The California Coastal Commission, which has accused about 90 homeowners of abusing a low-income housing program in Dana Point, is awaiting a court decision that could shape the outcome of the agency’s 18-month-old enforcement action.
Orange County Superior Court Judge David C. Velasquez might rule soon on several key legal issues raised by property owners in Niguel Beach Terrace, a bluff-top enclave of condominiums that overlooks the ocean.
In a pending lawsuit against the commission, the homeowners are seeking to counter allegations that they violated deed restrictions by selling or renting their low-income units without state approval.
If the court rules in their favor and there is no successful appeal, it could force the commission to abandon its enforcement action, freeing the owners to do as they wish with their condominiums.
If not, the agency is set to continue its fight to preserve what remains of the affordable units by buying them back at a modest profit to the owner or modifying current deed restrictions.
“There could be the potential to settle the cases, but we could end up going to trial over the individual facts for each owner,” said Deputy Atty. Gen. Jamee Jordan Patterson, who represents the Coastal Commission.
The planning agency has overseen the state-mandated program at Niguel Beach Terrace since the early 1980s, when about 200 condos were sold at discounted prices to low-income people.
Under terms of the original sales contracts, buyers were obligated to live in the condominiums for at least 20 years or sell their properties back to a public housing agency at a small profit so the units could remain affordable housing.
Commission officials contend that some owners rented out their units during summers for $1,000 a week or more, while others leased their properties and moved out, a few to other states.
They allege that other condos were sold improperly at a handsome profit. Dwellings in the Niguel Beach complex, just south of the Ritz-Carlton hotel, fetched up to $300,000 when the enforcement action began. That is roughly five times the original sales price.
During a two-day hearing before Velasquez in September, the property owners asserted that the Coastal Commission cannot enforce the deed restrictions because they were unreasonable, and that the agency waited too long to take action -- in some cases only days before contract restrictions were to expire.
Velasquez has taken their arguments and the Coastal Commission’s under submission. The judge, however, has scheduled a hearing for Monday to determine whether he should remove himself from the case because he knows two Niguel Beach homeowners in the case.
Should Velasquez be allowed to rule on the matter, a settlement conference will be set after his decision.
Thomas D. Roth, a San Francisco attorney who helps represent about 80 Niguel Beach owners, argued during the September hearing that the state imposed an “unconscionable” contract on uninformed buyers who were neither represented by attorneys nor real estate agents.
The purchasers “were not familiar with the process, they felt they had no choice, and they did not know whether their contracts were fair or not,” Roth said.
The homeowners further contend that the commission and the program’s administration did nothing for years to enforce deed restrictions, although they were warned in the early 1990s that many of the Niguel Beach units were being rented out improperly.
“You can’t sleep on your rights too long,” Roth said. The commission “can’t ignore contract provisions for 20 years, then try to enforce them two days before they expire.”
Niguel Beach owners also argued that the program’s administration was so poor that it was difficult to find out whom to contact about getting permission to sell or rent their units.
Frustrated by the situation, some said they struck out on their own and rented their dwellings at below-market rates to tenants they thought were low- to moderate-income wage earners.
“They all complied with the program, so what is the Coastal Commission arguing about?” Roth said.
“They were renting to other low-income people. It is not really fair to take the units back” -- a penalty for renting, he asserts, that is not spelled out in the contract.
The state contends that many people who signed Niguel Beach sales contracts were aware of the deed restrictions or should have been. Those provisions, Patterson said, are not unlike other terms involving property sales.
The homeowners “are trying to say the contracts should be set aside because people were unsophisticated,” she said. “But you should read and understand a contract before signing it.”
Patterson noted that many Niguel Beach owners apparently understood their contracts because they were able to contact the commission to execute sales and to get permission to rent their units.
If homeowners do not obtain written consent to rent the property, Patterson said, that triggers the Coastal Commission’s right to force the sale of the unit through the program.
She also disputed claims that the commission did little to investigate past complaints that units were being rented and sold improperly.
“There have been efforts,” Patterson said.
“But if there were delays, that doesn’t change the requirements. The deeds say they can be enforced any time” within the life of the contract.