As everyone is adjusting to comply with Governor Newsom’s recent order to “Stay In Place”, Grid Legal's clients and consultant colleagues are asking how the coronavirus and the resulting slow-down of the world as we know it will affect real estate transactions, development projects and standard operating procedure for on-going businesses.

We have compiled a list of questions and answers, based on what we know as of March 21, 2020, to help preempt timing issues or guide you towards a solution if project deadlines have already been impacted. Given the changing nature of the situation and different approaches being taken by each city and public agency, contact Grid Legal or your attorney for detailed responses.  

FOR PROJECT'S PENDING APPROVAL:

1. The City has closed all public buildings; can I still submit an application for a permit or project?

Many cities have closed their public buildings to the public.  However, most public agency staff are still working remotely and working hard to continue accommodating project applicants.  We recommend contacting your agency directly to learn how best to submit your application or to have an informational meeting, often required before submitting an application.  Moreover, the state included many government and construction workers, and specifically, “Workers to ensure continuity of building functions” as essential services that may remain open (see, the State's Essential Critical Infrastructure Workers, “Other Community-Based Government Operations and Essential Functions”, pages 10 - 11).   So while cities and counties may be choosing more stringent rules, they can choose to open under the California’s most recent guidance.  

2. If the agency fails to act within  the 30-day deadline under the Permit Streamlining Act, is my development project application deemed approved?

Under the Permit Streamlining Act, an agency has 30 days after an application is submitted to inform the applicant of whether the application is complete.  If the agency does not act within this time, the application will be "deemed complete" even if the application is deficient. However, the Permit Streamlining Act is not self-executing and is nuanced for project applications that are undergoing environmental review pursuant to the California Environmental Quality Act (CEQA). For example, public notice is required for any project to be deemed approved. While it may not be a clear-cut victory to get approval under the Permit Streamlining Act, invoking the Act may push your project application ahead faster than others in what is likely to be a bottle neck of projects pending future hearing and decisions.  

3. I am worried funding will dry up if my project does not get to a public hearing next month. Is there an alternate way to get project approval other than at a traditional public hearing?

Public Agencies may choose to hold their meetings telephonically or virtually thanks to the loosening of regulations during this time by Governor Newsom’s order N-25-20 (“EO N-25-20”). Pursuant to EO N-25-20, the statutory requirements for council or board members to be physically present at public meetings has been waived during the COVID-19 emergency order.  However, EO N-25-20 still requires noticing of the meeting in at least one publicly accessible location.  Moreover, state and local bodies are required to use “sound discretion” and to make “reasonable efforts to adhere as closely as reasonably possible”  to the provisions of the state and local laws regulating the conduct of public meetings in order to maximize transparency and provide the public access to their meetings.

So, while the physical presence requirements have been waived or modified, beyond noticing requirements, agencies are also coming up with ways to allow for public comment during a meeting whether telephonically or virtually, in advance or simultaneously.  How this will look to ensure everyone can comment, even those without access to the internet, is still evolving and will differ by the legislative body holding the meeting.  This may take some agencies weeks to work out the kinks and ensure legal compliance with the Brown Act.  

Several local cities have made these changes, for example San Marcos and Carlsbad.

FOR APPROVED PROJECTS OR DEVELOPMENT AGREEMENTS:

1. My Tentative Parcel Map is about to expire, what can I do?

It is too soon to report if any public agencies are granting extensions in response to COVID-19. The state may decide, legislatively, to issue an extension on all Tentative Parcel Maps (TM or TPM) similar to the extensions granted in 2011, 2009, and 2008 due to The Great Recession.  Absent any such automatic extensions, the deadlines are strict. Therefore, you may want to consult with your attorney to discuss options under state law and local ordinances to file an application to extend a TM that is about to expire.  

2. I have entered into a number of contracts to assemble land, design the project or begin construction and no one is working. Are contract deadlines, “time of the essence” and escalation clauses enforceable?

Some contracts have provisions that allow for extensions or relief in the act of natural disasters, Acts of God, or even pandemics.  

Based on the most recent guidance from the State, most construction workers are not subject to the stay at home order under the Stay in Place EO.  See Page 11, Other Community-Based Government Operations And Essential Functions.  The State updated its essential function list to provide additional guidance of essential services to include “Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction).”  Nonetheless, businesses may have policies in place that requires workers to stay home or workers may not be able to work if they are impacted by COVID-19.  

The other sector that may be impacted are various real estate professionals.  We did not see these professionals explicitly called out as essential services that can continue in the March 19, 2020 update by the State to essential services.  In the Stay in Place EO, the Governor left open the opportunity in the future to “designate additional sectors as critical in order to protect the health and well-being of all Californians.”  (Stay in Place EO).  Realtors, mortgage brokers, and title officers have issued letters to the Governor requesting that they be designated as essential services that can stay open during this time. The California Association of Realtors has also setup a useful web page which can be found here to provide updates and respond to frequently asked questions regarding the current health situation.

Bottomline: The contract controls so review your contract, e.g., purchase and sale contract, lease, loan document, etc. to review if and how timelines, extensions and legal concepts such as temporary impossibility or frustration of purpose can impact or save, your specific project.

3. My project is complete but I can’t start selling or operating until I get a certificate of occupancy and the city is not conducting building inspections. Are they required to continue conducting inspections since this is an “emergency”?

The state has designated “Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction)” to be essential services that can continue to work.   See the list of Essential Critical Infrastructure Workers (pdf).

However, cities and counties throughout the State may have more restrictive requirements.  You should first check if the agency has adopted a proclamation of Local Emergency due to COVID-19 in the particular city or county you are working in.  

FOR EXISTING BUSINESS THAT NEED TO MODIFY OR NEED EMERGENCY FUNDING:

1. Do I need to apply for a temporary permit or other permit to convert my restaurant to a drive-thru or curbside delivery operation while dine-in restaurants are required to close?

Whether or not a permit is required to operate your restaurant, bar, winery, or other eating establishing as a drive-thru or curbside delivery operation (i.e., delivering food, beverage, and goods directly to a vehicle) will depend on the city or county’s zoning use requirements.  If you have a use permit, such as a Major or Minor Use Permit or Conditional Use Permit to operate, you should also review the Permit to see what limitations or conditions, if any, are imposed.  Some can be amended through a ministerial process, by the director or planning manager, others may require consideration at a public hearing.  We also recommend you check with your local city or county to see if they have adopted a proclamation for a Local Emergency during the COVID-19 pandemic.  Those that have may allow temporary operations during this time even if zoning limits said uses.  

2. What emergency funding measures are available?

Two weeks ago, the federal government approved an $8.3B package  providing funds for research, public health programming, and small business loans, among other things. Congress also adopted HR 6201 the Families First Coronavirus Response Act, which among other things, directs employers to provide expanded family medical leave and paid sick leave with some exceptions (businesses with over 500 employees, and businesses with under 50 employees). Congress is considering further stimulus packages and legislation, ballooning to nearly One Trillion Dollars.  As of March 22, 2020 Congress had failed to approve the measure, but another vote is anticipated today, March 23, 2020.  

California recently adopted two measures that appropriated $500 million to provide emergency relief and resources needed for the immediate response and mitigation of the effects of COVID-19. This funding will also ensure that public schools continue to receive funding from the state, despite physical closure. Cities are also providing some relief measures. For example, the City of San Diego’s Mayor announced directives around small business relief, including $4 million in grants and loans to support small businesses, that will be a part of a larger Business Continuation Fund which can be found here.

Per the Governor’s formal State of Emergency declaration, California’s provision against price gouging is in effect which could provide protection for the construction industry trying to secure depleted supplies during this time.

3. Does the government have the right to commandeer my hotel or other commercial building?

Under the California Emergency Services Act, the Governor is authorized to commandeer or use any private property or personnel deemed necessary in the exercise of emergency powers during a state of war or state of emergency.  EO N-25-20 did just that, giving state agency’s the power to enter into contracts or agreements to commandeer the use hotels, and other places of temporary residences or facilities for quarantining, isolating, or treating individuals who test positive for COVID-19 or who have had a high-risk exposure and are thought to be in the incubation period.  If the state is seeking to commandeer your hotel, you should work with your attorney to negotiate terms of the contract and compensation to be paid.  

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Please contact Stephanie Smith at Stephanie@GridLegal.com or Avneet Sidhu at Avneet@GridLegal.com with questions.  We can also be reached at our office at 619-363-1471. Avneet and Stephanie are partners at the law firm Grid Legal, LLP, where they specialize in working with you on your real property transactions, land use and development projects and environmental review under the California Environmental Quality Act (“CEQA”).

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This is for informational purposes. This information is not intended to substitute for obtaining legal advice from an attorney. No person should act or rely on any information herein without seeking the advice of an attorney. No attorney-client relationship has been created. Additional facts or future developments may affect any laws, subjects, or information shared. Seek the advice of an attorney before acting or relying upon any information in this or any update from Grid Legal LLP. Contact Stephanie@GridLegal.com or Avneet@GridLegal.com for additional guidance or support.

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