SB-9 and the Dangers of Lot-Splitting

On September 16, 2021, California Governor Gavin Newsom signed Senate Bill 9 (“SB 9”) into law. Also known as “The Duplex Bill”, SB 9 purports to address the housing crisis in California by allowing for the ministerial, or automatic, approval of certain lot-splits and housing development projects containing up to two dwelling units. With SB 9 set to take effect on January 1, 2022, Roseman Law has received many requests to provide additional guidance on how associations should prepare to comply with SB 9. This article provides a brief overview of SB 9 and its operative provisions, then discusses a few important considerations as they relate to planned developments.

What Does SB 9 Do?

Firstly, SB 9 requires the automatic approval, without discretionary review or hearing, of urban lot-splits of parcels zoned for single-family residential use, provided the enumerated criteria in SB 9 are satisfied.

Secondly, SB 9 requires the automatic approval, without discretionary review or hearing, of the construction of up to two residential units on a parcel zoned for single-family residential use, provided such construction meets the qualifying criteria under SB 9.

SB 9 allows local agencies to impose objective zoning, subdivision, and design standards, but otherwise does not allow for a local agency’s subjective judgment in determining whether a proposed, qualifying lot-split or development should be approved or denied. Although they can impose objective standards, local agencies cannot impose standards that would have the effect of physically precluding the construction of up to two units on a parcel or would physically preclude either of the two units from being at least 800 square feet in floor area.

In plain language, the passage of SB 9 creates the possibility that a single-family residential lot can now be divided and developed with up to four residential units where only one single-family home previously existed.

SB 9 enumerates certain criteria that must be met in order for a lot-split or housing development project to be automatically approved under the statute. A few of the most important qualifying criteria are listed below:

Selected Qualifying Criteria for a Lot-Split

1. The parcel map must subdivide an existing parcel to create no more than two new parcels of approximately equal lot area. One parcel can be no smaller than 40 percent of the lot area of the original parcel.
2. Newly created parcels must be no smaller than 1,200 square feet. However, a local agency may adopt a smaller minimum lot size by ordinance. If such an ordinance is adopted, the ordinance must specify a minimum lot size of at least 800 square feet.
3. The original parcel being subdivided must meet the following criteria:
   • The parcel must be within a single-family residential zone
   • The parcel must be located within a city or unincorporated area that contains an urbanized area or urban cluster
   • The parcel must not be located within a historic district or be a historic property
   • The parcel must not have been previously split under SB 9
   • The parcel must not be adjacent to a parcel previously split under SB 9
4. The lot split must not require demolition or alteration of any of the following types of housing:
   • Affordable housing for persons or families of moderate, low, or very low incomes
   • Rent-controlled housing
   • Housing which has been occupied by a tenant in the last three years

Selected Qualifying Criteria for a Proposed Housing Development

1. The parcel subject to development must be located within a city or unincorporated area that contains an urbanized area or urban cluster.
2. The development must not require demolition or alteration of any of the following types of housing:
   • Affordable housing for persons or families of moderate, low, or very low incomes
   • Rent-controlled housing
   • Housing which has been occupied by a tenant in the last three years
3. The development must not be located within a historic district or on a historic property site.
4. The development must not allow for the demolition of more than 25 percent of the existing exterior structural walls, unless:
   • A local ordinance so allows
   • The development site has not been occupied by a tenant in the last three years

Exceptions and Limitations of SB 9

Local agencies are allowed to deny or limit development projects and lot-splits pursuant to SB 9 in limited circumstances. A few of the most relevant exceptions and limitations are described below:

A local agency may deny a proposed development project or lot-split if the municipality’s building official makes a written finding based on a preponderance of evidence that the proposed development project or lot-split would have a specific, adverse impact upon the health and safety of the physical environment and there is not a feasible method to satisfactorily mitigate or avoid the specific, adverse impact.

SB 9 directs local agencies to require that lots created by SB 9 be limited to residential uses. Moreover, applicants are required to sign an affidavit stating that the applicant intends to occupy one of the housing units as their principal residence for a minimum of three years from the date of approval of the lot-split.

SB 9 also specifies that local agencies must require that the rental of any unit created pursuant to SB 9 be for a term longer than thirty days.

Impact on Community Associations

SB 9 has the practical effect of removing obstacles to property owners splitting their lots and constructing additional dwelling units on those lots at the local government level. As described above, local agencies (defined as counties and cities) would be required to automatically approve qualifying projects, without hearing or public review. Importantly, however, homeowners’ associations can still enforce their CC&Rs and other governing documents containing prohibitions and restrictions on lot-splitting and the construction of additional dwelling units.

Without the local government impediments described above, an association’s CC&Rs may operate as a last line of defense against lot-splitting and construction of additional dwelling units on lots within a community. In this regard, it is important that an association’s CC&Rs and other governing documents prohibit lot-splitting and the construction of more than one dwelling unit on a single lot. Association managers and boards of directors should act quickly to ensure the proper prohibitions and restrictions are in place.

Although changes to state law effective in 2020 render void any CC&R provision which prohibits construction of an Accessory Dwelling Unit (“ADU”) or Junior Accessory Dwelling Unit (“JADU”) on a single lot, there is nothing in SB 9 which prohibits associations from enforcing CC&R restrictions that prohibit lot-splitting or prohibit the construction of additional dwellings on a lot which do not meet the definition of an ADU or JADU.

SB 9’s impact could be far-reaching and could significantly affect the operation, financing, and management of planned developments. If an association for a planned development does not have the proper prohibitions and restrictions included in its CC&Rs and other governing documents, routine issues may materialize into more significant and ongoing problems. A few of these potential concerns are identified below:

• Association Assessments. Although SB 9 allows for lot-splitting and construction of additional dwelling units, the law does not provide for increases to assessments based upon these actions. With as many as four times the amount of housing units on the same lot as before a lot-split and subsequent construction, associations may see an increase in residents and common area usage without a corresponding increase in assessments.
• Parking Congestion. In the same vein, with an increase in the number of residents, many of whom are likely to have or need their own vehicle, associations may have to deal with increased parking congestion. Many associations were developed to provide resident and visitor parking based upon the number of lots within the community, as originally built. With an increase to the number of lots and dwelling units within the community, providing additional parking may be a necessity to alleviate an increase in congestion.
• Aesthetics. Many homeowners purchase into planned developments for the benefits of the community – including the uniform appearance and aesthetic of the properties. Without the proper prohibitions and restrictions in place, homeowners may more easily add structures to their properties, thereby altering the overall exterior aesthetic of the community.

Boards of directors and association managers should be advised that SB 9 is silent as to its impact on recorded covenants, including CC&Rs, in planned developments. This means that it is possible that courts could, in the future, interpret SB 9 as prohibiting HOAs in the same manner in which it prohibits local agencies, or use SB 9 as justification to declare provisions of the governing documents void as against public policy. For the time being, however, and until the courts or state legislators tells us otherwise, SB 9 does not prohibit homeowners associations from enforcing their CC&Rs or provisions within other governing documents.

Therefore, associations for planned developments should review their CC&Rs and governing documents to ensure these documents are properly drafted in light of SB 9. To the extent an association’s CC&Rs and governing documents do not contain the prohibitions and restrictions described above, the association may consider retaining the services of a law firm to properly amend the governing documents. In so doing, the association may properly prepare itself to act in the best interest of the association, its members, and its residents when SB 9 takes effect on January 1, 2022.