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Quote of the Day - Believe it or not, Boise is poised to be the No. 1 market for appreciation in 2006, and that has many real estate investors excited. - Lyndon Holderman

How To Fight City Hall And Win At Building Homes

Back in 1980, you have a little extra cash in your pocket, so you buy a nice parcel of land in San Clemente, some 2.85 acres.  You know, the same town where Nixon bought his La Casa Pacifica, more popularly known as the "Western White House," just for the sake of reference for those who remember that far back.  Anyway, back to the parcel of land.

Well, "you" are actually a group of investors who wanted to make some money on their purchase, so they sought to build homes on the parcel.  The City originally zoned the parcel to allow up to six homes per acre, but the owners only wanted four home and submitted plans to the City, which were approved.  The parcel was practically surrounded by other landowners' homes, who really wanted the parcel kept as open space.  The City attorney at the time told the City council that it would be a taking if it rezoned the parcel as open space, so the City didn't take that step, and as time slipped by, so did the adjacent landowners' voices.  Despite the approval, however, the owners never got around to building on the parcel.

A few years later, the City amended its general plan and added a zoning category that limited developers to one home per 20 acres, and applied that zoning category (designated RVL) to the parcel.  The City was trying to protect development in sensitive canyons.  The parcel sits on a slope, not a canyon.

Fast forward some 30 years.

The owners decide that it's time to start building, but their earlier approvals have now expired and they reapply to the City for approval to build one home on their 2.85 acres, which is 17.15 acres shy of the requirement to build one home under the 1983 zoning.  The City denied the application, and the owners filed an eminent domain suit, claiming the City used spot zoning to "take" their parcel under the 5th Amendment.  

That the part of the Bill of Rights that doesn't allow the government to take private property without just compensation.  It's not the part of the 5th Amendment that you know from watching television - you know, the part where they say, "I'm taking the 5th."  

Wow.  An amendment to the Constitution that does two things at once.  

Since we're dealing with the part about "just compensation," you're probably wondering by now what happened in the lawsuit.  The case is known as Avenida San Juan Partnership v. City of San Clemente.  In the case, the appellate court decided that the City had taken the owners' parcel of property by denying development on the parcel.

The trial court awarded the owners $1.3M for their troubles, and after both parties complained about the size of the award (City, too much; owners not enough), the appellate court sent the case back to the trial judge to consider both parties' arguments and recalculate the amount the City has to pay the owners.

Now don't think the City has only one option here.  The trial court told the City that if it didn't want to pay the inverse condemnation damages that it could instead just approve the owners' application for development and avoid paying the $1.3. That way, the owners can build out their property and sell it to recoup (hopefully) the $1.3M that they would have otherwise gotten from the City.

So, presumably everyone wins.  The nearby neighbors would likely have wanted the parcel to remain open space, but as real estate moves forward in time, that expectation just isn't realistic.  Houses are going to get built.

Posted by J. Craig Williams on 12/20/2011 at 13:55 Comments (0)


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