Laguna’s Bootleg Housing War Now Waged in Court

Four years ago, when her neighbor became ill and paramedics had to weave through a street cluttered with cars, Denise Viviani became livid.

The packed street was a result of a neighborhood saturated with bootleg apartments. The illegal units, also called granny flats, had proliferated in then unincorporated South Laguna under relaxed county standards.

Today Viviani and hundreds of others involved in one of the most divisive battles in the city’s history are watching Orange County Superior Court, where Judge William F. McDonald is expected to rule on a class-action suit brought by bootleg owners. The suit alleges that Laguna Beach “embarked on an illegal scheme” to eliminate South Laguna’s bootlegs after the area was annexed to the city.

Lawyers estimate that as many as 600 people who own or rent bootlegs will be directly affected by today’s ruling.

On the one side are those who argue that the granny flats, tucked tightly along city streets, provide affordable housing for renters and additional income for property owners who often are stretching to make ends meet. On the other are those who say bootleg units have made their community shabby and less safe.

As a divisive issue in town, said Assistant City Atty. Hans van Ligten, “there is nothing that even comes close. Here you have some people who feel their personal economic resources are going to be destroyed, and you have other people who say their own neighborhoods are being changed.”

The lawsuit alleges that shortly after South Laguna was annexed in 1987, bootleg owners in South Laguna began receiving threatening letters from the city insisting that they dismantle their units immediately or sign an agreement that gave them up to five years to bring their units up to code or get rid of them. Residents over 60 were exempted until they sold the property.

“Vigilante groups,” the owners say, turned on their neighbors and funneled names of suspected owners of illegal units to city officials, an experience that scarred the community.

The city’s action, they say, violated the spirit of a state law named the Chacon Act, which encourages second units to provide more housing and sets more lax standards for them.

Van Ligten, however, says the state law applies to new units and that officials gave proper advice to bootleg apartment owners. Van Ligten said the city has a responsibility to make sure second residential units meet local building and zoning codes.

About 70 South Laguna residents signed the five-year agreements. For those whose granny flats could not meet city standards, the agreements were a way of buying time.

But some residents refused to sign. Harold L. Wilson, one of two named plaintiffs in the class-action suit, sought legal help instead.

“I found it unacceptable because it makes it impossible to ever finance your house and perhaps to sell it either, we don’t know,” said Wilson, who lives in a 42-year-old, oceanfront home with a downstairs bootleg. “If you try to sell it to someone with that cloud on the title, lenders will not refinance.’

Some South Laguna residents say they were misled by annexation proponents years ago and wish it had never happened.

“The whole crux of this (is that) when we were taken into Laguna Beach as a part of that city, we were told that nothing was going to change in our community and everything was going to be the way it’s always been,” said Mary Reynolds, president of the Assn. for the Preservation of Diversity in South Laguna, which was formed to protect bootleg property owners. “They were not a problem under the county, and why are they all of a sudden a problem in Laguna Beach?”

Should the court side with the city, owners of second units in South Laguna who did not previously sign the deal with the city will have to adhere to city law, which requires owners to either do away with their units immediately or file for a conditional-use permit, a process that can be cumbersome and expensive. Many of the apartments could never qualify for the necessary permits because they probably would not meet parking and building code requirements, van Ligten said.

“The probability of many of them meeting standards is pretty small, I think, because they were created illegally,” he said.

Without the income from second units to help feed their mortgage payments, said David Delman, attorney for the plaintiffs, some residents would be forced to move.

“A lot of people are worried,” he said. “I think you’ll see a lot of, especially elderly, people having no choice but to give up their homes.”

The suit focuses on the city’s handling of bootleg apartments during an 18-month period from the time of annexation until June, 1989, when Laguna Beach passed an ordinance establishing criteria for issuing permits for second units. The plaintiffs want 18 months to modify their bootlegs to meet the standards of the state Chacon Act, which they say are less restrictive than the city’s.

But Viviani said residents who increased their income by ignoring the law should not receive special consideration by the courts.

“Why should they be given time to legalize their property when they did it illegally to begin with?” she said.

Van Ligten said the city has a responsibility to enforce zoning and building codes intended to ensure the safety of living quarters in Laguna.

“There are a lot of issues the plaintiffs try to ignore that deal with the safety of these units,” he said. ‘One day a fire truck may not be able to get by a narrow spot in the road.’

Viviani said most residents support the city’s actions. But Laguna’s policy of not investigating second units unless a complaint is made has sparked tensions in the community.

“I think they support the city’s actions, but it has been a horrible thing to get involved with, with turning your neighbor in,” she said.