On June 28, 2021, the Supreme Court issued Pakdel v. City and County of San Francisco, 594 U.S. ____ (2021), a unanimous per curiam opinion vacating a ruling by the Ninth Circuit in favor of the City and County of San Francisco.  The petition for review was filed by a married couple who bought an interest in a six-unit apartment building in San Francisco’s Russian Hill neighborhood.  The couple’s interest gave them the right to occupy one of the units, which they planned to live in when they retired.  Until retirement, however, they rented the apartment to a tenant.

The purchase agreement required the couple to work with the other owners of the building to convert each owners’ interests to condominiums.  In 2015, the owners applied for conversion under a City program that would allow conversion if the non-occupant owners offered a lifetime lease to their tenants.  Thus, if the couple’s tenant decided to stay, the couple might never be able to live in their condo.  The couple twice asked the City to excuse them from the lifetime lease requirement, but their requests were rejected.  The City instead threatened the couple that “failure to execute the lifetime lease violated the [program] and could result in an enforcement action.”

The couple sued in federal court under section 1983, where they argued that the lifetime lease requirement constituted an unconstitutional regulatory taking of private property without compensation.  The district court dismissed their claim without reaching the merits, and the Ninth Circuit upheld that ruling.  According to the Ninth Circuit, the couple’s takings claim was not final, as required by Williamson County Regional Planning Commission v. Hamilton Bank, 473 U. S. 172 (1985), because they had not obtained a “final decision” from the City.  Instead, the couple had only requested an exemption after the conversion process was approved—not during the administrative process—and they had agreed to the lifetime lease.

The couple filed a cert petition with the Supreme Court, which granted the writ, vacated the Ninth Circuit’s decision, and remanded the case for further proceedings.  The justices explained that the finality requirement in takings cases is “relatively modest” and is intended to show that the plaintiff has actually been harmed by the government’s conduct.  All a plaintiff must show is that “there [is] no question . . . about how the ‘regulations at issue apply to the particular land in question.”  And in this case this case, there is no question about the city’s position: petitioners must “execute the lifetime lease” or face an “enforcement action.”  The Ninth Circuit’s contrary rule—that a conclusive decision is not “final” unless the plaintiff also complied with administrative processes in obtaining that decision—is inconsistent with the ordinary operation of civil-rights suits.  According to the Supreme Court, whatever policy virtues this doctrine might have, administrative “exhaustion of state remedies” is not a prerequisite for a takings claim when the government has reached a conclusive position.  Knick v. Township of Scott, 588 U.S. __ (2019).


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.