Laguna Attack on Granny Flats Upheld : Litigation: A judge upholds the city’s crackdown, meaning that owners of some second units may have to dismantle them or apply for special permits.

A Superior Court judge Wednesday let stand Laguna Beach’s crackdown on bootleg apartments, a decision which could affect up to 600 residents in one of the most bitter fights in the city’s history.

Judge William F. McDonald partially rejected a class-action lawsuit which alleged that the city illegally tried to eliminate South Laguna’s bootleg apartments. Those apartments had proliferated under more relaxed county standards before the area was annexed to Laguna Beach.

The ruling means many bootleg owners may have to immediately dismantle their illegal second units, apply for permits, or face civil charges. But many residents have said that they depend on the income from those apartments, also called granny flats, to make their mortgage payments.

“Those are the people who are really going to suffer,” said Mary Reynolds, president of the Assn. for the Preservation of Diversity in South Laguna, which was formed to protect bootleg property owners.

Reynolds said the city has placed property owners in a Catch-22 situation because they must apply for special permits despite the fact that their apartments don’t qualify.

Some South Laguna residents have railed against the second units, arguing that they create shabby neighborhoods and nearly impassable streets.

Denise Viviani, who has fought against bootleg apartments, said Wednesday: “I’m elated. I think it really is a victory for the city.”

Philip Smith, an attorney for the homeowners, said he will appeal the ruling. But Smith said he was “very gratified” by some of the judge’s findings on points of law in the case. Ultimately, he said, he is confident that his clients will win.

“We are very pleased we prevailed on almost every legal issue we submitted to the court except the actual outcome,” Smith said. “We acknowledge it is a complicated decision. It is a very difficult issue.”

The suit focused on the city’s crackdown during an 18-month period from December, 1987, until June, 1989, when a city ordinance was adopted regulating the apartments.

During that time, South Laguna residents said they received threatening letters from the city, insisting that they dismantle their second units immediately or sign an agreement that would give them up to five years to get rid of the apartments or bring them up to code. The agreement exempted residents over 60 as long as they owned the property.

“Vigilante groups,” the plaintiffs had complained, turned on their neighbors and gave names of suspected bootleg apartment owners to city officials, an action that divided the community.

Plaintiffs say the city’s action violated the spirit of a state law which encourages second units to provide more housing and which relaxes some standards for them. The plaintiffs asked the court to give them 18 months to modify their apartments to meet those state standards.

In his ruling, McDonald agreed that the state standards did apply during that 18-month period. But he said he agreed with the city that the permit applications received during that time were incomplete.

City Atty. Phil Kohn said that City Council members probably will do one of two things at their meeting Tuesday. They will either require bootleg owners to immediately dismantle the apartments or apply for a conditional use permit, or they may allow owners to sign the previously offered agreement.

Harold L. Wilson, one of two named plaintiffs in the class-action suit, had refused to sign the agreement because he said it places a “cloud on the title” and means lenders will not refinance the home.

“I’m let down,” Wilson said Wednesday. “My sense of outrage and injury against the city is not diminished at all by the adverse decision of the court. I heartily concur with the attorney’s decision to appeal.”