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"Building Industry Prevails in San Juan Capistrano Moratorium Litigation"

Builder and Developer
By: John P. Erskine

In a landmark decision that could aid homebuilders and property owners across California, a State Court of Appeal unanimously ruled in June that cities cannot impose moratoria on processing of development applications.
The Fourth District Court of Appeal decided on June 17, 1999 in Building Industry Legal Defense Foundation v. San Juan Capistrano that Concorde Development Co. had been unlawfully denied processing of its Whispering Hills project applications due to a moratorium adopted by the San Juan Capistrano City Council on June 16, 1998. The Building Industry Legal Defense Foundation and Concorde, which our firm represented, filed a petition for writ of mandate alleging that the City's moratorium was in violation of state law. The petition further alleged that while the City's stated purpose in adopting the moratorium was to ostensibly update its General Plan, the June 1998 Urgency Ordinance was initiated by the City in April 1998 immediately after vociferous opposition arose to Concorde's 356 lot development.
Government Code section 65858 allows a city to adopt an interim ordinance (moratorium) that prohibits any uses which may be in conflict with a general or specific plan under consideration by the city. However, before a city can adopt a moratorium, it must make a finding that the approval of additional subdivisions, building permits, or other entitlements would result in a "current and immediate threat to the public health, safety, or welfare." Since Concorde's petition only sought the ability to formally process entitlement applications and environmental documentation through the City's public review process, and no approval or use was pending or imminent, the City could not and did not make such a finding of "current and immediate threat to the public health, safety or welfare."
The specific issue raised in Building Industry Legal Defense Foundation v. City of San Juan Capistrano was whether, given the express language of section 65858, a city may adopt an interim ordinance that prohibits the mere processing of development applications. The Court of Appeal held, under the plain language of the statute, that the answer is no. Since processing of development applications does not guarantee legislative approval of such applications, even in the most developer friendly jurisdictions, no approval was imminent.
The unanimous opinion of the Court, written by Presiding Justice Sills, rejected the City's argument that the Court should pay judicial deference to the broad police powers of the City and that San Juan Capistrano was within its legislative authority to impose the moratorium on processing of development applications.
The Court stated that "the power to establish uses does not include the power to fix procedures for processing development applications." Looking to the development processing procedures set forth in the Subdivision Map Act (Gov. Code section 66410 et seq.), the Court analyzes the applicability of such procedures to development applications that are under review at the time a moratorium is imposed, and states unequivocally that "A city cannot use an interim ordinance as a backdoor method to modify the rules."
Limiting the reach of an interim ordinance establishing a moratorium to those situations where actual approval of an entitlement for use is imminent is consistent with the purpose of interim controls, according to the Court. Moreover, as Justice Sills notes in the decision: "Although the Legislature [in enacting Government Code section 65858] could have tied adoption of an interim ordinance to the submission or processing of a development application, it chose to set the bar higher, restricting its application to situations where an approval of an entitlement of use was imminent."
The Court's ultimate conclusion that Government Code section 65858 does not permit a city to prohibit the formal processing of development applications and declaration that the City of San Juan Capistrano's interim ordinance is invalid insofar as it prohibits processing of Concorde's (or any other affected property owner's) development applications, is a direct and unassailable application of the statute to the City's interim ordinance.
According to Nick Cammarota, General Counsel of CBIA, the improper adoption of "processing" moratoria has been an all too frequent occurrence throughout California in the recent past, and the case will, in his opinion, be an important precedent governing land use planning throughout the state.
This appellate decision has broad implications for California developers as they attempt to entitle new housing projects under the myriad planning, zoning and environmental laws created by the State Legislature over the last 25 years. The Building Industry Legal Defense Foundation v. City of San Juan Capistrano decision should have a deterrent effect on overzealous government action utilizing "urgency ordinances" to target unpopular development projects.
John P. Erskine is a partner in the Irvine office of Nossaman, Guthner, Knox & Elliott , and together with litigation partner, Robert I. McMurry, represented Concorde Development and the Building Industry Legal Defense Foundation in the case.
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