TOP REAL ESTATE AND DEVELOPMENT LAWYERS 2025
Replacing
recovery potential. “I was concerned that there would be a feeding frenzy of claims based on the financial mismanagement and that the large number of claims would diminish the assets that we could recover,” Miller said. “Leveraging first-mover advantage and being aggressive often pays.” Looking ahead, he said he sees opportunity in current market conditions. “With interest rates remaining significantly higher than they were a couple years ago, we are seeing more real estate projects in distress,” he said. “This will inevitably lead to litigation and opportunity for developers to buy assets at depressed prices.” For Miller, each case represents more than legal technicalities — they reflect broader economic forces reshaping the real estate landscape. has not yet interpreted what the replacement requirements would be for units, including ADUs, that have never been occupied. The replacement obligations also apply to SB9 projects, if one residence is demolished to build more than one residential unit, including with ADUs. Under the new ordinance (Ord. 188482, LAMC 1A.4C.15 (Residential Protections)), project activities include new construction, major remodel, exterior modification, use modification, temporary use, with a single-family residence and ADU is subject to the replacement analysis if either or both of the units are demolished and rebuilt. For any single-family house constructed prior to Oct. 1, 1978, where an ADU is added later, both units are now subject to the RSO provisions. (LAMC §151 et seq.) This requires removal of the units under the Ellis Act if the owner no longer intends to rent the units (LAMC §151), and replacement of the units as Protected Units in the event the units are demolished. Under state law, all units must be replaced on a one-to- one basis; therefore, once an ADU is constructed, there must always be at least two units on the property. If an owner demolishes and rebuilds the house or ADU, and either was rented in the past five years or subject to the Ellis Act in the past 10 years, the owner must submit a Replacement Unit Determination (RUD) application to LAHD to determine if affordable unit covenants are required. LAHD
demolition and renovation. The replacement requirements apply to such project activities that result in the loss or reduction of occupied or vacant Protected Units. In addition, LAHD requires the owner to sign an affordable housing covenant restricting the leasing of the unit to a renter who qualifies at the designated level of affordable housing. The covenant includes a conflict-of-interest provision that requires the owner to certify, under penalty of perjury, that it will not rent the unit to an owner of the property, or to a member of the immediate family of the owner. This would preclude allowing family members, such as parents or grandparents, to occupy the rebuilt ADUs in the future. In a current example, a family found black mold in their entire house and ADU; however, prior to demolishing the structures to remove the mold, LAHD is requiring that the owner file the RUD application to determine affordable replacement requirements, based on the rental history and city area, which may preclude providing housing for their grandparents and other family members in the future. Conclusion In conclusion, city and state laws require replacement requirements to ensure no net loss of housing units and Protected Units in large multi-family developments. However, when applying the same provisions to single-family homes with ADUs, it will substantially burden the
homeowners. It will likely preclude many families from doing major renovations or demolishing and rebuilding their homes and ADUs to avoid triggering the replacement requirement. In addition, the city’s specific prohibition on renting covenanted units to family members is directly counter to the intent of the state ADU ordinance to permit “granny flats” for multi-generational households. To preserve this intent, the city council may be requested to exempt ADUs from the more restrictive replacement provisions in the city’s ordinance and the conflict- of-interest provisions.
units at an affordable rent or cost as the same or lower income category than the existing tenants, based on the categories: Low Income, Very Low Income, Extremely Low Income and Acutely Low Income. Units vacated prior to the date of application shall be replaced with units of affordability based on the high point in occupancy during the past five years. (LAMC §16.60.3.(a) (1)) For units where the incomes were not known, LAHD provides a replacement formula based on the proportion of the affordability level of renters within the city. The ordinance also provides that units subject to the RSO may require replacement units based on the area of the city. In Moderate or High Opportunity Areas, the units deemed or presumed occupied by low-income families shall be replaced with low-income units, and in Lower Opportunity Areas, units shall be replaced proportionate to the share of all lower-income renters. The replacement units must be of equivalent size and contain at least the same total number of units and bedrooms as the demolished Protected Units. The ordinance exempts projects that consist of a single residential unit on a site with a single Protected Unit. (LAMC §16.60.A.3.A.4.(i)) However, an ADU is considered a residential unit; therefore, a project
Sheri L. Bonstelle is a partner at Jeffer Mangels Butler & Mitchell LLP. Her practice focuses on land use, zoning, environmental, litigation and construction matters. She manages all aspects of the entitlement process, including representing clients before local and state agencies, commissions and councils.
Miller
Park
Khalatian
disputes, including representing the Horn Trust in a case against a minority owner accused of embezzling $8 million over four years. The litigation involved novel applications of California Penal Code provisions for treble damages and ultimately resulted in a settlement granting his client full management control and monetary recovery. investment firm, in multiple high- stakes cases involving financial misconduct and fraud. After ER invested nearly $44 million and discovered widespread financial Miller has also represented ER Group, a major real estate irregularities, Miller pursued claims against not only the primary defendant but also a Big Five accounting firm and major consulting firm. The strategy required quick action to maximize
obstacles, and we deal with them methodically by listening to rationale concerns and working with community stakeholders and elected officials to address those concerns that can be addressed,” he said. The current development climate presents challenges that extend beyond regulatory complexity. Rising construction costs and political sentiment create additional barriers for housing development, according to Khalatian. “With construction costs as high as they are, coupled with anti-developer sentiment that most cities maintain, we are seeing less housing built,” he said. “While the state has taken more control over development, most of the state bills include provisions that ensure housing is infeasible to actually construct.”
market, and I’m starting to notice buyers looking at vineyards again,” Philippakis said. While she expects continued market corrections, she remains confident in the industry’s long-term viability. Philippakis to ensure the most desired outcome.” Park’s approach to practice was shaped early in her career at McDonough Holland and Allen, where she learned from mentors including David Spottiswood, Susan Edling, Pat Elliot and David Krotine. “The real estate lawyers there emphasized clarity in writing and collegiality in making a deal,” Park recalled.
DAILY JOURNAL SUPPLEMENT | JUNE 18, 2025 | PAGE 27
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