The California Court of Appeal Allows California Coastal Commission to Force Permitting Concessions for Seawalls on Encinitas Homeowners

The California Coastal Commission won a victory in the California Court of Appeal in their ongoing battle with a couple of North County San Diego homeowners that want to protect their homes on the bluff overlooking the Pacific Ocean. The dispute centers on attempts by these property owners to repair and replace damaged sea walls in Encinitas that protect their real estate by fending off erosion from advancing waves.

Update: The California Supreme Court agreed to review this case.

Unfortunately, to protect their homes, these Encinitas homeowners are now ensnarled in a nightmare of costly red-tape while battling an obstructionist government agency. As a real-estate investor myself, I understand how frustrating it is when rational and beneficial property improvements are met with hostility by a government agency that doesn’t understand the meaning of property rights.

In 2003, two individuals that own adjacent, bluff-top homes applied to the City of Encinitas for authorization to replace their over twenty-year-old sea walls, along with a lower section of the stairway that allowed them access to the beach. Six years later, Encinitas approved the project, but conditioned its approval on obtaining a permit from the California Coastal Commission. That certainly wasn’t a rubber-stamp condition.

The homeowners, as required, applied to the Commission for the permit. But while their application was pending, a major winter storm destroyed the bluff below one of the homes, along with portions of the sea-wall and stairway. Thus, the property owner had no choice but to seek more extensive construction.

The Commission partially approved the permit and there were special conditions: The property owners couldn’t rebuild the stairway, the permit would only last twenty years, and the Encinitas homeowners had to actually record these and other deed restrictions in a form approved by the Commission.

The homeowners challenged these conditions by filing a petition for writ of mandate, but then signed and recorded the required deed restrictions and other requirements, so they could obtain the permit and construct their project. The trial court granted the writ, agreeing that the Commission’s conditions had to be removed.

In Barbara Lynch et al. v. California Coastal Commission, the California Fourth District Court of Appeal overturned the San Diego Superior Court, which had reversed the earlier Commission decision. The appellate court held that (1) the homeowners waived their right to challenge the Commission’s permit conditions because they signed and recorded the deed restrictions and obtained the permit; and (2) the conditions were valid and supported by substantial evidence. In doing so, the court rejected as unripe, a claim for unconstitutional takings.

Waiver Issue

The court explained that generally “a property owner may only challenge an allegedly unreasonable permit condition by refusing to comply with the condition and bringing a mandate action to have the condition declared invalid.” If the property owner complies with the condition, the owner waives the right to challenge it: “He who takes the benefit must bear the burden.”

The homeowners argued that they accepted the permit under protest and duress because it was the only way to save their homes. The California Court of Appeal, however, was not moved by this. It explained that there are two recognized exceptions to the general waiver rule, but neither apply in this case:

The first exception, under Government Code section 66020, applies to developers that object to a local-agency condition that divests them of money or a possessory interest in property. They can proceed with the development, while simultaneously challenging the permit condition.

The second exception “applies when an agency imposes new conditions on a permit for a later phase of a project already underway.” In this case, the development has already started, so the developer has “no economically practicable option to elect not to accept the subsequent permit and its accompanying conditions.” Of course, in this case, the homeowners similarly had no practicable option to decline the permit, as they had to save their homes.

The court declined to adopt a third “under protect” exception for permit applicants who want to build their projects while simultaneously challenging non-fee conditions.

Validity of Permit Conditions

Twenty-Year Duration Condition. The California Court of Appeals applied an abuse of discretion standard to the Coastal Commission’s decision and held that it lawfully limited the duration of the Encinitas homeowners’ permits to twenty-years. The court did not conduct an independent review of the evidence, but instead determined that the Commission’s findings are supported by substantial evidence—the typical standard for reviewing agency determinations.

The court explained that the Coastal Commission’s findings supporting the twenty-year limit on the permit essentially were that “the duration limit allows the Commission to revisit the need for the seawall or require further mitigation for its impacts based on a lifespan corresponding to, but not exceeding, the remaining anticipated lifespan of respondent’s existing homes.” The court explained that it may not substitute its own judgment for the Commission’s judgment and that the Commission has broad discretion to impose conditions to mitigate the seawall’s impact.

The court expressly rejected the dissent’s view that Public Resources Code Section 30235 of the California Coastal Act of 1976 precludes the Commission from imposing any condition on the seawall except a condition to eliminate or mitigate the seawall’s adverse impacts on the local shoreline sand supply. The court held that this section “does not limit the type of conditions that the Commission may impose in granting a permit to construct a seawall.”

Finally, the court quickly dismissed as unripe the idea that the twenty-year limit on the permit is an unconstitutional taking. The dissent, by contrast, argued vigorously that this condition is a taking under both the California and Federal constitutions. In so doing, it cited the US Supreme Court’s recent decision of Koontz v. St. Johns River Water Management District, which applied the unconstitutional conditions doctrine to land-use restrictions.

As the dissent explained, the right to continue a particular use of land is a property right and a permitting agency cannot, except under narrow circumstances (like a nuisance, violation of law, or failure to follow permitting conditions), revoke its approval once granted. Previous Supreme Court decisions, Nollan and Dolan, hold that the federal takings clause allows the government to take a property interest as a condition of a permit approval only if the condition bears an essential nexus and rough proportionality to the adverse impacts caused by the project. This requirement seeks to limit the ability of the government to exploit property owners that are in the vulnerable position of needing a permit from the government.

The dissent concluded that “the Commission’s condition that the seawall permit expires in 20 years unconstitutionally forces the homeowners to waive their rights and property interests without any nexus or ‘rough proportionality’ to potential adverse impacts caused by the seawall.” The condition extinguishes the homeowner’s right to protect their properties, beginning in 2031. Keep in mind that property rights have a temporal element such that “taking” an aspect of the property right at a later time is, in fact, a taking. To do so, the Commission would have to show that this taking has a nexus and rough proportionality to the impacts of the seawall. It could not do this because the twenty-year limit was based upon mere speculation.

The dissent also argued that the Commission could not satisfy these standards with regard to the required negative easements and monetary exactions the homeowner’s suffered.

Rebuilding the Lower Stairway. The court also upheld the Commission’s permit condition that the homeowners must remove the lower stairway from the project plans.

The court concluded that the reconstruction of the lower stairway—damaged during storms—is subject to the permitting requirements. As such, it must conform to Encinitas’ local coastal program, which discourages and requires the phasing out of private access to the beach over the bluffs.

Conclusion

The California Supreme Court agreed to review this case.

It isn’t an easy world for property owners in California, particularly those near the coasts. The Coastal Commission in this case put Encinitas homeowners in the untenable position of having to accept permit conditions that they objected to at every turn, so they could save their homes while dealing with the legal process. And the California Court of Appeals—over a strongly-written dissent—accepted this approach.

If you have a real-estate litigation issue, whether against the government or a private party, please contact Bona Law PC at 858-964-4589 or info@bonalawpc.com.