Developer Must Challenge City’s Below Market Rate Housing Requirement Within 90 Days

In Trinity Park, L.P. v. City of Sunnyvale, (— Cal.Rptr.3d —-, Cal.App. 6 Dist., March 24, 2011), a court of appeal considered whether a trial court properly dismissed a developer’s challenge to a city’s below market rate housing requirement. The court of appeal held the lawsuit was properly dismissed because the developer failed to challenge the requirement within the 90 day statute of limitations period under the Subdivision Map Act. The court rejected the developer’s argument that it could challenge the requirement within the much longer time period allowed under the Mitigation Fee Act.

Facts

Classic Communities, Inc., and Trinity Park, L.P. (collectively, “Trinity”), sought to develop a residential housing project in the City of Sunnyvale (“City”). Trinity filed an application for rezoning, a special development permit to allow it to build 42 single family homes, and a tentative map that subdivided four lots into one common lot and 42 individual lots. In 2007, City approved Trinity’s application. However, City conditioned its approval of the application on the condition that the resulting subdivision, known as Trinity Park, comply with City’s below market housing ordinance.

City adopted the below market housing ordinance in 1980. The ordinance provides that twelve and one-half percent of the total number of dwelling units in a development must be maintained as below market rate units. If a development will only contain between nine and nineteen units, a developer may pay an “in-lieu fee.” If a residential development provides at least 10 percent of its units as below market rate units, it “is entitled to priority processing of required city approvals.”

Trinity and City entered into a “Below Market Rate Developer Agreement” in 2008, which required Trinity to sell five houses at below market purchase prices. The agreement required that Trinity first offer the below market rate units for sale to City or its designees. The completion date for the five houses was estimated to be June 30, 2009.

In August 2009, Trinity sent City a letter stating that it was objecting to the below market rate housing requirements and that it was providing notice pursuant to Government Code “sections 66020 and 66021, that any contracts to sell houses in Trinity Park for less than market value ‘should be deemed to be executed or submitted, and continue to be executed and submitted, under protest and subject to full reservation of rights to seek relief therefrom.'” In December 2009, Trinity filed a lawsuit against City alleging that “City’s below market rate ‘housing policies’ and ‘[below market rate] exactions’ were unlawful.” The trial court found that Trinity’s lawsuit was barred by the statute of limitations.

Decision

The court of appeal held that the trial court properly found that Trinity’s lawsuit was barred by the statute of limitations. The court of appeal rejected Trinity’s argument that the below market rate (“BMR”) requirements were “exactions” and thus subject to a 180-day limitations period.

Government Code section 66499.37 provides the statute of limitations applicable to the Subdivision Map Act. Section 66499.37 provides, an action to challenge a “decision of an advisory agency, appeal board, or legislative body concerning a subdivision . . . or validity of any condition attached thereto . . . shall not be maintained by any person unless the action or proceeding is commenced and service of summons effected within 90 days after the date of the decision.” After 90 days “all persons are barred from any action or proceeding or any defense of invalidity or unreasonableness of the decision or of the proceedings, acts, or determinations.”

The California Supreme Court has interpreted section 66499.37 as manifesting “a legislative purpose that a decision . . . approving a subdivision map and attaching a condition thereto, shall be judicially attacked within [the limitation period of section 66499.37], or not at all.” Challenges “to local legislative or administrative acts or decisions taken pursuant to ordinances enacted under the authority of the Subdivision Map Act” are also subject to the 90-day statute of limitations. This section applies to any action arising under the Subdivision Map Act.

Pursuant to Government Code section 65009, subdivision (c)(1)(E), a person may not maintain an action “to determine the reasonableness, legality, or validity of any condition attached to a variance, conditional use permit, or any other permit” unless the person commences the action “and service is made on the legislative body within 90 days after the legislative body’s decision.” Section 65009 establishes a 90-day statute of limitations for several types of actions including “the grant, denial, or imposition of conditions on a variance or permit.”

Trinity argued the preceding two statute of limitations provisions were not applicable because the BMR requirements amounted to an “exaction.” The Mitigation Fee Act sets out the “procedures for protesting the imposition of fees and other monetary exactions imposed on a development by a local agency.” Government Code section 66021 provides a protest of a “fee, tax, assessment, dedication, reservation or exaction” may be made by (1) tendering payment or providing evidence of arrangements to pay the fee, and (2) serving notice on the governing body. The notice must provide that payment is or will be tendered under protest and must contain a statement informing the governing body of the factual elements of the dispute and the legal theory for the protest. Pursuant to Government Code section 66020, subdivision (d), a protest must be made within 90 days after the imposition of the fee, dedication, reservation, or exaction and any party who files a protest may file an action to protest the imposition of the fee, dedication, reservation, or exaction within 180 days after it delivers notice on the governing body.

A local agency “must give project applicants written notice of the fee amount indicating that they have 90 days to protest it.” Any “party who files a protest may then file an action attacking the imposition of the fees within 180 days after delivery of the local agency’s notice.” Trinity claims City failed to provide it notice of the 90-day protest period and therefore the 180 day limitations period “has not begun to run.” Therefore, Trinity asserts its complaint was timely filed in December 2009.
The court of appeal rejected Trinity’s argument that the BMR requirement was an exaction. It noted the term exaction is not defined in sections 66020 or 66021, or any other provision of the Mitigation Fee Act. The court, however, found “statutory language indicating that an ‘exaction’ within the meaning of sections 66020 and 66021 is an exaction that is (1) imposed by a local agency as a condition of approval of a development project; and (2) for the purpose of ‘defraying all or a portion of the cost of public facilities related to the development project.’” The court further found that “the Legislature intended the 180-day limitations period provided by section 66020, subdivision (d)(2) to apply to an exaction imposed for the purpose of ‘defraying all or a portion of the cost of public facilities related to the development project.’” The court held that the BMR requirement does not constitute an exaction because its purpose is to enhance public welfare by increasing the number of residential units affordable to very low, low, and moderate income households. The BMR requirement is not intended to defray the cost of public facilities related to Trinity Park.

Instead, the court of appeal found Trinity’s action against City is time barred under both section 66499.37 and section 65009, subdivision (c)(1)(E). At the center of Trinity’s complaint is its challenge to the BMR requirement “as a condition of subdivision approval and the issuance of development permits, and a request for relief from the below market housing condition.” Because on the face of its complaint, Trinity challenges City’s decision to impose the BMR requirement on Trinity Park as a condition of obtaining City’s approval of the development, the court found that section 66499.37 contains a statute of limitations period applicable to City’s claim. The 90-day limitations period in section 66499.37 begins to run from the date of the decision that is being challenged. The date of the decision here “is not later than April 17, 2008, the date of recording of the “Below Market Rate Developer Agreement.” Therefore, the court found that Trinity’s complaint, filed on December 17, 2009, was not timely filed because it was not filed within 90 days of April 17, 2008.

The court further found that the complaint was also untimely under section 65009, subdivision (c)(1)(E), which required Trinity to file its complaint within 90 days after City’s decision to impose the BMR requirement, which occurred no later than April 17, 2008, the date of recording for the agreement between Trinity and City. Accordingly, the court of appeal affirmed the trial court’s dismissal of Trinity’s complaint as untimely.

Questions

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Jeffrey L. Massey | 916.321.4500

Jon E. Goetz | 805.786.4302