Megamansion developers in Los Angeles got a big win this month after the California Supreme Court significantly restricted the circumstances in which single-family homes can be subject to costly environmental reviews.

As some homes in posh communities such as Bel Air and Beverly Hills have come to rival the size of shopping centers, foes of mansionization have argued the massive projects should be held to the same standard as large commercial developments. They frequently use the California Environmental Quality Act, or CEQA, as a cudgel to fight such plans in court.

But the high court’s March 2 decision raises the bar for opponents to use CEQA to demand environmental reviews for single-family home projects. The ruling put the onus on opponents of a project to document the alleged environmental impact before they can bring a CEQA action.

Tim Piasky, chief executive of the Building Industry Association of Southern California’s L.A. and Ventura chapter, said he hoped the ruling would put a stop to some of the litigation surrounding these projects.

“The original intent of CEQA, which we agree with, is to protect the environment. But project opponents are abusing CEQA and using it as a method to stop or oppose projects just because they don’t like them,” he said.

Indeed, the law has been the go-to vehicle for disgruntled neighbors fighting construction projects in their communities, who only needed to suggest that a project might have a negative environmental impact.

“A year or two ago, no one was using CEQA to stop (residential) developers,” said Edgar Khalatian, partner in the downtown L.A. office of law firm Mayer Brown who regularly represents developers in land-use disputes. “It’s very frustrating for them because they know that’s not what CEQA was intended to do. Now they feel vindicated.”

The court’s decision is unlikely to affect developments already in the pipeline, such as a partly built megamansion on Strada Vecchia Road in Bel Air being built by Mohamed Hadid. That project has been on hold since the city of Los Angeles revoked its building permits last year and issued a stop-work order. Hadid has endured significant opposition from neighbors over the 30,000-square-foot home.

However, the ruling could simplify the process for similar controversial projects in the future.

Homebuilders required to develop a plan to reduce the environmental impact of their project can spend $50,000 to $75,000. A full environmental impact report required under CEQA can cost up to $250,000 – much more than a mitigation plan – and take about nine months longer to complete.

Khalatian said this month’s ruling will strengthen developers’ argument that their projects are exempt from environmental review.

“It will give developers more confidence,” he said. “I just think it will make the process easier.”

Split decision

The highly anticipated decision was nearly six years in the making.

The dispute originated in Berkeley after Mitchell Kapor, founder of Lotus Development Corp., and his wife, Freada Kapor-Klein, sought to demolish an existing house on a steep hill and replace it with a nearly 10,000-square-foot home.

An architect applied for a permit through the city of Berkeley in 2009, which was finally approved the following year after the city determined the home is exempt from CEQA review.

Outraged opponents took the matter to court, fearing the construction would increase the risk of landslides. The trial court ruled in favor of the city, agreeing with its decision to hold the single-family home exempt from review, but an appellate court reversed the ruling.

A state Court of Appeal found enough evidence to show “the proposed project may have a significant environmental impact” and ordered developers to complete an environmental impact report.

That’s when California’s high court took the case.

In a 67-page opinion written by Justice Ming W. Chin, the court overturned the appellate court’s decision, voting unanimously in favor of the city of Berkeley.

“It is not enough for a challenger merely to provide substantial evidence that the project may have a significant effect on the environment,” Chin wrote. Challengers now have to show definitively that the project will have a significant effect on the environment.

Land-use lawyer Ed Casey, partner in the downtown L.A. office of Alston & Bird, said the decision is poised to give municipalities more authority to determine whether a planned project should be exempt from CEQA review, but noted that some very large and unusual homes might still require further analysis.

“The lead agencies, they’ve got the boots on the ground,” he said, “so they really are in the best place to make the determination.”

Noah Muhlstein, planning deputy in Los Angeles City Councilman Paul Koretz’s office, said the impact on a local level is still unclear and that he was working with the City Attorney’s Office to determine if changes were needed to the city’s permit process.

The Building Industry Association’s Piasky said developers, in general, are relieved to finally have clarification on the issue, but challenges still remain.

“It does not fast-track mansionization,” he said. “It merely provides more certainty to the CEQA exemption. These projects still have to meet all the planning and zoning requirements, and all the rules and regulations that are still in place.”

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