What COVID-19 Means For Calif. Real Estate And Use Permits

By Stephanie Smith and Avneet Sidhu
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Law360 (April 1, 2020, 4:12 PM EDT) --
Stephanie Smith
Stephanie Smith
Avneet Sidhu
Avneet Sidhu
As everyone is adjusting to comply with California Gov. Gavin Newsom's recent order to stay in place, we have compiled a list of frequently asked questions on how the coronavirus and the resulting slowdown of the world as we know it will affect real estate transactions, development projects and standard operating procedure for ongoing businesses.

The following list of questions and answers is intended to help preempt timing issues or guide you towards a solution if project deadlines have already been impacted. 

For Projects Pending Approval

The city has closed all public buildings; can I still submit an application for a permit or project?

Many cities have closed their public buildings to the public. However, most public agency staff are still working remotely and working hard to continue accommodating project applicants. We recommend contacting your agency directly to learn how best to submit your application or to have an informational meeting, often required before submitting an application.

Moreover, the state included many government and construction workers, and specifically, "Workers to ensure continuity of building functions" as essential services that may remain open.[1] So while cities and counties may be choosing more stringent rules, they can choose to open under the California's most recent guidance.

If the agency fails to act within the 30-day deadline under the Permit Streamlining Act, is my development project application deemed approved?

Under the Permit Streamlining Act, an agency has 30 days after an application is submitted to inform the applicant of whether the application is complete. If the agency does not act within this time, the application will be deemed complete even if the application is deficient.

However, the Permit Streamlining Act is not self-executing and is nuanced for project applications that are undergoing environmental review pursuant to the California Environmental Quality Act. For example, public notice is required for any project to be deemed approved. While it may not be a clear-cut victory to get approval under the Permit Streamlining Act, invoking the act may push your project application ahead faster than others in what is likely to be a bottle neck of projects pending future hearing and decisions.

I am worried funding will dry up if my project does not get to a public hearing next month. Is there an alternate way to get project approval other than at a traditional public hearing?

Public agencies may choose to hold their meetings telephonically or virtually thanks to the loosening of regulations during this time by Newsom's order N-25-20. Pursuant to EO N-25-20, the statutory requirements for council or board members to be physically present at public meetings has been waived during the COVID-19 emergency order.

However, EO N-25-20 still requires noticing of the meeting in at least one publicly accessible location. Moreover, state and local bodies are required to use sound discretion and to make reasonable efforts to adhere as closely as reasonably possible to the provisions of the state and local laws regulating the conduct of public meetings in order to maximize transparency and provide the public access to their meetings.

So, while the physical presence requirements have been waived or modified, beyond noticing requirements, agencies are also coming up with ways to allow for public comment during a meeting whether telephonically or virtually, in advance or simultaneously. How this will look to ensure everyone can comment, even those without access to the internet, is still evolving and will differ by the legislative body holding the meeting. This may take some agencies weeks to work out the kinks and ensure legal compliance with the Brown Act.

Several local cities have made these changes, such as San Marcos and Carlsbad.

For Approved Projects or Development Agreements

My tentative parcel map is about to expire, what can I do?

It is too soon to report if any public agencies are granting extensions in response to COVID-19. The state may decide, legislatively, to issue an extension on all tentative parcel maps similar to the extensions granted in 2011, 2009 and 2008 due to the Great Recession. Absent any such automatic extensions, the deadlines are strict. Therefore, you may want to consult with your attorney to discuss options under state law and local ordinances to file an application to extend a tentative parcel map that is about to expire.

I have entered into a number of contracts to assemble land, design the project or begin construction and no one is working. Are contract deadlines, time-of the-essence and escalation clauses enforceable?

Some contracts have provisions that allow for extensions or relief in the act of natural disasters, acts of God or even pandemics.

Based on the most recent guidance from the state, most construction workers are not subject to the stay at home order under the stay-in-place EO.[2] The state updated its essential function list to provide additional guidance of essential services to include "Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction)."

Nonetheless, businesses may have policies in place that requires workers to stay home or workers may not be able to work if they are impacted by COVID-19.

The other sector that may be impacted are various real estate professionals. We did not see these professionals explicitly called out as essential services that can continue in the March 19 update by the state to essential services. In the stay-in-place EO, the governor left open the opportunity in the future to "designate additional sectors as critical in order to protect the health and well-being of all Californians."[3]

Realtors, mortgage brokers and title officers have issued letters to the governor requesting that they be designated as essential services that can stay open during this time. The California Association of Realtors has also set up a useful web page[4] to provide updates and respond to frequently asked questions regarding the current health situation.

The bottom line is that the contract controls, so review your contract, e.g., purchase-and-sale contract, lease, loan document, etc. to review if and how timelines, extensions and legal concepts such as temporary impossibility or frustration of purpose can impact or save, your specific project.

My project is complete but I can't start selling or operating until I get a certificate of occupancy and the city is not conducting building inspections. Are they required to continue conducting inspections since this is an emergency?

The state has designated "Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction)" to be essential services that can continue to work.[5]

However, cities and counties throughout the state may have more restrictive requirements. You should first check if the agency has adopted a proclamation of local emergency due to COVID-19 in the particular city or county you are working in.

For Existing Businesses That Need to Modify or Need Emergency Funding

Do I need to apply for a temporary permit or other permit to convert my restaurant to a drive-thru or curbside delivery operation while dine-in restaurants are required to close?

Whether or not a permit is required to operate your restaurant, bar, winery, or other eating establishing as a drive-thru or curbside delivery operation (i.e., delivering food, beverage, and goods directly to a vehicle) will depend on the city or county's zoning use requirements.

If you have a use permit, such as a major or minor use permit or conditional use permit to operate, you should also review the permit to see what limitations or conditions, if any, are imposed. Some can be amended through a ministerial process, by the director or planning manager, others may require consideration at a public hearing.

We also recommend you check with your local city or county to see if they have adopted a proclamation for a local emergency during the COVID-19 pandemic. Those that have may allow temporary operations during this time even if zoning limits said uses.

What emergency funding measures are available?

TRecently , the federal government approved an $8.3 billion package[6] providing funds for research, public health programming and small business loans,[7] among other things.

Congress also adopted H.R. 6201,[8] the Families First Coronavirus Response Act, which among other things, directs employers to provide expanded family medical leave and paid sick leave with some exceptions (businesses with over 500 employees, and businesses with under 50 employees).

Congress also passed a $2 trillion economic stabilization package late last week.

California recently adopted two measures that appropriated $500 million to provide emergency relief and resources needed for the immediate response and mitigation of the effects of COVID-19. This funding will also ensure that public schools continue to receive funding from the state, despite physical closure.

Cities are also providing some relief measures. For example, San Diego's mayor announced directives around small business relief, including $4 million in grants and loans to support small businesses, that will be a part of a larger business continuation fund.

Per the governor's formal state of emergency declaration,[9] California's provision against price gouging is in effect which could provide protection for the construction industry trying to secure depleted supplies during this time.

Does the government have the right to commandeer my hotel or other commercial building?

Under the California Emergency Services Act, the governor is authorized to commandeer or use any private property or personnel deemed necessary in the exercise of emergency powers during a state of war or state of emergency.

EO N-25-20 did just that, giving state agency's the power to enter into contracts or agreements to commandeer the use hotels, and other places of temporary residences or facilities for quarantining, isolating or treating individuals who test positive for COVID-19 or who have had a high-risk exposure and are thought to be in the incubation period.

If the state is seeking to commandeer your hotel, you should work with your attorney to negotiate terms of the contract and compensation to be paid.

Stephanie Smith and Avneet Sidhu are partners at Grid Legal LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

‍[1] (see, the State's Essential Critical Infrastructure Workers, "Other Community-Based Government Operations and Essential Functions", pages 10 - 11).

[2] See Page 11, Other Community-Based Government Operations And Essential Functions.

[3] (Stay in Place EO).

[4] https://www.carcovidupdates.org/.

[5] See the list of Essential Critical Infrastructure Workers at https://covid19.ca.gov/img/EssentialCriticalInfrastructureWorkers.pdf.

[6] https://markets.businessinsider.com/news/stocks/trump-signs-billion-emergency-funding-package-fight-coronavirus-legislation-covid19-020-3-1028972206.

[7] https://www.sba.gov/funding-programs/disaster-assistance.

[8] https://www.congress.gov/bill/116th-congress/house-bill/6201.

[9] https://www.oag.ca.gov/news/press-releases/attorney-general-becerra-issues-consumer-alert-price-gouging-following-statewide.

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