CA App. Court Holds City May Enforce Its Inclusionary Housing Ordinance as a Condition of the Use Permit despite Ordinance Being Preempted by Rental Housing Act

Defendant 1080 Delaware, LLC, the owner of a mixed-use residential rental project in Berkeley, appeals from a judgment compelling it to comply with a condition in the use permit for the project requiring compliance with the inclusionary housing ordinance of the City of Berkeley. Defendant contends the City may not enforce the condition, included in the use permit obtained by former owners of the property, because the ordinance has subsequently been preempted by the Costa–Hawkins Rental Housing Act. Because there was no dispute with the contention that the ordinance itself is now unenforceable, the issue is whether the City may enforce condition 10 of the use permit, which requires compliance with the ordinance, even though subsequent to issuance of the use permit the ordinance was held to have been preempted. Here, it is undisputed that 1080 Delaware did not file any action challenging Berkeley Municipal Code § 23C.12 within three years of the enactment of the Costa–Hawkins Rental Housing Act in 1996. Thus, due to the failure to timely challenge the use permit, condition 10 of the permit remains enforceable despite the subsequent determination that the ordinance has been preempted. The conditions of the permit remained enforceable against a subsequent owner of the property because Delaware’s predecessors in interest waived their right to challenge the permits. 1080 Delaware obtained the property in question with the same limitations and restrictions which bound its predecessors in interest, and waived, by its purchase of deed-restricted lots, any right to a property interest greater than that conveyed by their predecessors in interest. If the Regulatory Agreement entered by Adeli is no longer in effect, then under the terms of the ordinance and the trial court’s judgment, 1080 Delaware must itself specify the units that it will lease at below market rates. Because the second cause of action alleging a breach of the Regulatory Agreement was dismissed, the court found that there was no impediment to the entry of final judgment determining that 1080 Delaware is bound by and must comply with condition 10 of the use permit. Berkeley v 1080 Delaware, LLC, 2015 WL 403885 (Ca. App. Div. 3 unrep. 1/30/2015) The opinion can be accessed at: http://www.courts.ca.gov/opinions/nonpub/A142162.PDF