The Los Angeles City Council recently changed the game for future real estate development in the city. Like most cities in California, the entitlement approval process in Los Angeles (the “City”) required real estate developers to indemnify the City against any challenges to the entitlements. In Los Angeles, however, the City Attorney has typically defended the City, thus reducing the developer’s financial obligation to indemnify.
With the City Council’s recent action, the indemnification procedure in Los Angeles has changed. Based on recommendations made by the City Attorney, a real estate developer will now be required to pay all reasonable costs and fees charged by an outside law firm sitting on the City’s newly formed Land Use/CEQA Panel.
In short, the City Council authorized the retention of five outside law firms which will form a Land Use/CEQA Panel and will defend the City in all land use, CEQA, and Brown Act litigation. Although the developer will still have the right to retain its own counsel to defend the litigation, it is unlikely that many smaller developers will be able to absorb the costs of two law firms defending the litigation. While there may some ways to minimize the potential legal bills associated with the defense of such lawsuits, the City Council may have made small to mid-sized development in Los Angeles less financially feasible.
Ariel Bedell is an experienced attorney at The Loftin Firm. For questions relating to this blog post or any other California real estate, land use, corporate governance, or estate planning issue, contact Ms. Bedell at 760-814-9649.