The Development Blues: Property Lies Undeveloped for 30 Years and Counting

By Cori M. Badgley and Kate J. Hart

In an attempt to invalidate or, at a minimum, get damages for the California Coastal Commission’s (“Commission”) denial of a coastal development permit, Charles A. Pratt Construction Co., Inc. (“Pratt”) brought suit against the Commission, claiming that the Commission’s decision violated Pratt’s vested right to develop its property and, in the alternative, if the decision was valid, the Commission committed a regulatory taking by denying the coastal development permit. In Charles A. Pratt Construction Co., Inc. v. California Coastal Commission (2008) 162 Cal.App.4th 1068, the Court of Appeal, Second Appellate District upheld the Commission’s denial of the permit and dismissed Pratt’s regulatory takings claim for lack of ripeness.

The development saga surrounding the Pratt property began over 30 years ago when San Luis Obispo County (“County”) approved Pratt’s tentative subdivision map subject to a number of conditions. The original map broke the property into two units: Unit I and Unit II. Pratt never fulfilled the conditions on the original map, and later, Pratt submitted separate maps for the two units. A final map for Unit I was recorded in 1989. In 1990, Pratt submitted a new vesting tentative subdivision map for Unit II, and in 1999, the County approved the new map and granted Pratt a coastal development permit. A number of governmental agencies, organizations and individuals disagreed with the County’s grant of the coastal development permit and appealed the County’s decision to the California Coastal Commission.

The California Coastal Commission overturned the County’s approval and denied the coastal development permit. Pratt brought suit in superior court, where the court found in favor of the Commission. Pratt appealed.

Pratt’s appeal consisted of three arguments: 1) Unit II was exempt from requiring a coastal development permit because Pratt had a vested right to develop the property; 2) the Commission’s decision was arbitrary and capricious and therefore invalid; and 3) if the Commission’s decision was upheld, the Commission committed a regulatory taking of Unit II by denying the permit.

1.         Vested Rights

As to the first argument, Government Code section 66474.2(a) “requires a local agency to apply only those ordinances, policies and standards in effect on the date the local agency has determined the tentative map application is complete.” This means that the approval of the tentative subdivision map creates a vested right in the developer to develop the property in conformance with the map and the laws in place at the time the map was completed. However, according to the appellate court, Government Code section 66498.6(b) limits Section 66474.2(a). Section 66498.6(b) states:

The rights conferred by this chapter shall relate only to the imposition by local agencies of conditions or requirements created and imposed by local ordinances. Nothing in this chapter removes, diminishes, or affects the obligation of any subdivider to comply with the conditions and requirements of any state or federal laws, regulations, or policies and does not grant local agencies the option to disregard any state or federal laws, regulations, or policies.

The appellate court interpreted Section 66498.6 to mean that Section 66474.2 only applies to local laws. No prior courts have interpreted Sections 66498.6 or 66474.2 in regards to the application of federal and state policies. In this court’s interpretation, the current federal and state laws must be applied to Pratt’s project regardless of when the vesting tentative map was deemed complete.

Relying on the vesting provisions, Pratt argued that the policies applied by the Commission to deny the permit were not in place in 1990, and therefore, Pratt’s tentative map was exempt from those policies. Pratt contended that the Local Coastal Permit (“LCP”) was local law, which meant that subdivision (a) of Section 66474.2 applied and only those provisions of the LCP and the California Coastal Act in place in 1990 could be used to evaluate whether to grant the permit. 

The appellate court disagreed. The court found that the County only had the authority to issue coastal development permits because the Commission delegated its power as a state agency to the County. Since the County was merely exercising state authority granted to it, the LCP and the California Coastal Act fell under the category of state law, not local law. Therefore, the current policies applied to the coastal development permit and not those in place in 1990. The appellate court held that the Commission acted properly in applying the current state policies.

2.         Arbitrary and Capricious

As to the second argument, Pratt contended that the Commission acted arbitrarily and capriciously in denying the permit by “treating the vast bulk of his property as an Environmentally Sensitive Habitat;” using “the County’s generic provision for view protection rather than the LCP;” finding that sufficient water was not available to serve the development; and determining “that no development can occur on the Pratt property until after all the ‘infill’ lots within the [Urban Services Line] have been ‘built out.’” Many of these contentions concerned the Commission’s finding that Pratt could not show a sufficient water source, in spite of the Southern California Water Company’s issuance of a “can and will serve letter.” The court quickly dismissed all of these contentions, finding that the Commission’s decision was supported by substantial evidence and the Commission had properly exercised its discretion in denying the permit. Therefore, the appellate court upheld the Commission’s decision.

3.         Regulatory Taking

As to the third argument, “Pratt contends that if the Commission’s interpretations of the LCP are correct, there is no economically productive use that can be made of its property.” In other words, the Commission has committed a regulatory taking. A regulatory taking occurs when “the regulation deprives the owner of all economically viable use.” If Pratt could prove a regulatory taking, the Commission would be forced to pay Pratt fair market value, or “just compensation,” for the property. Here, 80 percent of Unit II was deemed Environmentally Sensitive Habitat Area, leaving 20 percent or 24-plus acres available for development.

Like the trial court, the appellate court dismissed the claim for lack of ripeness and never reached the merits of the claim. A regulatory taking claim is not ripe “unless ‘the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue.’” The court found that Pratt had not exhausted the ways in which it could develop the property. The mere denial of one coastal development permit did not mean that a permit was forever out of Pratt’s reach. If Pratt had attempted multiple times with multiple different designs to develop its property and the Commission denied Pratt a permit every time, the claim would most likely be ripe. As it was, the appellate court held that the claim was not yet ripe and dismissed the claim.

Conclusion

Pratt attempted every conceivable argument in order to revive its tentative subdivision map, but in the end, the Commission won on every point. All of Pratt’s claims were dismissed, and after 30 years, Unit II remains undeveloped.

The statements made by the court as well as its conclusions concerning vested rights could have substantial implications on future cases. The following are two of the future issues that could be raised by this case:

-         Vesting tentative maps provide assurance to developers that they can budget and move forward with development without uncertainties about what requirements could be imposed in the future. This case and its interpretation of Section 66498.6, if applied broadly in the future, could take some of that assurance away, especially with regards to coastal development. Future courts might limit this case to its specific set of facts, but if they don’t, developers will have to be very careful about discerning which laws and policies are frozen in time by vesting and which are still subject to change.

 

-         Although not discussed in detail in this article, the court in this case spent a lot of time discussing the lack of sufficient water resources and the sad state of the current water resources in the area. The court even went so far as stating that “Pratt cites no authority that the water company’s [“can and will serve” letter] is definitive.” In other words, Pratt needed more evidence that the Southern California Water Company could and would supply water to the development; the Southern California Water Company’s written commitment was not enough. None of the court’s holdings specifically concerned water, but it was definitely on the court’s mind. In recent cases, water has been a major issue and will continue to be in cases to come. A sufficient and supportable water source goes a long way.

Most of all, this case illustrates the old adage: bad facts make bad law. We can only hope that its impact is minimal.

Cori Badgley is an associate with Abbott & Kindermann, LLP, and Kate Hart is a senior associate with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.

 

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