Judge: James C. Chalfant, Case: 24STCP00504, Date: 2025-05-08 Tentative Ruling

Case Number: 24STCP00504    Hearing Date: May 8, 2025    Dept: 85

Petitioner Westdale Pacific, LLC (“Westdale”) seeks administrative mandamus to compel the City of Los Angeles (“City”) to set aside its denial of a Rent Stabilization Ordinance (“RSO”) exemption.

The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

A. Statement of the Case

1. Petition

On February 16, 2024, Petitioner Westdale filed the Petition against Respondent City alleging a claim for administrative mandamus.  The Petition alleges in pertinent part as follows.

The development at issue is a 25-unit residential building (“Project”) located at 11210 West Sardis Avenue, Los Angeles, California (“the Property”).  The Project sits on three lots: Lot 131 of Tract 7417 (“Lot 131”), Lot 132 of Tract 7417 (“Lot 132”), and Lot 133 of Tract 7417 (“Lot 133”) (collectively, “Lots”).  Pet., ¶¶ 1, 13.

The Lots each contained a single-family residence, and Lot 131 also contained a duplex.  Pet., ¶¶ 14-15.  Lot 131 was subject to the RSO.  Pet., ¶14.  Lot 132 and 133 were not subject to the RSO and were vacant.  Pet., ¶14-15.

On July 12, 2014, Westdale filed applications for demolition permits for the improvements on the Lots.  Pet., ¶16.  The City approved the applications and issued a demolition permit for each structure.  Pet., ¶16.  Lot 131 took additional time for approval because it was subject to the RSO.  Pet., ¶18.  All improvements were demolished by September of 2016.  Pet., ¶20.

On May 12, 2014, Westdale applied for building permits for the Project.  Pet., ¶21.  Because the Project would cross the boundaries of the Lots, the City required a lot-tie agreement as a condition precedent to issuance of the permits.  Pet., ¶22.  On February 20, 2015, Westdale recorded against the Lots a Covenant and Agreement to Hold Property as One Parcel (“Lot-Tie Covenant”), a standard form issued by the Los Angeles Department of Building and Safety (“LADBS”).  Pet., ¶26.

On July 22, 2016, the City issued the building permits.  Pet., ¶27.  On June 8, 2018, the City issued a Certificate of Occupancy for the Project.  Pet., ¶27.

On January 16, 2015, the City issued its final decision in Case No. DIR-2014-1726-DB, the administrative approval for the Project’s density bonus application.  Pet., ¶28.  Condition 3 of the determination required a minimum of two units (11% of the base dwelling units) be reserved as affordable units.  Pet., ¶28.  The Los Angeles Housing Department (“LAHD”) informed Westdale that the Project must satisfy an exemption or comply with the RSO and confirmed that it would satisfy an exemption if it replaced the three units subject to the RSO.  Pet., ¶29.

On December 15, 2016, Westdale entered a Rental Covenant Agreement Running With the Land City of Los Angeles (“Affordable Unit Covenant”) on a form prepared by the City.  Pet., ¶30.  Through the Affordable Unit Covenant, Westdale agreed to deed-restrict one low-income unit and two very low-income units for the purposes of securing an RSO exemption.  Pet., ¶30.  The Affordable Unit Covenant acknowledged the different treatment of low and very low-income units.  Pet., ¶31.  Westdale only entered into the Affordable Unit Covenant to secure an RSO exemption under Los Angeles Municipal Code (“LAMC”) section 151.2.B based on the City’s promises and assurances.  Pet., ¶32.

On or about May 10, 2017, Westdale applied for an RSO exemption with the understanding that its replacement of Lot 131’s RSO-subject units with three new RSO-subject units sufficed for a RSO exemption of the remaining Lots.  Pet., ¶33. 

On March 9, 2021, the City issued a letter denying the exemption, asserting for the first time that the lot-tie subjected Lot 132 and Lot 133 units to the RSO.  Pet., ¶34.

At the time of the application, LAMC section 151.02 exempted single-family dwellings “except where two or more units are located on the same lot.”  Pet., ¶35.  On April 30, 2017, the City amended this section to read “on the same parcel” rather than “on the same lot.”  Pet., ¶35.  The City argued that the filing of the lot-tie had the effect of placing the units on a new parcel, so subjecting them to the RSO.  Pet., ¶36.

In March of 2021, Westdale appealed to the LAHD General Manager, who issued an order denying the appeal on November 22, 2023.  Pet., ¶37.

Westdale seeks mandamus compelling the City to set aside its RSO exemption denial and issue a RSO exemption pursuant to section 151.28.B.  Prayer, ¶1.  Westdale further asks the court to retain jurisdiction to ensure compliance with its orders.  Prayer, ¶3.  Finally, Westdale seeks costs, fees, and such other further relief as the court may deem just and proper.  Prayer, ¶¶ 2, 4.

2. Course of Proceedings

A proof of service on file shows that Westdale served the City with summons and the Petition on February 20, 2024.  The City filed its Answer on January 8, 2025.

B. Governing Law

1. Vested Rights

“Only those building standards approved by the commission, and that are effective at the local level at the time an application for a building permit is submitted, shall apply to the plans and specifications for, and to the construction performed under, that building permit.”  Health and Safety Code §18938.5(a).

 “Whenever plans sufficient for a complete plan check are accepted by the Department of Building and Safety and a fee is paid, a vested right is granted to the project to proceed with its development in substantial compliance with the zoning, and development rules, regulations, ordinances and adopted policies of the City of Los Angeles in force on the date that the plan check fee is paid as indicated on a valid building permit application.”  LAMC §13B.10.B.2.a. (emphasis added).

2. RSO Exemption

A property owner who develops new rental units in place of demolished rental units is entitled to an RSO exemption provided several criteria met.  LAMC §151.28.B.  In order to qualify for an RSO exemption, the property owner must “replace[] the number of demolished rental units with a number of affordable housing units at least equal to the number of withdrawn rental units subject to the Rent Stabilization Ordinance on a one-for-one basis or at least 20% of the total number of newly constructed rental units, whichever is greater.” Id.

“Rental units” are defined as “all dwelling units, efficiency dwelling units, guest rooms, and suites, as defined in Section 12.03 of this Code, and all housing accommodations as defined in Government Code Section 12927, and duplexes and condominiums in the City of Los Angeles, rented or offered for rent for living or dwelling purposes, the land and buildings appurtenant thereto, and all housing services, privileges, furnishings and facilities supplied in connection with the use or occupancy thereof, including garage and parking facilities.”  LAMC §151.02. 

As it existed before 2017, this definition exempts “Dwellings, one family, except where two or more dwelling units are located on the same lot. This exception shall not apply to duplexes or condominiums.”  Id. (emphasis added).  After a 2017 amendment, LAMC section 151.02 exempts such dwellings “except where two or more dwelling units are located on the same parcel.”  Id. (emphasis added).

C. Standard of Review

CCP section 1094.5 is the administrative mandamus provision which structures the procedure for judicial review of adjudicatory decisions rendered by administrative agencies.  Topanga Ass’n for a Scenic Community v. County of Los Angeles, (“Topanga”) (1974) 11 Cal.3d 506, 514-15. 

CCP section 1094.5 does not in its face specify which cases are subject to independent review, leaving that issue to the courts.  Fukuda v. City of Angels, (1999)20 Cal.4th 805, 811.  In cases reviewing decisions which affect a vested, fundamental right the trial court exercises independent judgment on the evidence. Bixby v. Pierno, (1971) 4 Cal.3d 130, 143.  See CCP §1094.5(c).  In other cases, the substantial evidence test applies.  Mann v. Dept. of Motor Vehicles, (1999) 76 Cal.App.4th 312, 320; Clerici v. Dept. of Motor Vehicles, (1990) 224 Cal.App.3d 1016, 1023.

A right may be deemed fundamental based on either (1) “the character and quality of its economic aspect; (2) the character and quality of its human aspect.”  Amerco Real Estate Co. v. City of West Sacramento, (“Amerco”) (2014) 224 Cal.App.4th 778, 783 (citation omitted).  This is a case-by-case determination.   Termo Company v. Luther, (2008) 169 Cal.App.4th 394, 398-99 (independent judgment test applies where implementation of the agency’s decision and order to shut down and abandon oil wells would shut down the petitioner’s oil well business that had been in existence for 20 years).  Compare Standard Oil v. Feldstein, (1980) 105 Cal.App.3d 590, 604 (substantial evidence test applied where there was no contention oil company will be driven to ruin by the agency action); Mobil Oil Corp. v. Superior Court, (1976) 59 Cal.App.3d 293, 305 (same).

“[A]s a general rule, when a case involves or affects purely economic interests, courts are far less likely to find a right to be of the fundamental vested character."  JKH Enterprises, Inc. v. Department of Industrial Relations, (2006) 142 Cal.App.4th 1046, 1060 (impact of agency’s decision to issue an administrative stop work order and penalty for violation labor relations was purely economic and the substantial evidence was appropriate standard of review).  The substantial evidence test applies to review administrative decisions that restrict a property owner’s return on investment, which increase the cost of doing business, or reduce profits, because such decisions impact mere economic interests rather than fundamental rights.  In contrast, a court will apply its independent judgment where the administrative decision will drive the owner out of business or significantly injure its ability to function.  Amerco, supra, 224 Cal.App.4th at 784 (land use decision that U-Haul could not maintain overlarge sign governed by substantial evidence test). 

This case does not implicate fundamental rights.  The City’s decision to concerning an exemption from the RSO impacts Westdale’s right to a fair return on its property, making substantial evidence the proper standard.  See San Marcos Mobilehome Park Owners’ Assn. v. City of San Marcos, (1987) 192 Cal.App.3d 1492, 1500 (city’s denial of rent increase subject to substantial evidence standard of review). 

“Substantial evidence” is relevant evidence that a reasonable mind might accept as adequate to support a conclusion (California Youth Authority v. State Personnel Board, (“California Youth Authority”) (2002) 104 Cal.App.4th 575, 585) or evidence of ponderable legal significance, which is reasonable in nature, credible and of solid value.  Mohilef v. Janovici, (1996) 51 Cal.App.4th 267, 305, n.28.  The petitioner has the burden of demonstrating that the agency’s findings are not supported by substantial evidence in light of the whole record.  Young v. Gannon, (2002) 97 Cal.App.4th 209, 225. 

The court exercises independent judgment as to questions of law.  Lanigan v. City of Los Angeles, (2011) 199 Cal.App.4th 1020, 1029. 

The trial court considers all evidence in the administrative record, including evidence that detracts from evidence supporting the agency’s decision.  California Youth Authority, supra, 104 Cal.App.4th at 585.  “‘[T]he test of substantiality must be measured on the basis of the entire record, rather than by simply isolating evidence which supports the board and ignoring other relevant facts of record which rebut or explain that evidence.’ [Citations.]” Martori Brothers Distributors v. Agricultural Labor Relations Bd., (1981) 29 Cal.3d 721, 727 (italics added.)”  Gerawan Farming, Inc. v. Agric. Labor Relations Bd., (2018) 23 Cal.App.5th 1129, 1162.  The standard is met if there is relevant evidence in the record which a reasonable mind might accept in support of the findings.  Id. (citation omitted).  If there is a plausible basis for the decision, the fact that contrary findings may be equally reasonable, or even more so, is of no moment.  Id.

            The agency’s decision must be based on the evidence presented at the hearing.  Board of Medical Quality Assurance v. Superior Court, (1977) 73 Cal.App.3d 860, 862.  The hearing officer is only required to issue findings that give enough explanation so that parties may determine whether, and upon what basis, to review the decision.  Topanga, supra, 11 Cal.3d at 514-15.  Implicit in section 1094.5 is a requirement that the agency set forth findings to bridge the analytic gap between the raw evidence and ultimate decision or order.  Id. at 515.

            An agency is presumed to have regularly performed its official duties (Evid. Code §664), and the petitioner therefore has the burden of proof.  Steele v. Los Angeles County Civil Service Commission, (1958) 166 Cal.App.2d 129, 137.  “[T]he burden of proof falls upon the party attacking the administrative decision to demonstrate wherein the proceedings were unfair, in excess of jurisdiction or showed prejudicial abuse of discretion.”  Afford v. Pierno, (1972) 27 Cal.App.3d 682, 691.

D. Statement of Facts[1]

1. The Project

The Project consists of a 25-unit multi-family residential building at the Property, which is located at 11210 W. Sardis Avenue, Los Angeles, CA 90064 (APN 4251-002-023).  AR 2, 161.  The Project sits on three lots, Lot 131, Lot 132, and Lot 133.  AR 4, 142-43.

Lot 131 contained a duplex and a separate single-family home, while Lot 132 and Lot 133 each contained one vacant single-family residence not subject to the RSO.  AR 100-01, 250.  Lots 132 and 133 were vacant prior to demolition.  AR 101.

2. Vested Rights

Westdale applied to LADBS for building permits in early 2014.  AR 100.  LAMC section 12.26.A.3 (now codified as LAMC section 13B.10.B.2.a) provides that an applicant receives a vested right to proceed upon acceptance of plans sufficient for a complete plan check, along with payment of a fee.  AR 195.  The applicant’s project is subject only to those requirements in effect at the time the rights vest.  AR 195.  The Project acquired vested rights to proceed with the requirements in effect as of May 12, 2014.  AR 195.

3. The Lot-Tie Covenant

In May of 2014, LADBS informed Westdale that it must execute the Lot-Tie Covenant as a condition for issuance of a building permit.  AR 100.  Westdale executed and recorded the Lot-Tie Covenant on February 20, 2015.  AR 2.  The Lot-Tie Covenant states that Westdale agrees to hold Lots 131, 132, and 133 as one parcel and no portion shall be sold separately.  AR 2.  The Lot-Tie Covenant states that it is executed for the purpose of creating a single building site and a 25-unit apartment building as regulated by LAMC section 12.03, and shall bind future owners and shall continue in effect until released by the Superintendent of LADBS upon submittal of fees and evidence that it is no longer required by law  -- i.e., no improvements cross the lot boundaries.  AR 2.

After the execution of the Lot-Tie Covenant, the Los Angeles County Assessor’s Office (“County Assessor”) issued a new Assessor’s Parcel Number (“APN”) for the Property, effective February 20, 2015.  AR 161.

4. The Ellis Act Withdrawal and Demolition

On July 12, 2014, Westdale filed applications for demolition permits for the improvements on the Lots.  AR 101.  

In February 2015, LADBS issued demolition permits for Lot 132 and Lot 133.  AR 153-54.  AR 101, 127.

On April 1, 2015, Westdale filed with LAHD a Notice of Intent to Withdraw the three Lot 131 units from the RSO under the Ellis Act (Govt. Code §7060 et seq.).  AR 156-59.  No Ellis Act withdrawal of the single-family residences on Lots 132 and 133 occurred as they were not subject to the RSO.  AR 128.

On May 28, 2015, LADBS issued demolition permits for the duplex and single-family residence on Lot 131.  AR 151-52.  LADBS issued a LAHD clearance for Lot 131.  AR 101.  No LAHD clearance was issued for Lots 132 and 133, again because they were not subject to the RSO.  AR 101.

The improvements on all three Lots were demolished by September 15, 2016.  AR 151-54.

5. The Affordable Unit Covenant

Westdale applied for a density bonus.  On January 16, 2015, the City issued its final decision in Case No. DIR-2014-1726-DB granting approval for the Project’s density bonus application conditioned on reservation of two units for very low-income tenants for 30 years.  AR 45. 

LAHD informed Westdale that the Project must comply with the RSO or satisfy an exemption.  AR 101.  LAHD informed Westdale that the Project would satisfy an exemption under LAMC section 151.28.B if the Project replaced the three RSO-subject units that had existed on Lot 131.  AR 63, 101.  LAHD did not state that it considered the single-family residences that had been on Lots 132 and 133 to be covered by the RSO due to the Lot-Tie Covenant.  AR 101.

Westdale entered into the Affordable Unit Covenant on December 15, 2016, using a LAHD form.  AR 10-30.  Pursuant to its terms, Westdale agreed to deed restrict three units of the Project as affordable units based on the City’s direction and representation that doing so would satisfy an RSO exemption.  AR 10-30.  The Affordable Unit Covenant acknowledged that two units would be very low-income units under LAHD Schedule 6 rents for 55 years to meet bonus density requirements and one unit would be a low-income unit under HUD Schedule 1 rents for 30 years to meet the RSO exemption.  AR 13, 62.  Westdale only entered into the Affordable Unit Covenant to satisfy an RSO exemption under LAMC section 151.28.B.  AR 101.

6. The Exemption Determination

The City issued building permits on July 22, 2016, and the Project was issued a Certificate of Occupancy on June 8, 2018.  AR 34-37. 

On or about May 10, 2017, Westdale applied for the RSO exemption based on the additional deed restriction in the Affordable Unit Covenant.  AR 31-33, 102.  The application stated that the three RSO units on Lot 131 had been demolished and that the Project replaced those three units.  AR 31.  Westdale believed it had fulfilled all requirements to obtain an RSO exemption.  AR 102.

Westdale emailed LAHD for an update on August 1, 2017 but received no response.  AR 101.  Several years then went by.  AR 101.

On March 9, 2021, the City issued a letter denying the RSO exemption.  AR 41-42, 125.  LAHD explained that the RSO applies to all rental properties in the City built before October 1, 1978.  AR 41.  Per the Ellis Act provisions implemented in LAMC section 151.28, if a RSO unit that was the subject of a Notice of Intent to Withdraw pursuant to LAMC section 151.23.A is demolished and rental units are constructed on the property within five years, the owner may establish the initial rental rate, but the RSO will apply.  AR 41.  If rental units subject to the RSO are demolished without complying with the Ellis Act withdrawal provisions in LAMC section 151.22 through 151.28, then all replacement units constructed on the same property shall be deemed subject to the RSO.  AR 41.

Westdale withdrew three units from the rental market under the Ellis Act and a 25-unit apartment building was constructed within five years.  AR 41.  Two additional units were not withdrawn from the rental market.  AR 41.  Although in 2014 those two units were not subject to the RSO, they were tied together in the current APN 4251-002.023 on February 20, 2015 (the Lot-Tie Covenant).  AR 41.  At that time, the two “units” became subject to the RSO because they were no longer the sole detached dwelling units on a parcel.  AR 41.  When these two RSO units were demolished without a Notice of Intent to Withdraw, the property became ineligible for the RSO exemption.  AR 41.

7. The Appeal

Westdale appealed the determination to LAHD’s General Manager.  AR 43-102.  A General Manager Hearing Officer heard the appeal on October 5, 2023.  AR 103.  The City submitted a staff report and Westdale filed a response brief.  AR 125-238. 

On November 22, 2023, the Hearing Officer denied the appeal.  AR 279-88.  The Hearing Officer stated that Westdale’s appeal was timely because LAHD’s March 9, 2021 determination letter did not give notice to Westdale of its right to administratively appeal LAHD’s determination.  AR 286. 

The Hearing Officer agreed that there were three Lots when Westdale entered into the Lot-Tie Covenant.  AR 287.  However, Westdale entered into the Lot-Tie Covenant without withdrawing Lots 132 and 133 under the Ellis Act and LAMC section 151.28.A, B.  The Hearing Officer rejected any distinction between “lots” and “parcels” asmerely semantic.  AR 286-87.  LAHD reasonably exercised its discretion in denying the RSO exemption because the Lot-Tie Covenant that legally described the property as one parcel subsumed all five residential units on Lots 131, 132, and 133 into a single development property subject to the RSO.  AR 287.  Had Lots 132 and 133 not been included in the Lot-Tie Covenant, they would have been exempted from the RSO.  AR 287.

E. Analysis

Petitioner Westdale seeks mandamus to compel the City to set aside its denial of a RSO exemption and issue an exemption under LAMC section 151.28.B.

1. The LAMC Section 151.02 Definition of “Rental Unit” in Effect When the Project Plans Were Approved Applies

Whenever plans sufficient for a complete plan check are accepted by LADBS and a fee is paid, a vested right is granted to the project to proceed with its development in substantial compliance with the zoning, and development rules, regulations, ordinances and adopted policies of the City of Los Angeles in force on the date that the plan check fee is paid.  LAMC 13B.10.B.2.a (emphasis added).  This ordinance accords with Health and Safety Code section 18938.5(a).

Westdale submitted its application for building permits on May 12, 2014 and the City issued building permits in July 2016.  The Hearing Officer determined that the Project vested under the rules in existence when the permits were approved and issued in 2016.  AR 283.  The City previously conceded that “the pre-2017 exemption rule applied because the new construction permit had a plan check approved on 5/12/2016, therefore it had vested under the original exemption rules of LAMC 151.28.B.”  AR 130 (emphasis added). 

Westdale argues that the pre-2017 definition of “rental unit” applies.  Pet. Op. Br. at 9.  The City agrees.  Opp. at 6.

2. The Interpretation of LAMC Section 151.02

This case requires interpretation of the pre-2017 version of LAMC section 151.02, which provided the RSO definition of “Rental Unit” and expressly exempted: “Dwellings, one family, except where two or more dwelling units are located on the same lot.”  AR 127 (emphasis added). 

The construction of local agency charter provisions, ordinances, and rules is subject to the same standards applied to the judicial review of statutory enactments.  Domar Electric v. City of Los Angeles, (1994) 9 Cal.4^th 161, 170-72; Department of Health Services of County of Los Angeles v. Civil Service Commission, (1993) 17 Cal.App.4th 487, 494.  In construing a legislative enactment, a court must ascertain the intent of the legislative body which enacted it so as to effectuate the purpose of the law.  Brown v. Kelly Broadcasting Co., (1989) 48 Cal.3d 711, 724; Orange County Employees Assn. v. County of Orange, (1991) 234 Cal.App.3d 833, 841.

The court first looks to the language of the statute, attempting to give effect to the usual, ordinary import of the language and seeking to avoid making any language mere surplusage.  Brown v. Kelly Broadcasting Co., (1989) 48 Cal 3d 711, 724.  Significance, if possible, is attributed to every word, phrase, sentence and part of an act in pursuance of the legislative purpose.   Orange County Employees Assn. v. County of Orange, (1991) 234 Cal.App.3d 833, 841.  The statutory language must be harmonized with provisions relating to the same subject matter to the extent possible.  Id.  “The statute's words generally provide the most reliable indicator of legislative intent; if they are clear and unambiguous, ‘[t]here is no need for judicial construction and a court may not indulge in it. [Citation.]’” MCI Communications Services, Inc. v. California Dept. of Tax & Fee Administration, (“MCI”) (2018) 28 Cal. App. 5th 635, 643.

If a statute is ambiguous and susceptible to more than one reasonable interpretation, the court may resort to extrinsic aids, including principles of construction and legislative history.  MacIsaac v. Waste Management Collection & Recycling, Inc., (“MacIsaac”) (2005) 134 Cal.App.4th 1076, 1082 (quoting Riverview Fire Protection Dist. v. Workers’ Comp. Appeals Bd., (1994) 23 Cal.App.4th 1120, 1126).  Where ambiguity still remains, the court should consider “reason, practicality, and common sense.”  Id. at 1084.  This requires consideration of the statute’s purpose, the evils to be remedied, public policy, and contemporaneous administrative construction.  MCI, supra, 28 Cal.App.5^th at 643.  The enactment must be given a reasonable and commonsense interpretation consistent with the apparent purpose and intent of the lawmakers, practical rather than technical in nature, and which, when applied, will result in wise policy rather than mischief or absurdity.  Lungren v. Deukmejian, (1988) 45 Cal. 3d 727, 735.  Finally, statutes are not construed in isolation and every statute must be read and harmonized with the statutory scheme.  People v. Ledesma, (1997) 16 Cal.4^th 90, 95.  

Westdale argues that the plain meaning of the pertinent LAMC section 151.02 definition of “Rental Unit” excludes separate lots.  As such, the plain language demonstrates that lot and parcel are different terms.  Pet. Op. Br. at 9.[2]

Westdale argues that, even if the term “lot” is ambiguous in LAMC section 151.02 is ambiguous, the rules of statutory interpretation support its position.  In 2017, the City amended LAMC 151.02 to replace the term “lot” with the term “parcel”.  The fact that the City did so shows that they have different meanings.  The use of different terms – lot versus parcel – cannot be disregarded.  Pet. Op. Br. at 11.

Finally, Westdale argues that the legislative history of the 2017 amendment shows there are different meanings.   Pet. Op. Br. at 12.  On February 26, 2015, the Los Angeles Housing and Community Investment Department (“HCIDLA”) issued a memorandum for amendments to the RSO.  The memorandum stated that the purpose of the amendments was to “provide clarity for both tenants and landlords on the administration of the City’s rent stabilization and housing code enforcement programs.”  AR 200-01.  HCIDLA stated that LAMC section 151.02 needed clarification of the applicability of the RSO rental units located on the same parcel because of the legal distinction between the terms “lot” and “parcel.”  AR 203.  The memorandum expressly recognized that lots can legally be split into multiple parcels owned by different property owners and the current language would subject units to the RSO that were all located on the same lot but were different parcels.  HCIDLA recommended that the provision be amended to use the word “parcel” consistent with the County Assessor’s APN, “which is imperative to the determination whether a rental unit is subject to the RSO.”  AR 203.

Westdale argues that HCIDLA’s proposed amendment is strong evidence that Westdale’s interpretation of LAMC section 151.02 is correct.  No reasonable conclusion can be made that lot and parcel are not legally distinct terms.  Accordingly, the Hearing Officer’s decision that there is no difference between the two terms was improper.  AR 287.  Pet. Op. Br. at 12-13.

The City concurs that the word “lot” in the former version of LAMC section 151.02 has a plain meaning, but it argues that lot and parcel are equivalent terms.  LAMC section 151.02 does not set forth a definition of “lot”, but LAMC section 12.03, which is part of LAMC’s planning and land use section, defines a “lot” as:

“A parcel of land occupied or to be occupied by a use, building or unit group of buildings and accessory buildings and uses, together with the yards, open spaces, lot width and lot area as are required by this chapter and fronting for a distance of at least 20 feet upon a street as defined here, or upon a private street as defined in Article 8 of this chapter.” City RJN Ex. 1 (emphasis added).

The subject matter of LAMC section 12.03—the development of real property— supports the fact that the term “lot” in LAMC section 151.02 has the same meaning.  See Union of Medical Marijuana Patients v City of San Diego, (2019) 7 Cal.5th 1171, 1119 (terms defined by statute are presumed to have been used as the definition states).  Opp. at 6-7.

The City argues that LAMC section 12.03’s definition show that lot and parcel are interchangeable terms because a “lot” is defined as a “parcel of land.”  Nothing in LAMC section 12.03 suggests that the term lot does not apply to lot-tied property.  Indeed, the Lot-Tie Covenant states that the new apartment complex is governed by LAMC section 12.03.  AR 2.  Opp. at 6.

Further, courts defer to a city’s interpretation of its own regulations “unless no reasonable person could have reached the same conclusion on the evidence before it.” See No Oil, Inc. v. City of Los Angeles, (1987) 196 Cal.App.3d 223, 243-49. The deference is significant because agencies have the expertise to administer their laws, especially when the interpretation “includes careful consideration by senior agency officials.”  Yamaha Corp. of America v. St. Bd. Of Equal., (1998) 19 Cal.4th 1, 12-13. Thus, if the court were to find the term “lot” in LAMC section 151.02 to be ambiguous, LAHD’s interpretation is entitled to deference because it is reasonable.  Opp. at 8.[3]

In reply, Westdale notes that the HCIDLA memorandum recommended that LAMC section 151.02 be amended to use the word “parcel” consistent with the County Assessor’s APN.  AR 203.  Reply at 4-5. The County Assessor’s Handbook defines an “assessment parcel” for purposes of property tax assessment as follows:

“An ‘assessment parcel’ of land is an area of land in one ownership and one general use.  A parcel shows land area as it is actually owned and used rather than as it may have been plotted on subdivision or other maps.  It is an area of land that in the opinion of the assessor should be included under one description for assessment purposes after consideration of all legal factors.  [¶] A parcel may have been conveyed by one deed or by several deeds, and it may contain several lots or fractions of lots.”  Cafferkey v. City and County of San Francisco, (2015) 236 Cal. App. 4th 858, 868-69 (emphasis added).

The court agrees with the City (Opp. at 7, n. 5) that Westdale has argued that there is a difference between the terms “lot” and “parcel” without saying what either term means.  There is a difference, but it is immaterial.  LAMC section 12.03 applies, and it defines a “lot” as “[a] parcel of land occupied or to be occupied by a use, building or unit group of buildings….” City RJN Ex. 1 (emphasis added).  A parcel, therefore, is a piece of real property, whether or not it is raw land or improved by development.  A lot is a parcel intended for development or that is developed.[4] 

These differences are not significant for purposes of evaluating whether Lots 132 and 133 are subject to the RSO exemption in LAMC section 151.02.

2. Application of the Lot-Tie Covenant

As stated, the applicable version of LAMC section 151.02 provides the definition of a “Rental Unit” that is subject to the RSO and expressly exempted: “Dwellings, one family, except where two or more dwelling units are located on the same lot.”  AR 127 (emphasis added).  The issue becomes whether the parties intended the RSO to apply to the three Lots when they entered into the Lot-Tie Covenant.  The answer is that they did not because there were not two  or more dwelling units on the same lot.

As Westdale argues, the Project site covers three separate lots.  Lots 132 and 133 before the Lot-Tie Covenant were both “Non-RSO single-family dwelling.”  AR 281.  The City admitted that the Lot 132 and 133 single-family residences were not subject to the RSO.  AR 250, 281. 

The Lot-Tie Covenant is a written agreement.  As such, the normal rules of contract interpretation apply.  Contract interpretation is a matter of law.  Civil Code §§ 1636, 1639.  Courts should interpret a contract based on the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.  Rice v. Downs, (2016) 248 Cal. App. 4th 175, 185-86.  When the parties dispute the meaning of contract language, the first issue is whether the language is reasonably susceptible to the interpretation urged by the party.  Dore v. Arnold Worldwide, Inc., (2006) 39 Cal.4^th 384, 393.  If so, the court must consider all credible evidence offered to prove the intention of the parties.  Pacific Gas & Electric Co. v. G.W. Thomas Drayage, (1968) 69 Cal.2d 33, 39-40.  The parties’ undisclosed intent or understanding is irrelevant to contract interpretation.  Iqbal v. Ziadeh, (2017) 10 Cal.App.5^th 1, 8-9.

The Lot-Tie Covenant expressly states that it concerns three separate Lots.  AR 2.  The description of the property lists the three Lots.  AR 2.  The attached legal description also lists the three Lots and their APNs.  AR 4.  In the Lot-Tie Covenant, Westdale agrees that the three Lots would be “held as one parcel and no portion shall be sold separately.”  AR 2.  The purpose of doing so was to create a single building site for a 25-unit apartment building.  AR 2. 

There is nothing in the Lot-Tie Covenant that shows the parties intended the RSO to apply to the tied Lots.   The Lot-Tie Covenant did not combine the three existing lots into a single new lot.  While the parties agreed that the three Lots would be held as one parcel – i.e., not sold separately – this does not make Lots 132 and 133 subject to the RSO.  Had the City wanted to include the RSO in the agreement it could have done so; there is even a space for inclusion of LAMC provisions that would regulate the site and yet it is blank.  AR 2.  See Pet. Op. Br. at 10, 14.

Lot-tie agreements do not constitute a merger of subdivided parcels under the Subdivision Map Act.  Govt. Code §66451.10; van’t Rood v. County of Santa Clara, (2003) 113 Cal. App. 4th 549, 567.  The Subdivision Map Act “provide[s] landowners with elaborate procedural safeguards of notice and opportunity to be heard before their lots can be involuntarily merged.”  van’t Rood, supra, 113 Cal. App. 4th at 567.[5]  See also LAMC §17.10.1 (“[t]he filing of the final map or parcel map, pursuant to Div. 13B.7. (Division of Land) of Chapter 1A of this Code, shall constitute legal merging of the separate parcels into one parcel and the resubdivision of the parcel.”).  Pet. Op. Br. at 4; Reply at 10.

While a new APN was issued, this did not result in a merger of the three Lots.  “An assessor’s parcel number, also referred to as an ‘APN’ ... is a numerical identifier associated with a particular piece of property for property tax assessment purposes.”  MTC Financial Inc. v. California Dept. of Tax & Fee Administration, (2019) 41 Cal. App. 5th 742, 745, n. 4.  An APN does not show title.  An APN “will be used only for administrative and procedural purposes and will not be proof of title and in the event of any conflicts, the stated legal description noted upon the document shall govern.”  Revenue and Taxation Code §11911.1 (emphasis added).  Reply at 9-10.

The City’s conduct shows that it did not interpret LAMC section 151.02’s definition of “Rental Unit” to include tied Lots 132 and 133 within the exclusion of two or more dwelling units are located on the same lot, thereby making them subject to the RSO.  In September 2015, LAHCID employee Rosalind Barden (“Barden”) told Westdale that the RSO requires three affordable units for the exemption and all three affordable units need to meet the requirements of items #2 and #3 on the RSO application.  AR 63.  Barden informed Westdale of the size required for the third unit, and that it should ensure that the three affordable units are dispersed throughout the Project.  AR 63.

Westdale only deed restricted the third unit in the Affordable Unit Covenant to obtain the exemption as discussed with Barden.  On October 23, 2015, after receiving a draft of the Affordable Unit Covenant, Westdale noted that the third affordable unit was “suppose [sic] to be for the exemption from the RSO which is only a 30 year requirement.”  AR 62.  Barden agreed, stating that this was a “[g]ood catch.”  AR 62. 

Westdale’s October 23, 2015 email also pointed out that the Affordable Unit Covenant has different restrictions and number of years for the third unit than the two units for the density bonus.  AR 62.  The third unit is only “HUD Restricted” for 30 years rather than the more stringent “HCD Restricted” for the other two units for 55 years.  AR 17.  The Affordable Unit Covenant also allows for a higher rental rate on the HUD Restricted 30-year unit because it was addressing the RSO exemption whereas the other two units were for the density bonus.  AR 28 (Exhibit B).  Thus, the parties treated the third unit differently only because it was added to obtain the RSO exemption. 

The uncontradicted Nelson declaration summarizes Westdale’s understanding of the Lot-Tie Covenant and its effect:

·         LADBS told Westdale that the Lot-tie Covenant was required before building permits would issue, but never said it would create some obligation to comply with the Ellis Act for Lots 132 or 133 or make them subject to the RSO.  AR 100.

·         Westdale did not have “any inkling that this might be a LAHD requirement, especially given that both [single-family residences] were vacant (i.e., no tenants existed) and had been for several years.”  AR 100.

·         LADBS did not issue a LAHD clearance requirement for Lots 132 and 133 and did not inform Westdale during the demolition permitting process that the single-family residences on Lots 132 and 133 were subject to the RSO due to the existence of the Covenant.”  AR 101.

·         After obtaining entitlements to construct the Project in early 2015, the parties engaged in more than 40 email discussions/negotiations (particularly with LAHD employees Marites Cunanan and Barden) regarding an RSO exemption pursuant to LAMC section 151.28. At no time was Westdale advised by LAHD staff that the single-family residences on Lots 132 and 133 were considered by LAHD to be covered by the RSO due to recordation of the Lot-tie Covenant.  AR 101.

·         Instead, the City indicated that Westdale would receive an RSO exemption if it committed a third restricted unit, which it did “[u]nder pressure by LAHD, and only in light of the reasonable understanding that doing so was required to obtain the RSO Exemption.”  AR 101.  Pet. Op. Br. at 15.

The City’s actions are consistent with this understanding.  As Westdale argues (Pet. Op. Br. at 15), the City’s actions before LAHD decided to switch course show that Westdale’s understanding was mutual. 

The City argues that “lot” is defined in LAMC section 12.03 as a “parcel of land” and LAHD correctly interpreted the word “lot” in LAMC section 151.02 to include a parcel created by a lot-tie.  By any measure, the Lot-Tie Covenant created a “parcel of land to be occupied by a use, building or unit group of buildings” because Westdale developed a parcel occupied by a 25-unit building.  Westdale gained all the benefits of the Lots being considered one parcel and it is reasonable for the tied Lots to be regulated as one parcel.  This application of local regulation to lot-tied property is not particular to the City.  The County gives lot-tied property a new APN in place of the APNs each lot had before the tie.  AR 10161.  Opp. at 6-7.

The City contends that its admission there are still three Lots is not particularly significant.  It ignores the Lot-tie Covenant, the Affordable Unit Covenant makes no mention of the Lot-tie Covenant, and a lot can be both a single lot and a lot comprised of tied-lots per LAMC section 12.03.  Finally, the tied property could revert to separate lots if the Lot-Tie Covenant terminates in the future.  For that reason, the legal descriptions of the individual lots do not just disappear from City or County databases after there is a lot-tie agreement. But they are essentially defunct as individual lots unless the Lot-Tie Covenant is terminated.  Opp. at 8.

The City’s policy on the effect of a lot-tie only has to be reasonable, and making lot-tied parcels subject to rent regulation is reasonable.  The developer obtains significant benefits from a lot-tie,[6] and it would be anomalous to treat lot-tied parcels differently from non-tied parcels with respect to regulations that stem from the City’s police power.  See Birkenfeld v. City of Berkeley, (1976) 17 Cal.3d 129, 146 (“It is of the essence of the police power to impose reasonable regulations upon private property rights to serve the larger public good.”).  Opp. at 11-12.

The City also makes a series of arguments that Westlake wholly or partly rebuts.  First, the City argues that Westdale provides no supporting evidence that the City did not believe withdrawal under the Ellis Act was required for Lots 132 and 133.  There is no evidence that LAHD had actually considered the Lot-Tie Covenant or was even aware of it.  It is not mentioned in the Affordable Unit Covenant.  Westdale’s argument also falsely implies that LAHD conducts the RSO exemption review before the completion of the development, but that is not correct. Additionally, LAHD does not fill out the withdrawal forms—the property owner does.  AR 156-59.  An Ellis Act withdrawal form is not an agreement between the City and the developer; it is a form that tells LAHD what units are being withdrawn.  Opp. at 10-11.

Westdale correctly replies that Barden’s email shows she was a “Management Analyst II” for LAHCID.  AR 63.   Reply at 8, n. 5.  Thus, LAHD did not believe Ellis Act withdrawal was required for Lots 132 and 133.

Second, the City contends that Westdale wrongly argues that the purpose of the Affordable Unit Covenant was to ensure the RSO exemption.  Rather, the express purpose of the Affordable Unit Covenant was to provide Westdale with the applicable benefits of the Density Bonus Law (Govt. Code §§ 65915-18).  AR 11, 17.  Further, the Affordable Unit Covenant stated that the RSO would govern unless the owner obtains an exemption.  AR 12.  The Affordable Unit Covenant also has an integration clause which in part states that each party acknowledges that no representations or promises have been made by any party.  Both the integration clause and the express language disavowing an automatic RSO exemption belie Nelson’s declaration that the purpose of the Affordable Unit Covenant was to guarantee the RSO exemption.  Opp. at 12-13.

The City adds that Nelson’s declaration shows that the lot-tie was not considered at the time of the Affordable Unit Covenant, very likely because LAHD was not aware of it.  Nelson does not state that he ever discussed it with LAHD and his subjective intent about the Affordable Unit Covenant is irrelevant to its interpretation.  The Affordable Unit Covenant contains no representations about how many units must be restricted to qualify for the RSO exemption.  It only refers to the number required for the density bonus incentives, which is a distinct state statutory land use scheme.  Opp. at 13.

However, Westdale does not contend that the Affordable Unit Covenant guaranteed an RSO exemption, only that its negotiation shows the City understood that the exemption would apply.  The recitals of the Affordable Unit Covenant also expressly contemplate that, while the Project is subject to the RSO, Westdale may be entitled to the exemption: “WHEREAS, in reference to the Project, unless the Owner obtains a valid exemption from the RSO, the Owner acknowledges and agrees that while during the terms of this Agreement . . . the RSO shall still apply to the Project.”  AR 12 (emphasis added).  See Reply at 9.

Third, the City argues that LAHD employee Emma Garcia (“Garcia”) testified that LAHD’s established practice is to consider a lot-tied property as one parcel for the purposes of the RSO.  “So this joined all of the parcels, all of the lot and created one parcel, which is how the housing department viewed and analyzes applicability of the RSO.”  AR 250.  Opp. at 6-7.

Westdale replies that, other than this single statement by Garcia, there is no evidence in the record that this was the established practice of the City.  Reply at 6.  The court adds that the City’s actions show that it was not an established practice to consider a lot-tied property as one parcel for the purposes of the RSO, and that LAHD changed its position at a later unknown date.

Although not argued by Westdale, any City decision to apply LAMC section 151.02’s definition of a “Rental Unit” to include otherwise exempt lot-tied property may well be an unlawful regulation.  The Administrative Procedure Act (“APA”) requires that every regulation be adopted according to specific procedures.  Govt. Code §11340.5(a), (b).  A “regulation” is defined as every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any rule, regulation, order or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure.  Govt. Code §11342.600.  Any order which is a regulation as defined in Government Code section 11342.600 may not be enforced unless the order has been adopted as a regulation under the APA.  Govt. Code §11340.5.  The two-part test whether a rule constitutes a regulation subject to the APA is well established: “First, the agency must intend its rule to apply generally….Second, the rule must ‘implement, interpret, or make specific the law enforced or administered by [the agency], or . . . govern [the agency’s] procedure.”  Tidewater Marine Western, Inc. v. Bradshaw, (1996) 14 Cal.4th 557, 571 (quoting Govt. Code §11342(g), now Govt. Code §11342.600).  This definition sweeps “very broadly” (id. at 571) and ensures that all stakeholders may participate through a formal, public process in the adoption of any “regulation.” Id. at 568-69.  An agency’s statutory interpretation in the course of a case specific adjudication is not a regulation.  Tidewater, supra, 14 Cal.4^th at 571. 

The definition of “rental units” subject to the RSO in LAMC section 151.02 expressly exempts “[d]wellings, one family, except where two or more dwelling units are located on the same lot.”  Id. (emphasis added).  The City’s application of the lot-tied property to the same lot exception to the single-family exemption would be a rule of general application.  It would not a statutory interpretation of LAMC section 151.02 because the ordinance contains no language supporting an exception for multiple dwelling units on multiple lots, which is what a lot-tie is.

The City argues that a policy allowing the demolition of three RSO units to result in the whole complex becoming subject to the RSO is not extreme.  Westdale could have easily avoided this result. It evidently did not understand the effect of a lot-tie agreement and blames the City rather than the law of unintended consequences.  Westdale blames LADBS for not requiring an LAHD clearance for the demolition of Lots 132 and 133.  But Westdale applied for the permits in 2014, before tying the Lots, so LADBS would not have known LAHD clearances would be needed for the Lots 132 and 133.  In addition, LADBS does not administer the RSO, LAHD does, and the former will not necessarily be aware of the application of the RSO to previously exempt units.  Opp. at 11.

The court disagrees because the City’s position does not serve the RSO’s purpose.  Westdale wanted to create a single building site for the Project and was compelled by LADBS to enter into the Lot-Tie Covenant so as to prevent piecemeal sale of the Lots.  The Lot-Tie Covenant covered one RSO Lot and two single-family residence Lots not covered by the RSO.  To conclude that the two non-covered Lots were swept into the RSO by the Lot-Tie Covenant and Westdale’s failure to withdrew them flies in the face of the purpose of the RSO, which is to prevent excessive rent increases and to “provid[e] landlords with just and reasonable returns from their rental units.”  LAMC § 151.01 (emphasis added).  Neither purpose is served by the City’s position.  The City can have no concern for excessive rent for lots not covered by the RSO.  The City’s position would also allow an extreme result whereby the demolition of three RSO units results in a requirement that all new units, regardless of number, are subject to the RSO.  That is not the intent of the RSO. 

Additionally, equity lies in Westdale’s favor.  It would be inequitable to allow the City to use the Lot-Tie Covenant, recorded before building permits were issued, to sweep in Lots that are not subject to the RSO and then argue that the developer should have withdrawn those uncovered units under the Ellis Act.  The City should not be allowed to induce Westdale to accept a lot-tie and significant rent restrictions of two units for a density bonus with the mutual understanding of an RSO exemption after Westdale deed restricts a third unit, and then renege on that understanding. 

F. Conclusion

The Petition is granted.  A judgment and writ shall issue directing the City to set aside its denial of the RSO exemption and to issue an exemption under LAMC section 151.28.B.

Westdale’s counsel is ordered to prepare a proposed judgment and writ, serve them on the City’s counsel for approval as to form, wait ten days after service for any objections, meet and confer if there are objections, and then submit the proposed judgment and writ along with a declaration stating the existence/non-existence of any unresolved objections.  An OSC re: judgment is set for June 10, 2025 at 9:30 a.m.