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«JOURNAL OF LAW, ECONOMICS & POLICY VOLUME 10 SPRING 2014 NUMBER 2 EDITORIAL BOARD 2013-2014 Steve Dunn Editor-in-Chief Crystal Yi Meagan Dziura Sarah ...»

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103 Testimony of D. Leeper, supra note 15, at 98.

2014] NATURE ABHORS A VACUUM AND SO DO LOCAL GOVERNMENTS 363 Chula Vista anticipated problems and in 2007 enacted the CVAPO.

The city council expressly declared that the purpose of its regulatory scheme was to avoid blight.104 It is the purpose and intent of the Chula Vista City Council, through the adoption of this chapter, to establish an abandoned residential property registration program as a mechanism to protect residential neighborhoods from becoming blighted through the lack of adequate maintenance and security of abandoned properties.105 To achieve its purpose, the CVAPO “compels”106 the lender to assume the borrower’s contractual obligation to maintain and secure the property.107 The CVAPO completely eviscerates a provision in the standard deed of trust that grants the lender the contractual right to exercise its own discretion as to when to advance funds to secure and maintain the collateral property108 by forcing the lender to undertake the borrower’s maintenance obligations without regard to the lender’s pre-loan-closing risk and cost analysis. This renders the deed of trust provision meaningless or, more accurately, the CVAPO rewrites this provision so that it reads the exact opposite of 104 CHULA VISTA, CAL., MUN. CODE § 15.60.010 (2013).

105 Id. (emphasis added).

106 Testimony of D. Leeper, supra note 15, at 101.

107 The typical deed of trust provision states in part,

7. Preservation, Maintenance and Protection of the Property; Inspections. Borrower shall not destroy, damage or impair the Property, allow the Property to deteriorate or commit waste on the Property. Whether or not Borrower is residing in the Property, Borrower shall maintain the Property in order to prevent the Property from deteriorating or decreasing in value due to its condition.

California-Single Family-Fannie Mae/Freddie Mae Uniform Instrument, Form 3005 01/01 § 7 (italics added).

108 The relevant portion of the typical deed of trust provision reads in part, 7.... Lender or its agent may make reasonable entries upon and inspections of the Property.

If it has reasonable cause, Lender may inspect the interior of the improvements on the Property. Lender shall give Borrower notice at the time of or prior to such an interior inspection specifying reasonable cause.

9. If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, (b) there is a legal proceeding that might significantly affect Lender’s interest in the Property and/or rights under this Security Instrument (such as a proceeding in bankruptcy, probate, for condemnation or forfeiture, for enforcement of a lien which may attain priority over this Security Instrument or to enforce laws or regulations), or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument, including protecting and/or assessing the value of the Property, and securing and/or repairing the Property.... Securing the Property includes, but is not limited to, entering the Property to make repairs, change locks, replace or board up doors and windows, drain water from pipes, eliminate building or other code violations or dangerous conditions, and have utilities turned on or off. Although Lender may take action under this Section 9, Lender does not have to do so and is not under any duty or obligation to do so. It is agreed that Lender incurs no liability for not taking any or all actions authorized under this Section 9.

California-Single Family-Fannie Mae/Freddie Mae Uniform Instrument, Form 3005 01/01 §§ 7, 9 (emphasis added).

34364 JOURNAL OF LAW, ECONOMICS & POLICY [VOL. 10:2

what the parties intended—the lender will now be responsible for what the borrower had agreed to do.

The following part of this article examines the question of whether the CVAPO is constitutionally valid as an application of police power. Is a local ordinance that impairs a contract under the justification of public health and safety valid when there is no data to establish that blight actually exists? Is a local ordinance that impairs a contract for the sake of public health and safety arbitrary and unreasonable when local government already has other alternatives, including a range of land use regulations applicable to the borrower to clean and repair property that is in poor condition?109 An analysis of the issue of validity requires the classification of the CVAPO as a land use regulation concerned with blight or as a public nuisance ordinance primarily concerned with untidy and unsightly properties— because courts review these two types of regulations differently.110 Under this latter classification, it is important as well to evaluate whether the CVAPO is arbitrary and whether it is unconstitutionally vague.

B. The Classification of the CVAPO and Its Validity

The CVAPO could be classified as a regulation that seeks the prevention of blight because the CVAPO itself and city staff statements given to the city council repeatedly refer to concerns about blight. Typically, blight is spoken of in the context of a neighborhood that requires extensive clean up, so much so that the local government uses a redevelopment project to rehabilitate the neighborhood. Yet, the CVAPO does not involve a redevelopment plan and the testimony and information provided by city staff does not mention a redevelopment plan. From another perspective, the CVAPO appears to be tantamount to a public nuisance ordinance in that it emphasizes the elimination of property conditions and appearances that negatively affect the safety and values of the property and the neighborhood. Despite the stated purpose of blight prevention, the emphasis upon the condition of the property and the neighborhood indicates that the CVAPO is best classified as a general land use regulation that deals with public nuisances. Given these two possible classifications, the CVAPO will be examined under the standards for a regulatory scheme that deals with blight and the standards for a general land use regulation involving public nuisances.





109 See infra note 153 and accompanying text.

110 This is the case at least in California, where statutes and case law treat these two types of regulations differently. Compare supra sources cited and text accompanying note 104 with infra sources cited and text accompanying note 112.

2014] NATURE ABHORS A VACUUM AND SO DO LOCAL GOVERNMENTS 365

1. General Validity of Land Use Regulation

In general, land use regulations are constitutionally permissible under government’s implied police power. The U.S. Supreme Court has declared that such power is understood to enable local government to protect the public health, safety, morals, and welfare.111 The regulation must be substantially related to a legitimate government objective and cannot be arbitrary, capricious, or unreasonable.112

2. The Validity of the CVAPO as a Regulation to Eliminate Blight

California courts have upheld regulations with an objective to eliminate blight as a legitimate exercise of a government’s police power.113 Such regulations must relate to and adopt a particular redevelopment plan as the means to eliminate blight in the area the project covers.114 For purposes of a municipality’s redevelopment project, the California legislature defines a blighted area as one that consists of both a “predominantly urbanized” area and an area with a combination of [physical and economic] conditions set forth in [California Health & Safety Code] Section 33031 [that] is so prevalent and so substantial that it causes a reduction of, or lack of, proper utilization of the area to such an extent that it constitutes a serious physical and economic burden on the community that cannot reasonably be expected to be reversed or alleviated by private enterprise or governmental action, or both, without redevelopment.115 111 Berman v. Parker, 348 U.S. 26, 28–29 (1954); Vill. of Euclid v. Ambler Realty Co., 272 U.S.

365, 392 (1926); Mugler v. Kansas, 123 U.S. 623, 659 (1887).

112 Nectow v. City of Cambridge, 277 U.S. 183, 187–88 (1928); Vill. of Euclid, 272 U.S. at 395 (1926); see also Kucera v. Lizza, 59 Cal. App. 4th 1141, 1147 (1997) (“The constitutional measure by which we judge the validity of a land use ordinance assailed as exceeding municipal authority under the police power is whether it has a real or substantial relation to the public health, safety, morals or general welfare. Conversely, it is unconstitutional only if its provisions are clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.”).

113 E. Bay Mun. Util. Dist. v. Richmond Redevelopment Agency, 93 Cal. App. 3d 346, 355–56 (1979).

114 See infra note 118. The financial crisis in California brought about a 2012 change in California law that eliminated local governments’ redevelopment agencies and redirected funds held by such agencies to the state. This dramatic shift with the new legislation was motivated by the state’s need to make up a substantial budget deficit and primarily dealt with the financing of redevelopment. See T.

Brent Hawkins, The Rise and Fall of Redevelopment in California, 30 CAL. REAL PROP. J. 4, 4–8 (2012). Though it may be unclear how local government will finance local redevelopment in the future, the courts most likely will continue to rely on the underlying policies of accountability and limits on police power to require local government to justify a redevelopment plan with substantial evidence that there is in fact a blight problem.

115 CAL. HEALTH & SAFETY CODE § 33030(b)(1) (West 2011).

35366 JOURNAL OF LAW, ECONOMICS & POLICY [VOL. 10:2

Briefly put, blight involves physical and economic conditions116 that are so prevalent and substantial that “a serious physical and economic burden on the community”117 is created.

When a redevelopment plan is under consideration to solve a blight problem, there must be a finding that “a project area is blighted in order to establish a redevelopment plan.”118 “[F]indings of blight must be supported by substantial evidence in the administrative record.”119 When the record lacks findings of blight, the ordinance that adopts a redevelopment plan will be invalidated.120 This threshold requirement ensures that a local governmental ordinance that adopts the redevelopment plan to eliminate blight satisfies the state statute and passes constitutional muster in that the underlying data the local government relies upon establishes that the regulation is a “legitimate governmental function.”121 Accordingly, a vacant property registration ordinance enacted to prevent blight that might result from a high number of foreclosures must be based on substantial empirical data that establishes the existence of blight before such an ordinance can be valid. Since the ultimate objective of the CVAPO is to prevent blight, and by its ordinance the city employs an expansive reach of its police power, the CVAPO must also be held accountable to the threshold requirement of a finding of blight grounded on substantial empirical data.

The Chula Vista legislative body appears to have failed to provide substantial evidence of actual blight. The Recitals of the CVAPO and comments provided by city staff to the city council attempt to connect incidents of “risky financing arrangements” and an increase in foreclosures with the threat of blight in the city.122 However, the public records related to the public hearing for the CVAPO do not set forth the data that established that blight was a problem at the time of the passage of the CVAPO.123 At the most, city personnel’s statements and information should be interId. §§ 33030 (b)(2), 33031 (a)–(b).

117 Id. § 33030 (b)(1) (emphasis added).

118 County of Los Angeles v. Glendora Redevelopment Project, 185 Cal. App. 4th 817, 832, 111 Cal. Rptr. 3d 104, 116–117 (2010) (explaining the criteria that must be found for there to be a finding of blight); Boelts v. City of Lake Forest, 127 Cal. App. 4th 116, 120, 136–37, 25 Cal. Rptr. 3d 164, 165– 66, 178–80 (2005) (holding the city’s assertions were conclusory and failed to meet the definition of blight; city unsuccessfully argued there was blight because, among other reasons, a shopping center had antiquated design, twenty-three commercial vacancies, and signs of deterioration and deferred maintenance; the court pointed out that the city failed to show a connection between the project and health and safety problems, structural defects, or depreciation of property values); Friends of Mammoth v. Town of Mammoth Lakes Redevelopment Agency, 82 Cal. App. 4th 511, 560 (2000) (insufficient evidence to support the project even though 29% of buildings affected by deterioration and dilapidation).

119 Beach-Courchesne v. City of Diamond Bar, 80 Cal. App. 4th 388, 400 (2000).

120 Id. at 391.

121 E. Bay Mun. Util. Dist. v. Richmond Redevelopment Agency, 93 Cal. App. 3d 346, 356 (1979).

122 See infra text accompanying notes 124–30.

123 Id.

2014] NATURE ABHORS A VACUUM AND SO DO LOCAL GOVERNMENTS 367 preted to mean that the volume of foreclosures could lead to blight. Thus, it is fair to ask whether Chula Vista was suffering “a serious physical and economic burden” as a result of “physical and economic conditions” before the ordinance was enacted in 2007. Without the data, it appears that the city council did not make a reasonably based finding of blight at the time of enactment.



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