Article Summary
Bureaucracies Will Fight Against Each Other for Power and Authority
Summary:
The seismic shift in California's development approval process has significantly altered the real property building landscape and redefined the power structure for property owners, developers, and local municipalities. This transformation has profound implications, with property owners and developers now facing the daunting task of navigating intricate new laws. At the same time, local municipalities find themselves stripped of authority in property development.
Under the new regulations, the California Legislature holds the ultimate authority in property development approvals. Local municipalities are now limited to granting ministerial approvals that align with state-level mandates. Any objection from the local municipality can trigger legal action and the withholding of state and federal funds.
A new world exists regarding zoning, densities, approvals, and land valuations. The new laws have the potential to significantly impact property valuations, and property owners and developers need to be aware of these changes.
Historically, non-conforming buildings were considered unacceptable for institutional lender requirements. A cash flow analysis did not consider the cash flow from the non-conforming units.
Article:
Consider a property owner who wishes to use a ten-unit apartment building as collateral for a loan, even though the property is officially zoned for six units. This discrepancy can lead to serious legal issues, especially if the additional units were added without building permits.
The mortgage broker said:
My client owns a ten-apartment complex and wants to refinance and withdraw cash for investments. The property is an excellent cash flow vehicle. A typical reference may be a cash cow or an investment producing a steady income or profit stream. Both may be correct.
The competent lender replied:
The lender has thoroughly reviewed this file based on its extensive experience and knowledge. As it stands, the building has six units, four of which are bootlegged. These were created by converting the two-bedroom units into one-bedroom units and adding small bathrooms and kitchenettes. The lender's expertise in such matters is a cornerstone of its guidance, offering reassurance in navigating these complex laws.
Despite their complexity, these new laws offer a glimmer of hope. They encourage multi-tenant high-density residential apartments, even bootlegged ones. This shift in perspective can bring new opportunities and a sense of optimism to property owners and developers, offering a potential silver lining in these changes.
Owners with bootlegged units may or may not be able to obtain permits as conforming. This potential for change is why consulting a real estate entitlements lawyer specializing in navigating complex laws and obtaining necessary permits is crucial. Their expertise can guide and reassure property owners and developers in dealing with these complex laws, giving them a sense of security in their decisions and a hopeful outlook for the future.
However, all stakeholders must stay abreast of the current situation. This knowledge equips them to make informed decisions, even in the face of uncertainty, and to navigate these complex laws, ensuring they remain in control of their property rights.
This dual approach underscores the potential risks and benefits of dealing with non-conforming properties, offering hope in a complex situation.
The definitions of conforming, non-conforming, and legal non-conforming properties have been updated through state mandates and oversight of administrative regulations at the state level. It's crucial to note that local cities can only approve modifications that adhere to state regulations, highlighting the hierarchical nature of these regulations.
However, by transferring decision-making from the local to the state level, the local bureaucrats, who are the local government officials responsible for implementing and enforcing regulations, may resist this change. They may fight to keep their oversight and government jobs, leading to additional frustration when they are informed that they no longer have the right to withhold approvals.