In a case that exists only because of the choices a city made in both application decision-making and litigation, the Second District Court of Appeal held, in Felkay v. City of Santa Barbara, __ Cal.App.5th __ (2021), that multiple applications are not required where the permit denial makes clear that no development of the property would be allowed under any circumstance.
The plaintiff sought to build an approximately 2,800 square-foot single-family residence on an ocean-front flag lot in Santa Barbara. The seaward side of the lot was subject to Santa Barbara Local Coastal Plan Policy 8.2, which prohibits development on a bluff face. City staff concluded that except for Policy 8.2, the project would conform to all applicable zoning and building ordinances. And the inland side of the lot was in an area the City determined does not meet geologic stability safety factors.
City staff recommended that the planning commission approve the application, despite its inconsistency with Policy 8.2, to avoid an unconstitutional taking. The planning commission rejected the permit because it violated Policy 8.2. The landowner then appealed the denial to the city council, which also rejected the option to approve the permit to avoid a taking, and denied the project.
The landowner then filed a petition for writ of administrative mandamus and a complaint for inverse condemnation. The City contended the landowner’s complaint was not ripe because he had not investigated other potential uses of the property, including for agricultural or educational uses or merging the property with an adjoining property of the landowner. The project planner testified as an expert for the City. She testified that “since we have been telling the Applicant all along that development was not allowed on the bluff face for years,” the City would not anticipate that he would return with another proposal to build. When asked whether it was the City’s position that there can be no development on the bluff edge, she replied, “I would say that they received a denial for that, so that’s the case.” The trial court found that there had been a taking and that the landowner was not required to pursue futile applications.
After the court found there had been a taking, it afforded the City the opportunity to either (1) rescind the decision denying the permit, or (2) proceed to jury trial on the amount of damages as just compensation for a permanent taking of the property. The City chose the second option, stating it elected to “treat this matter as a permanent taking of the value of the property and not rescind its Permit denial to constitute a temporary taking.”
After a damages trial, a jury found the City was liable to the landowner for the fair market value of $2.4 million. After judgment, the trial court ordered the City to pay attorney and expert fees of $1 million.
On appeal the City contended that the inverse condemnation claim was not ripe because the landowner did not submit a revised application after the City denied his permit. The general rule is that a claim that the application of government regulations effects a taking of a property interest is not ripe until the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue. In other words, a landowner must have made at least one development proposal that has been thoroughly rejected by land use authorities and have prosecuted at least one meaningful application for a zoning variance, which has been finally denied. But under the “futility exception” to the requirement of a final decision the submission of another development plan is excused if such an application would be an “idle and futile act.” The futility exception relieves a developer from submitting “multiple applications when the manner in which the first application was rejected makes it clear that no project will be approved.”
The Court of Appeal pointed to the statements of the City’s project planner and concluded that the trial court did not err in crediting her testimony. Thus, the Court held that the landowner was not required to submit a second proposal because the City “made plain” it would not allow any development on the bluff and because the area above that elevation was “not buildable.”
Felkay is a helpful new case demonstrating the importance of the “futility exception” to the normal “ripeness” requirements in a takings cause of action. Developers need not file multiple, pointless applications when an agency makes clear nothing will get approved.
Questions? Please contact Bryan W. Wenter, AICP of Miller Starr Regalia.
For more than 50 years, Miller Starr Regalia has served as one of California’s leading real estate law firms. Miller Starr Regalia has expertise in all types of real property matters, including full-service litigation and dispute resolution, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, exactions, title insurance, environmental law, and land use. Miller Starr Regalia attorneys also write Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. For more information, visit www.msrlegal.com.