foot cell tower resembling a man-made tree in Roswell, Georgia. The location of the site, though planned inside a vacant lot, would be in an area zoned for single-family residences within a well-established residential neighborhood. Following an outpouring of public opposition to the tower, Roswell’s Planning and Zoning Division recommended that the Mayor and city council, which ultimately approve applications after a public hearing, impose certain conditions before approving the application. Specifically, the Planning and Zoning Division recommended that T-Mobile should relocate the site to another part of the property, erect a fence around the tower, and plant pine trees to shield it from view of area residents.  After a two-hour public hearing, city council members voted to deny the application.

Two days later, Roswell sent T-Mobile a letter notifying the company that the application was denied, without further elaboration, and referred the company to the minutes of the public hearing. T-Mobile sued Roswell and claimed that the city had not provided substantial evidence that would support a denial of the application. T-Mobile also argued that, by prohibiting T-Mobile from building the structure, Roswell violated the Telecommunications Act of 1996 (TCA).   The TCA provides that a state or local government’s denial of “a request to place construct, or modify personal wireless service facilities shall be in writing and supported by substantial evidence contained in a written record.”

The district court did not rule on the substantial evidence question and instead held that Roswell had not met the “in writing” component of the TCA, which required the government to state the reason(s) for denying an application. The district court ordered Roswell to grant the permit, and Roswell appealed. The U.S. Court of Appeals for the Eleventh Circuit held that Roswell had met the “in writing” requirement by issuing a written denial and referring to the minutes of the hearing for the reasoning.  The U.S. Supreme Court granted review, briefs have been filed and oral argument is scheduled for November.

T-Mobile has argued that the “in writing” requirement requires an explanation for the decision considering the approval criteria.  It claims that by not requiring such analysis, applicants will have no other choice but to seek judicial review of decisions to determine the reasons for denial, significantly increasing the costs of providing communications services.  Roswell, along with other amici, representing state and local government groups and the American Planning Association (APA), argued that requiring a detailed analysis for the decision would impose stringent procedural requirements that (1) is not borne out in the plain language of the TCA and (2) imposes significant additional costs on and unreasonably burden the ability of local governments to carry out land use regulation.  According to the APA amicus brief, although zoning and land use personnel is not a specifically identified category, census data from 2012 reveals that 71% of municipalities do not have a single full-time paid employee to handle “other government administration,” including land use, and others in that group 33% have no more than one part-time paid employee.  Finally, the amici argue that if the City erred in not providing a more detailed explanation of its decision, the remedy was a remand and not a reversal giving approval for tower siting without any local government review.

Even though Oregon has been requiring an explanation for individualized land use decisions for years, that would be a big step for the rest of the country.  Even the APA hopes that the US Supreme Court’s analysis sticks with the more banal principles of statutory construction.  After all, other parts to the TCA specifically require a more detailed writing including decisions by the Federal Communications Commissions that must “state that basis for its approval or denial.”  Such differences in language choices are typically deemed deliberate.  The Court should not conclude that local government planners are not equipped to handle the burdens imposed by explaining a decision in writing.  Certainly, if the Court were to survey whether local government staffers make written decisions analyzing the criteria based on the facts, Oregon’s local governments, even with a skeleton crew, have been doing this for years, for which the State and its citizens may be truly grateful.

Housing Land Advocates Conference – Equity in Form and Function: Recent Trends in Housing Policy

Jennifer Baragar, Garvey Schubert Barer

Garvey Schubert Barer is pleased to sponsor Housing Land Advocates’ Conference – Equity in Form and Function: Recent Trends in Housing Policy on November 7, 2014. Ed Sullivan and Jennifer Bragar will be featured speakers, and will be joined by other experts from across the nation. Join us for a 10th Anniversary Celebration of Housing Land Advocates’ work!

November 7, 2014, Ed Sullivan and Jennifer Bragar, will present during the Housing Land Advocates Conference on at David Evans and Associates, 2100 Southwest River Parkway, Portland, OR 97201.

See below for more details and links to conference registration, or learn more at www.housinglandadvocates.org.

Housing Land Advocates

Equity in Form and Function: Recent Trends in Housing Policy
Cosponsored by: Housing Land Advocates, Garvey Schubert Barer, and David Evans and Associates

Housing features prominently in the public discourse of 2014. The tiny house movement is gaining popularity with DIY builders, private developers are racing to complete micro-apartments, and democratically run self-help homeless communities are are seeking recognition along the West Coast. This year’s Housing Land Advocates (HLA) conference continues these conversations but with a focus on the geography of equity. It asks how emerging housing forms can be used to further affordable and fair housing. It emphasizes the function of housing as a means of accessing opportunity. To this end, the conference offers an analysis of the U.S. Department of Housing and Urban Development’s new regulations around affirmatively furthering fair housing and updates participants on the legal landscape of inclusionary zoning that is being tested by California Building Industry Association v. City of San Jose. HLA is bringing together national, regional and local experts to explore these concepts and issues and to consider ways to support a community vision that does not leave anyone behind.

Keynote Speaker: Marc Brenman
Teacher, author and policy expert on issues of diversity, equal opportunity employment and social justice, Mr. Brenman previously worked as the Executive Director of the Washington State Human Rights Commission, Senior Policy Advisor at the U.S. Department of Transportation, and Division Director for the Office of Civil Rights at the U.S. Department of Education.

Conference Schedule
9:00am Welcome from HLA President Jennifer Bragar
9:15am Affirmatively Furthering Fair Housing: Proposed Regulations and Actions to Consider
9:45am Inclusionary Zoning: Legal Developments
10:30am Morning Panel – Housing Affordability & Neighborhood Change
12:00pm Lunch and Keynote Speaker: Marc Brenman – Title VI Transportation Planning and Fair Housing
1:00pm Organized Networking Opportunities
1:30pm Gentrification: A Talk about N/NE Portland
2:00pm Afternoon Panel – There Goes the Neighborhood: Emerging Housing Alternatives
3:30pm Afternoon Panel – Inclusionary Zoning: Threats and Opportunities

AICP and Oregon State Bar CLE credit pending

Conference Location:
David Evans and Associates
2100 Southwest River Parkway, Portland, Oregon 97201

Who We Are:
Housing Land Advocates was formed in 2004. We are a 501(c)(3) charitable corporation, and pursue our work as an entirely volunteer-run and -operated organization. We advocate for land use policies and practices that ensure an adequate and appropriate supply of affordable housing for all Oregonians.

Online Registration

Paper Registration Form & Instructions available on Housing Land Advocates website

Visit the website: http://housinglandadvocates.org/ for updates on conference speakers and registration information.  Contact HLA at info@housinglandadvocates.org for conference sponsorship opportunities.

 

CALIFORNIA APPELLATE COURT FINDS NO DISCRETIONARY IMMUNITY FOR INFORMAL DESIGN APPROVAL OF PUBLIC WORKS

Motocyclist on country roadMartinez v. County of Ventura, 2014 WL 1372028 (Cal. App.) was a personal injury suit over an accident involving plaintiff motorcyclist who was injured when he struck an asphalt berm abutting a raised drain on a county road. The drain system used a heavy steel cover eight to ten inches off the ground with a sloped asphalt berm to channel water into the drain. Defendant County, which managed the road, responded with, among other things, a design immunity defense but brought forth no evidence of any engineering design plans. The County’s road maintenance engineer testified that he “probably” approved the design and there was no other testimony regarding design or engineering. The maintenance engineer was not a licensed engineer and there was no testimony or evidence to show any scientific of engineering analysis for the subject public work – in fact, testimony was that such works were designed “in the field,” and evolved based on practical experience rather than professional design. Plaintiff appealed a verdict favorable to Defendant County based on design immunity.

Plaintiff’s appeal was predicated on insufficient evidence to support the immunity defense. In reviewing a jury verdict, the Court looked only to whether there was substantial evidence to support the same. The Court set out the applicable law as follows:

[California public entity tort law] provides that public entity is liable for injury proximately caused by a dangerous condition of its property if the dangerous condition created a reasonably foreseeable risk of the kind of injury sustained, and the public entity had actual or constructive notice of the condition a sufficient time before the injury to have taken preventative measures. A public entity may avoid liability for a proven dangerous condition of its property by proving the affirmative defense of “design immunity.” * * *

The Court added that the purpose of design immunity was to prevent a jury from second guessing a local entity’s design or engineering judgment where reasonable people may differ. Under California case law, discretionary design immunity involves three elements:
1. Approval of a plan or design prior to construction;
2. A causal relationship between the plan or design and the accident; and
3. Substantial evidence supporting the reasonableness of the plan or design.

All three elements must be planned and proved by a defendant public entity.

In this case, the Court focused on the discretionary approval criterion as Plaintiff alleged there was no exercise of discretion involved in this case. The evidence showed no previously approved design or plan for the drainage system. Moreover, there was no approval of the project by anyone in the County system having discretionary immunity. The maintenance engineer did not have authority either by virtue of his position or by delegation.

Finally, the Court rejected the County’s contention that the use of this drainage plan in practice for 25-years constituted discretionary approval, as it had no basis in precedent and, in the Court’s view, would greatly expand this branch of immunity beyond what the legislature had authorized. In the absence of such immunity, a public entity is liable for reasonably foreseeable injuries proximately caused by a dangerous condition of its property. The immunity was designed to prevent second guessing decisions by engineers or design professionals exercising their discretion. The record fails to show that the claimed immunity has a basis in fact. Accordingly, the jury verdict was remanded to consider other issues raised by the County but not reached.

Oregon, like California, recognized discretionary immunity to prevent second guessing professional decisions. This case demonstrates the limits of such discretion.

Martinez v. County of Ventura, 2014 WL 1372028 (Cal. App.)

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