Developers Beware! Comply with the California Environmental Quality Act or Go Broke

California’s Environmental Quality Act (CEQA) was enacted in 1970.  The law has undergone  numerous amendments and has been the subject of countless published court opinions, which often have confused legal scholars and non-lawyers alike.

Generally speaking, CEQA requires that governmental entities (counties, cities, public utilities, the State of California, etc.) analyze the actual and potential environmental impacts of proposed “projects” and make the studies available for public comment.  When a particular study shows a significant adverse impact to one or more aspects of the environment, such as noise, traffic or air quality (among others), which cannot be mitigated (lessened), CEQA requires that the governmental entity prepare and publish an environmental impact report, which can cost several hundred thousand dollars, depending on the size and type of the project in question.

CEQA imposes  duties on the governmental sub-division that acts as the lead agency for the subject project, but the financial burdens for compliance fall on the developer of the  real  estate.  This is because the governmental sub-divisions that are responsible for the processing a land use applications look to the project developers to pay for the studies and for the legal consequences of a violation.

Assume you want to build a small strip mall in a  county in California.  Although the county in question would be the “lead agency” under CEQA and required to comply with its provisions, the county will require you to pay for all of the environmental studies.  Assume that you pay hundreds of thousands of dollars to study the environmental consequences of your project and you do everything the county officials tell you to do.  At the end of the process, you would have spent somewhere around a half million dollars. You get the final approval from the county and you are ready to break ground…until some organization you never heard of, with a  lawyer you’ve never heard of, files a lawsuit against you and the county for violating CEQA.  Impossible, you say?  It happens every day.  The county will then look to you to pay for its defense of the lawsuit. If the lawsuit is successful, the court could order you to start over.

And, it does not end there.  The attorney you’d never heard of will ask  the county to  pay for his or her legal services to the group you’d never heard of (and he or she will be entitled to an award of attorneys fees under CEQA), then the county will look to you pay the attorney you’d never heard of who just torpedoed your project.  Financially devastated yet?

CEQA is extremely confusing for even the most seasoned lawyers, as illustrated in the case of Sunnyvale West Neighborhood Association v. City of Sunnyvale City Council.  In this case, the City of Sunnyvale, California  proposed an extension of one of its streets.  The final environmental impact report, which no doubt cost the City a lot of money to prepare, studied potential impacts to the environment in the year 2020, when the project was expected to be completed and in use.  The Court of Appeal affirmed the trial court’s ruling to set aside the City’s approval of the project on the ground that the City did not comply with CEQA because it failed to address the PRESENT impacts caused by the project.  Indeed, utilizing the year 2020 as a baseline was not enough under CEQA.  Although this case did not involve a private developer, it illustrates the point that even a City, with millions of dollars in resources at its disposal to pay for sharp attorneys and bright engineers, can get it wrong.  Had this been a privately proposed project, the developer in question would have been crippled financially.

Those  who wish to develop their real property in California are best served to seek competent legal counsel in advance of their project being submitted through the application process. This will to make certain that the governmental sub-division that processes their land use application do so correctly.  The Sunnyvale case shows that the government makes mistakes…mistakes for which it will expect you to pay.