Q: We represented the Buyers of a large lot in 2020. The Property included a residential structure that had been partially damaged in one of the big wildfires. When they bought the Property, they intended to tear down the remains of the original 1,200 square foot house and build a new 3,400 square foot home with a separate tasting room for their winery business, which is also in the area. During escrow, their contractor and architect determined that the proposed changes met the applicable zoning laws so the Buyers closed escrow.
The local jurisdiction is now denying approval based upon the fact that the distance from the main access street to the home exceeds the 800 ft. maximum distance that is necessary for safety purposes and because they are changing the use of the Property. The Buyers are upset and do not understand how the City can deny their project. They have hired an attorney who is trying to get a handle on who is responsible for this mess. I am worried that they may try to sue me. I am confused as to how this situation could have happened. Help!
A: Buyers can always attempt to sue Agents when they are upset with the condition, value, or development potential of their property; the bigger question is whether there is any liability exposure for you and your Broker because the Buyers cannot develop the Property as they had intended? The good news here is that the Buyers had their own contractor and architect make an independent determination of what could be done with the Property and thus, arguably. the Buyers were not relying on you to make that assessment. As long as you did not make any representations or provide any assurances as to what the Buyers could do with the Property, you should have minimal, if any, liability exposure.
This type of post-Close of Escrow problem exemplifies why Agents should always recommend that Buyers retain their own independent experts to evaluate the future use and development of a Property. There are many laws, local regulations and construction requirements that impact what can be done with any given property and Agents should not advertise the future potential of any property or provide any opinions about what can be done in the future – nothing in life is certain and predicting the future is not an Agent’s duty.
Laws change over time, and it is difficult to always know what development or building requirements may be imposed at the time a property owner submits a development plan or building application. What is also critical for everyone to recognize is that zoning is only one of several factors that must be considered when evaluating the future use and development of any property; the availability and cost of infrastructure such as roads, water, electricity, and other services often create significant impediments to an owner’s future plans.
Now, the new fire regulations created by legislation passed after the big wildfires occurred must also be taken into consideration in determining what can be built or rebuilt and what the property can be used for especially in those areas of California that are more susceptible to wildfires than other parts of the state.
SB 901- WILDFIRE PROTECTION PACKAGE
Enacted in 2018, SB 901 was designed to address the effects of catastrophic wildfires across the state of California and to develop strategies to prevent future wildfires. SB 901 revamped the rules governing how much utility companies (such as PG & E) must pay for causing fires and it also revised multiple California statutes to force local governmental entities and property owners to take on some of the responsibility for minimizing the damage caused by wildfires.
One of the key elements of that bill authorized CalFire to develop regulations for safety standards and fuel break setbacks for commercial and residential developments in very high fire severity zones commencing on or after July 1, 2021. This new law did not just create a seller disclosure obligation; it implements minimum fire safety standards related to defensible space requirements for residential construction.
SB 901 mandated the expansion of the scope of CalFire regulations to include those lands designated as Very High Fire Hazard Severity Zones (“VHFHSZ”) located in State Fire Responsibility Areas (“SRAs”). Effective July 1, 2021, the 2018 law has been expanded to Local Responsibility Areas (“LRAs”) which are typically located within cities. These regulations provide that a homeowner can rebuild their home if it was burned down, BUT they cannot increase the square footage of the structure or change the use of the existing structure.
The harsh reality is that many construction projects are on the radar of the local fire districts and any other governmental entity that is charged with the responsibility of enforcing CalFire regulations; they will be considering such issues as whether there are multiple means of ingress and egress to the area and/or adequate turn-around space for fire engines (a problem that often exists with dead-end roads).
Current and future efforts to rebuild or develop properties will be impacted by the fire safety regulations and Buyers who intend to expand, modify, renovate, rebuild, or otherwise change the use or size of structures on properties located within Very High Fire Hazard Severity Zones should investigate the potential impact of all CalFire regulations as well as zoning and other issues on their planned use and development of the Property.
PRACTICE TIPS:
- Agents should not advertise the potential future use or development of any property; avoid indicating what “may” be possible. If the Buyer cannot use or develop the property as advertised, then the advertised use or development is not possible; at that point, the Agent faces liability exposure for false advertising.
- Agents should not give any opinions regarding the ability of a Buyer to change the use, size, or development of any property; since it is not the duty of an Agent to predict the future, make no effort to do so.
- Buyers who intend to expand, modify, renovate, rebuild, tear down, build, develop, or change the size or use of any property should be encouraged, in writing, to retain the services of construction and development experts (e.g., contractors, architects, land use consultants) to determine what the Buyers can and cannot do with the Property, preferably before the Buyers remove any investigation contingencies.
ATTORNEY-CLIENT PRIVILEGED COMMUNICATION: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
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