The developer of an El Sereno residential project overcame a legal challenge this year that its project head hopes may help his peers fend off battles of attrition that can stymie growth in L.A.

The True Life Cos. LLC, a Denver-based developer, in January prevailed in a California appellate court decision that cast aside a lawsuit challenging the project, on the basis that the suit was filed beyond the appropriate statute of limitations. That project, managed under TTLC Los Angeles – El Sereno LLC, is now in the permits stage, a process that will lead to the construction of 42 homes on a hillside El Sereno lot.

“Sitting here today, we’re now going to move forward,” said Aidan Barry, an executive vice president at TTLC who is running the El Sereno project. “We have an approved vesting tentative map. It will take me another six to eight months to get a grading permit.”

And while the ruling does not do anything to bar such legal challenges to environmental reviews for real estate development, it does strengthen a precedent to limit how late into a project’s planning stage one can petition to challenge that environmental review. This represents a big deal for developers, who can spend years in expensive litigation – “death by a thousand cuts,” Barry described it as – fighting such challenges.

“Delay is a frequently used arrow in the quiver of project opponents,” said Brooke Miller, a special counsel with downtown-based Sheppard, Mullin, Richter & Hampton LLP who represented TTLC in the suit, “and this is one case that will reduce that impact and hopefully avoid some of that delay.”

Project background

El Sereno LLC’s current project dates back to 2017, when TTLC’s predecessor submitted an application for a vesting tentative map for the small-lot development.

The city determined that TTLC needed to obtain a mitigated negative declaration and also apply for a zoning change to allow the small lots on the property, which is located where North Eastern Avenue meets Lombardy Boulevard in El Sereno and which was already zoned for residential development but not for small lots. In project applications, the lead agency – in this case the city of Los Angeles – asks for a mitigated negative declaration, instead of the more onerous environmental impact report, or EIR, when it has determined that the proposal adequately mitigates any potential significant environmental impacts to the area.

The city’s advisory agency approved the negative declaration, along with the tentative map, conditioned on a zoning change to permit small lots, in May 2020, and filed a notice of determination – basically, a public document from the agency signaling that it had approved a project that in some way fell under the California Environmental Quality Act, or CEQA.

Shortly after that, Barry said TTLC made a “business decision” to work toward a settlement over a lawsuit filed by an open space-advocacy group. In that settlement, which was agreed to later that year, TTLC agreed to plant an additional 225 black walnut tree seedlings on the property, as well as limit the amount of land grading and retaining-wall construction on the project. After that lawsuit was dismissed, the city’s planning and land use committee approved permits for the retaining walls and recommended in favor of the rezoning later that year – triggering another notice of determination – and the L.A. City Council formally approved the rezoning for the project, 14-0, in June 2021 – which triggered a third notice.

Fighting a lawsuit

And then came a second lawsuit, this time challenging the negative declaration and asking for an EIR. Barry said his company, in the face of this familiar tactic – an activist group waiting until the last possible moment to challenge a development, in hopes of winning a war of attrition to stop it – decided it was time to say “enough is enough.” Miller, who is based in San Diego, said she felt the case was solid – to her reading, the law indicated that the 30-day statute of limitations to challenge a CEQA project began after the first notice of determination.

“CEQA has a policy – and the legislature is very direct about this – that once you’ve gone through CEQA review and disclosed potential impacts, the project proponent is entitled to rely on that,” she explained. “It’s very clear that that document is not reopened on subsequent discretionary approval.”

However, Barry soon figured that the fight would probably have to reach the appellate courts.

“We went into full-blown litigation mode and decided to fight that one,” he continued, “but it became clear to us that, researching the record of the judge who got this one, that we were not going to win the lawsuit. We were right – the ruling ultimately came down in favor of (the plaintiff), with the judgment that we needed a full-blown EIR to be done. We decided then to appeal.”

The bet worked – the appellate panel unanimously reversed the lower court’s decision, holding that the changes to the project since the negative declaration was approved and noticed did not significantly change the project, meaning that the first notice triggered the statute of limitations. Nearly four years after its initial review hurdle the project is likely clear to proceed, unless the plaintiffs successfully appeal to the state Supreme Court.

“That’s almost four years that this project has been in limbo from when it was first approved,” Miller said. “Things like this should not be taking four years.”

Hopeful benefits

Barry said he hopes this decision will benefit developers, since opponents would be forced to file their CEQA-based petitions at the earliest juncture. It does not stop those challenges, he noted, but even a yearlong delay can bloat the ultimate cost of a project – which is part of the reason that housing in California is so expensive. Barry estimated that after $3 million per acre of horizontal work on the site and $150 per square foot of construction, these homes would market for about $1.2 million if they were listed today.

“I have to add all of those legal costs to the price of the home,” Barry said. “The more time that goes on, it’s not just the legal fees. It’s the cost of that effort, plus the rising cost of materials.”

Mark Weinstein, president of Sawtelle-based MJW Investments, said the propensity for development projects to get drawn out an indeterminate length of time was a major influence in the company pulling out of developments in California altogether around a decade ago.

“One of the reasons why we stopped doing developments was the uncertainty in the length of time it took a project to approved. It really made it more costly and uncertain that you could get a development off the ground,” he said. “Los Angeles was a real challenge. Everything was slow. There was a lot of bureaucracy, and this was just one of the things that made it difficult to deal in Los Angeles.”

Weinstein added that the appellate court’s decision would probably be welcomed by those still developing here, because that ruling affirmed that challenges to a largely unchanged project need to be filed often years earlier than would have been done previously.

“All time savings saves costs. With anything that you do, when you get things done quicker, it saves money,” he said. “This is a really great first step to revisit all of these CEQA rules. It was great that the courts were behind it, and it brings more certainty to people in development. I think it’s a really great thing.”

With that in mind, once the El Sereno project – TTLC’s first in L.A. proper – is completed, will the company take on another?

“We will think very hard about our next one,” Barry said. “We’re obviously pleased to move forward and put 42 homes in L.A.”