By Glen Hansen

In Hashalom v. City of Santa Monica (No. B212733, November 22, 2010) 2010 Cal.App. LEXIS 1990, the Court of Appeal for the Second Appellate District held that an apartment complex did not fall within a statutory exemption from historic preservation provided by Government Code section 37361, subdivision (c), because the property had always been a commercial enterprise, both when the current owner purchased it and when the same owner later sought the exemption.

The Teriton Apartments in the City of Santa Monica, constructed in 1949–1950, consist of a 28-unit, rent-controlled garden-style apartment complex in a single two- and three-story structure, arranged in a pinwheel or serpentine plan around landscaped courtyards. The owner of the property filed an application with the City to demolish the building on the complex and construct a new building. When the application triggered review by a City agency of the issue of historical preservation, the owner withdrew the application and reformed itself into a not-for-profit religious corporation. The owner then restated its intention to demolish and rebuild the building. The owner also stated that it planned to use the property to house Jewish refugees from Iran and Iraq, but it refused to answer questions as to whether it was operating as a synagogue. The owner then submitted a notice of exemption from the City’s landmarks ordinance pursuant to Government Code section 37361. Nevertheless, the City designated the complex as a landmark parcel. The owner then filed a petition for writ of mandate, seeking an order compelling the City to set aside its designation, on the ground that the property was “noncommercial” and qualified for the statutory exemption from historical preservation in section 37361, subdivision (c). The trial court disagreed and denied the petition. The Court of Appeal affirmed.

The Court of Appeal explained that to be “noncommercial” under the exemption in section 37361, subdivision (c), a property’s use must be related to the religious-entity owner’s fulfillment of its religious mission but not for profit making. The noncommercial use must predate the landmark designation and the exemption application. Here, the Court held that the Teriton Apartments did not qualify for the exemption in section 37361, subdivision (c), because the property had been a commercial and for-profit apartment building since it was built; because the property had never been used for a religious entity’s mission and has never been a nonprofit concern; because the owner had no religious purpose either at the time it purchased the property or when it initially sought to demolish the building; and because after the owner was reformed as a religious corporation, the owner was no more than a landlord of a conventional, commercial rent-controlled apartment building having no purpose related to any religious mission.

The Court explained that its holding—that “noncommercial” use must predate the exemption application—is intended to avoid two kinds of manipulation by property owners: First, without this rule, a nonsectarian owner could thwart a designation merely by incorporating as a religious association and declaring an exemption on its commercial property. Second, if this rule did not exist, a religious entity could trump the historic preservation scheme by purchasing a landmark and later declaring the exemption so as to demolish the landmark and erect a commercial building for financial advantage. The Court noted: “Under either scenario, the exemption would eviscerate the historic preservation statutes.”

Glen C. Hansen is a senior associate at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP 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.