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Wednesday, May 18, 2011

Coastal Commission Workshop May Foreshadow Land Panel’s Actions

• Controversial Development Package Prompts Close Look at Subject of Parcel Ownership

BY BILL KOENEKER

The California Coastal Commission held a workshop last week ostensibly to discuss single economic parcel theory and assessing what is also called unity of ownership and how a takings claim could be involved.
Experts were chosen from all over the country to participate in the half-day session. The public was allowed to speak and ask questions after the presentations.
What is behind it all are the pending applications for five homes planned for the upland area above Sweetwater Mesa.
Both the public and the Coastal Commission, after years of secrecy, knows one of the owners is David Evans, also know as The Edge, a guitar player for U2.
Now however, he and his representatives insist there are four other owners in partnership. No other names but the LLPs have been revealed to the public or the commission.
The workshop focused initially on what the experts called piercing the veil of corporate secrecy.
How do you know who owns what when property titles are buried in a pile of corporate names or partnerships?
How can regulatory agencies find out who or what they are dealing with when the real owners refuse to reveal themselves or others involved in ownership?
Experts explained that the courts are reluctant to get involved unless there is a very good reason to compel identities.
Professor Eric Talley, co-director at UC Berkeley Center in Law, Business and the Economy at the University of California at Berkeley talked about corporate law, veil piercing, and single economic parcel theory.
One reason the courts will respond is if there is enough evidence to show that the corporate entity is trying to avoid obeying the laws.
Many examples were given about other reasons and case law cited about how the courts ruled “on piercing the veil,” and what evidence was shown to the courts pointing to how a law was being skirted by such activity.
So could the commission consolidate parcels for purposes of regulation, if their separate owners engaged in some degree of coordination of land acquisition, financing, development or use, or had other economic or social relationships that might justify the agency to find unifications of the parcels in one ownership.
That was how the question was posed in a press release issued on Professor Steven Eagle of George Mason University School of Law in Virginia after his appearance at the workshop.
Under the single economic parcel theory, only one residence might be allowed on the five parcels, as opposed to five separate homes that the various separate owners otherwise would be entitled to construct.
What followed was a discussion about the takings clause, a partial takings and how regulatory restrictions can sometimes be interpreted as takings.
Eagle noted that under federal and California law regulations which go too far in depriving landowners of the use of their parcels are considered takings, entitling the owners for just compensation for their losses.
He reviewed the case law under which some courts had consolidated separate legal parcels belonging to the same owner for takings purposes, however no court has consolidated parcels where their legal ownership was separate, according to Eagle.
There was also much discussion on what the experts called the single economic parcel theory.
Eagle argued that adoption of such a policy would result in a reduction of socially beneficial cooperation among neighbors.
Eagle urged the commission to consider a threshold test to refrain from the practice unless it could be shown that their coordination exceeded that normally existing among neighboring owners.
Agreeing, Malibu land use consultant Don Schmitz, was quick to point out he thought there could be unintended consequences about such an analysis. “Adjacent lots used for ancillary or smaller structures won’t be allowed. It will discourage road improvement among neighbors, relocation of aboveground utilities and common access.
A member of the California Chamber of Commerce said it would be a terrible incentive for property owners, that there were unclear legal theories
Attorney Stanley Lamport said what the real issue was about trying to get around a takings issue. He said ownership is key. “If there are two lots and one owner, linkage matters,” he said.
“If there are two lots, separate owners, it is a takings to consider it a single ownership,” he added.
He noted that in California there is a presumption of ownership. “If there are two entities with different ownerships, the partnership is presumed to be separate ownership,” he said.
Some of the experts chimed in and said what distinguishes neighbors’ cooperation from a partnership is the partnership is working for a profit.
Another expert said the courts will look at people, who play games or are playing the system behind LLP or corporate ownership.
CCC Executive Director Peter Douglas said the idea is not trying to strike out in a new direction or make new law. “There are efforts to camouflage ownership to increase profits. There is a potential of commonality of ownership to increase profits at the expense of coastal resources. We hope it is a rare occurrence,” he said.
There seemed to be a consensus among the experts when the questions was asked, “Is there a baseline or threshold before looking further into the matter?”
There should be further questions asked, What does it look like? Is there a likelihood of a takings? Are there suspicious circumstances? The commission can ask for evidence. Is the evidence above and beyond what he adjacent owners do? The burden is on the applicant.
To some observes, given that both Schmitz and Lamport have been the representatives of Evans for some time, he discussions may have just been an opportunity for both sides to lay out the groundwork for a possible Evans vs. CCC takings lawsuit.

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