Most real estate developers would likely agree that, even when correctly applied and complied with, CEQA can be an onerous law which can significantly complicate, delay, increase the cost of, and in some cases (particularly where CEQA litigation is involved) even preclude projects.  But what recourse does a project applicant have under the law when CEQA is misapplied – and blatantly so – by a local agency which denies approval of a project that is clearly exempt from CEQA on the meritless basis that extensive (and expensive) CEQA review is required?  When the developer’s only recourse is time-consuming and expensive litigation to obtain a writ of mandate setting aside the agency’s illegal action subjecting the project to CEQA, can the developer who succeeds in obtaining the writ recover from the public agency compensation and damages resulting from the temporary “taking” of all reasonable economic use of its property?

The California Supreme Court may – and hopefully will – enlighten the CEQA and land use bar with answers to these important questions as a result of its December 19, 2018 grant of review (Case No. S252217) of the Fourth District Court of Appeal’s published decision in Bottini v. City of San Diego (2018) 27 Cal.App.5th 281.  My September 28, 2018 post on that decision, which summarizes the City Council’s legal errors in voting to subject a coastal development permit (CDP) application for construction of one single family home on a vacant La Jolla lot to CEQA review, can be found here.

That the City egregiously erred in applying CEQA no longer appears to be at issue, as the Bottinis’ petition for review raised only regulatory taking issues arising from the courts’ rejection, on summary judgment, of their constitutional claim for inverse condemnation and damages.  The Supreme Court’s grant of review expressly “includes the following issue:  Does the “substantially advances” formula used in Landgate, Inc. v. California Coastal Com’n (1998) 17 Cal.4th 1006 or the Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104 test (see Lingle v. Chevron U.S.A. Inc. (2005) 544 U.S. 528) determine whether there has been a regulatory taking under the California Constitution?”  Chief Justice Cantil-Sakauye, and Associate Justices Chin, Corrigan, Liu, Cuellar, and Kruger all voted to grant review.

This important case may be somewhat of a “sleeper” in that the stated issue does not necessarily define or limit the specific issues the high Court will likely address; moreover, it appears rather obvious (to me, at least) both that federal law sets a minimum constitutional “floor” for regulatory takings and protection of property rights that state courts must respect, and that the “substantially advances” due process test is plainly irrelevant to any taking analysis after Lingle.  More intriguing than its ostensible intent to resolve these seemingly straightforward issues is the possibility that the Supreme Court will go further and use the case to resolve other taking issues, and as a vehicle to overrule and rectify other troublesome holdings and reasoning in Landgate – which, in my view, was one of the Court’s worst land use decisions ever.

One such possibility, suggested by the Bottinis’ petition for review briefing, is that the Court could adopt the “bright-line test” from Justice Chin’s Landgate dissent, which would have held that where “a regulatory agency prohibits all use of a particular property, and the property owner is forced to sue the agency to get it to change its position, its stonewalling is not fairly characterized as a ‘normal delay’ in the permit approval process” (Landgate, supra, 17 Cal.4th at 1032-1033), and further that such action automatically results in a temporary taking entitling the owner to compensation for the period the invalid regulation was in effect.  (Id.)

Another issue the high court may tackle is at what point in time a taking claimant must demonstrate reasonable and distinct investment-backed expectations to prevail – i.e., at the time the property is acquired, or at the time the invalid regulation takes effect?  In Bottini, for example, the plaintiffs did not have any reasonable investment-backed expectation at the time they purchased a lot with a potentially historic cottage on it that demolishing the existing cottage and/or constructing a new house would be exempt from CEQA.  But they clearly were justified in such an expectation as to construction of a new single-family residence after the old cottage was determined to be non-historic and a public nuisance and was demolished pursuant to a ministerial permit issued by the City, thus leaving the only project properly under consideration for approval by the City the proposed construction of a single family home on a vacant residential lot.

In cases like Bottini, where the project (there, a single-family home) fits squarely within a CEQA exemption, and no substantial evidence supports the agency’s claim that an exception applies, I agree with Justice Chin’s Landgate dissent – there should be a taking remedy for a property owner that is forced to sue to remedy an agency’s patently illegal regulatory overreach so as to be able to use the property.  Perhaps our Supreme Court will see the light this time and provide one.  Bottinis’ opening brief is due March 4, 2019.  Stay tuned.

Questions? Please contact Arthur F. Coon of Miller Starr Regalia. Miller Starr Regalia has had a well-established reputation as a leading real estate law firm for more than fifty years. For nearly all that time, the firm also has written Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. The firm has expertise in all real property matters, including full-service litigation and dispute resolution services, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, title insurance, environmental law and land use. For more information, visit www.msrlegal.com.