fbpx

Use It or Lose It: Owners of Condemned Property Have an Option to Repurchase When Government Fails to Timely Develop or Reauthorize Public Use

Author: David Kahn

Guest Editor: Alla Policastro

August 12, 2020 11:00am

What happens when a city condemns private property for a stated public use but fails to follow through on the development of the public use?  Such was the issue recently decided by the Second District Court of Appeal in Rutgard v. City of Los Angeles published on July 30, 2020. (WL 4361069). The Court held a public entity desiring to retain condemned property must either develop the public use or reauthorize its initial resolution within ten years of the date the original authorizing resolution was finally adopted. Otherwise, the public entity must sell the property and the original owner of the property is given a right of first refusal to repurchase the property.

Relevant Law

Under the California Constitution, a public entity may only condemn private property for public interest and necessity provided the owner is justly compensated. (Cal. Const. art. 1 § 19; U.S. Const. 5th Amend; §§ 1240.010, 1240.030). To exercise its power of eminent domain, the public entity is required to adopt a resolution of necessity stating the public use for which the property is being taken. (Ibid.)  In 2006, the California legislature enacted Code of Civil Procedure (“CCP”) § 1245.245 to prevent public entities from taking private property and holding the property indefinitely without developing the stated public use. Section 1245.245 essentially provides property acquired by a public entity not used for the stated public purpose within ten years of the adoption of the original resolution must be sold with the original owner given the right of first refusal based on the property’s present market value unless the public entity timely reauthorizes the original stated public use.

Background Facts

May 29, 2007, the Los Angeles City Council condemned a two-story building located on Figueroa Street in the Highland Park neighborhood of Los Angeles. The property is registered as a City Historical Monument. Plaintiff Richard Rutgard owned the property taken by the City in 2007. The stated public use justifying the taking was the development of a constituent center.  The ordinance authorizing the taking of Mr. Rutgard’s property was approved by the Mayor on June 8, 2007 and became effective on June 14, 2007.  The City then filed an eminent domain suit to condemn the property in October of 2007. The lawsuit was settled with City agreeing to buy the property from Mr. Rutgard for the sum of $2.5 million. The constituent center was never developed due to the 2008 economic recession.

On June 23, 2017, the City enacted an ordinance reauthorizing the use of the taken property for a constituent service center. The ordinance was approved by the Mayor on June 27, 2017. The City calculated two different effective dates for the reauthorization. The first date was August 7, 2017 based on a posting date of June 28, 2017 which would be considered published 10 days later and become effective 31 days afterward. The next day, the City recalculated the effective date to be July 9, 2017 based on a posting of June 29, 2017, which would constitute publication 10 days later and on a finding the ordinance should take effect upon publication under section 252 of the city charter thereby circumventing the 31-day waiting period.

On July 24, 2017, Mr. Rutgard filed a verified petition for writ of mandate alleging the City had a present legal duty to offer him the right of first refusal to purchase the property under CCP § 1245.245 because its reauthorization was untimely. The trial court granted Mr. Rutgard’s petition finding the City’s reauthorization in June 2017 was already too late notwithstanding the publication date because the 10- year reauthorization clock in CCP § 1245.245 runs from the date of enactment (May 29, 2007) not publication. The City appealed.

Analysis

On appeal, the City argued CCP § 1245.245 does not impose any time limit on the adoption of a reauthorization but rather the “ten years” defines only how long the property has not been put to its designated public use. The court of appeal rejected this argument and analyzed the issue by breaking it down to four separate questions. (1) Does the ten year deadline obligate the public entity to adopt a reauthorization resolution within ten years of original resolution?  (2) If so, how does the statute define the term “adopted?” (3) Does the statute incorporate its own definition of initial adoption, final adoption or effective date or does it look to local law to define those terms?  (4) How does the local law governing the City adoption of resolutions defined the relevant term?

As to the first question, the court determined the ten-year deadline applies to the timing of the reauthorization. The purpose of the statute is to prevent a public entity from holding property indefinitely. Therefore, the only way for the statute to make sense is if the ten-year deadline applies to the reauthorization.

The second question deals with the meaning of the term “adopted” for purposes of determining when the 10-year deadline accrues. Because the statute does not define “adopted” the court first determined “adopted” pertains to a resolution’s adoption date rather than the effective date urged by the City. The court simply relied on the plain meaning of the statute which uses the term “adopted” not “effective date.”  The court further clarified the adoption date is the date the resolution is “finally adopted” or approved by the executive body (not the initial adoption date by the local legislative body). Thus, in this case the 10 years run from June 8, 2007, when the mayor approved the resolution.

The third question addresses the issue of whether to apply a one-size fits all definition of when a resolution is “finally adopted” or to defer to the law governing the public entity at issue. The court concluded the date of when a resolution is “finally adopted” should be based on the local law definition. Noting chartered public entities are constitutionally empowered to structure and organize differently from the state government, the court concludes it makes sense to construe CCP § 1245.245 in a way which “acknowledges -rather than squelches-this freedom to experiment.” (Id. at pg. 8).

The final question analyzes specifically how the public entity defines when a resolution is finally adopted. Relying on City’s charter, specifically Article II, § 250, “Procedure for Adoption of Ordinances,” the court concludes a resolution is finally adopted when it has been approved by the Mayor or if not approved, passed by a second override vote of the City Council. Section 251 of the Charter makes it clear a resolution is adopted before it becomes effective thereby negating the City’s reliance on the effective date.

Having analyzed and defined the law, the Court then applied the law to the facts and concluded the 2017 reauthorization ordinance is not timely under § 1245.245. The original resolution was finally adopted on June 8, 2007 when the mayor approved it. Likewise, the 2017 reauthorization resolution was finally adopted on June 27, 2017 when the mayor approved it. Accordingly, because the reauthorization was not “adopted” within 10 years, it is untimely and the City is obligated to sell the property and to give Mr. Rutgard a right of first refusal in purchasing it.

Takeaway

Owners of condemned property who may be interested in reacquiring property depending on market conditions, should carefully monitor the development status of condemned property. If the property is not developed to its stated public use with ten years, former owners should keep a watch on whether and when the public entity reauthorizes the public use. If market conditions are favorable, the former owner has a right of first refusal to buy back the condemned property from the City. On the other hand, those involved in representing public entities should calendar the ten-year reauthorization deadline and make sure the public use is either developed or reauthorized within ten years of final adoption of the original resolution as defined by local law or risk losing the property.

Copyright © 2020 Tyson & Mendes LLP. All Rights Reserved. Website by Big Behavior.