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On July 1, 2024, Texas May Have the Strongest Consumer Data Privacy Law in the United States

It’s Bigger. But is it Better?

They say everything is bigger in Texas which includes big privacy protection. After the Texas Senate approved HB 4 — the Texas Data Privacy and Security Act (“TDPSA”), on June 18, 2023, Texas became the eleventh state to enact comprehensive privacy legislation.^[1]

Like many state consumer data privacy laws enacted this year, TDPSA is largely modeled after the Virginia Consumer Data Protection Act.^[2] However, the law contains several unique differences and drew significant pieces from recently enacted consumer data privacy laws in Colorado and Connecticut, which generally include “stronger” provisions than the more “business-friendly” laws passed in states like Utah and Iowa.

Some of the more notable provisions of the bill are described below:

More Scope Than You Can Shake a Stick At!

The TDPSA applies much more broadly than any other pending or effective state consumer data privacy act, pulling in individuals as well as businesses regardless of their revenues or the number of individuals whose personal data is processed or sold.
The TDPSA applies to any individual or business that meets all of the following criteria:
- conduct business in Texas (or produce goods or services consumed in Texas) and,
- process or sell personal data:
  - The “processing or sale of personal data” further expands the applicability of the TDPSA to include individuals and businesses that engage in any operations involving personal data, such as the “collection, use, storage, disclosure, analysis, deletion, or modification of personal data.”
  - In short, collecting, storing or otherwise handling the personal data of any resident of Texas, or transferring that data for any consideration, will likely meet this standard.
Uniquely, the carveout for “small businesses” excludes from coverage those entities that meet the definition of “a small business as defined by the United States Small Business Administration.”^[3]
The law requires all businesses, including small businesses, to obtain opt-in consent before processing sensitive personal data.
Similar to other state comprehensive privacy laws, TDPSA excludes state agencies or political subdivisions of Texas, financial institutions subject to Title V of the Gramm-Leach-Bliley Act, covered entities and business associates governed by HIPAA, nonprofit organizations, and institutions of higher education. But, TDPSA uniquely excludes electric utilities, power generation companies, and retail electric providers, as defined under Section 31.002 of the Texas Utilities Code.
Certain categories of information are also excluded, including health information protected by HIPAA or used in connection with human clinical trials, and information covered by the Fair Credit Reporting Act, the Driver’s Privacy Protection Act, the Family Educational Rights and Privacy Act of 1974, the Farm Credit Act of 1971, emergency contact information used for emergency contact purposes, and data necessary to administer benefits.

Don’t Mess with Texas Consumers

Texas’s longstanding libertarian roots are evidenced in the TDPSA’s strong menu of individual consumer privacy rights, including the right to:

Confirm whether a controller is processing the consumer’s personal data and accessing that data;
Correct inaccuracies in the consumer’s personal data, considering the nature of the data and the purposes of the processing;
Delete personal data provided by or obtained about the consumer;
Obtain a copy of the consumer’s personal data that the consumer previously provided to a controller in a portable and readily usable format, if the data is available digitally and it is technically feasible; and
Opt-out of the processing of personal data for purposes of targeted advertising, the sale of personal data, or profiling in furtherance of a decision that produces legal or similarly significant legal effects concerning the consumer.

Data controllers are required to respond to consumer requests within 45 days, which may be extended by 45 days when reasonably necessary. The bill would also give consumers a right to appeal a controller’s refusal to respond to a request.

Controller Hospitality

The Texas bill imposes a number of obligations on data controllers, most of which are similar to other state consumer data privacy laws:

Data Minimization – Controllers should limit data collection to what is “adequate, relevant, and reasonably necessary” to achieve the purposes of collection that have been disclosed to a consumer. Consent is required before processing information in ways that are not reasonably necessary or not compatible with the purposes disclosed to a consumer.
Nondiscrimination – Controllers may not discriminate against a consumer for exercising individual rights under the TDPSA, including by denying goods or services, charging different rates, or providing different levels of quality.
Sensitive Data – Consent is required before processing sensitive data, which includes personal data revealing racial or ethnic origin, religious beliefs, mental or physical health diagnosis, citizenship or immigration status, genetic or biometric data processed for purposes of uniquely identifying an individual; personal data collected from a child known to be under the age of 13, and precise geolocation data.
- The Senate version of the bill excludes data revealing “sexual orientation” from the categories of sensitive information, which differs from all other state consumer data privacy laws.
Privacy Notice – Controllers must post a privacy notice (e.g. website policy) that includes (1) the categories of personal data processed by the controller (including any sensitive data), (2) the purposes for the processing, (3) how consumers may exercise their individual rights under the Act, including the right of appeal, (4) any categories of personal data that the controller shares with third parties and the categories of those third parties, and (5) a description of the methods available to consumers to exercise their rights (e.g., website form or email address).
Targeted Advertising – A controller that sells personal data to third parties for purposes of targeted advertising must clearly and conspicuously disclose to consumers their right to opt-out.

Assessing the Privacy of Texans

Unlike some of the “business-friendly” privacy laws in Utah and Iowa, the Texas bill requires controllers to conduct data protection assessments (“Data Privacy Protection Assessments” or “DPPAs) for certain types of processing that pose heightened risks to consumers. The assessments must identify and weigh the benefits of the processing to the controller, the consumer, other stakeholders, and the public against the potential risks to the consumer as mitigated by any safeguards that could reduce those risks. In Texas, the categories that require assessments are identical to those required by Connecticut’s consumer data privacy law and include:

Processing personal data for targeted advertising;
The sale of personal data;
Processing personal data for profiling consumers, if such profiling presents a reasonably foreseeable risk to consumers of unfair or deceptive treatment, disparate impact, financial, physical or reputational injury, physical or other intrusion upon seclusion of private affairs, or “other substantial injury;”
Processing of sensitive data; and
Any processing activities involving personal data that present a “heightened risk of harm to consumers.”

Opting Out and About

Businesses are required to recognize a universal opt-out mechanism for consumers (or, Global Privacy Control signal), similar to provisions required in Colorado, Connecticut, California, and Montana, but it would also allow businesses more leeway to ignore those signals if it cannot verify the consumers’ identity or lacks the technical ability to receive it.

Show Me Some Swagger!

The Attorney General has the exclusive right to enforce the law, punishable by civil penalties of up to $7,500 per violation. Businesses have a 30-day right to cure violations upon written notice from the Attorney General. Unlike several other laws, the right to cure has no sunset provision and would remain a permanent part of the law. The law does not include a private right of action.

Next Steps for TDPSA Compliance

For businesses that have already developed a state privacy compliance program, especially those modeled around Colorado and Connecticut, making room for TDPSA will be a streamlined exercise. However, businesses that are starting from ground zero, especially “small businesses” defined in the law, need to get moving.

If TDPSA is your first ride in a state consumer privacy compliance rodeo, some first steps we recommend are:

Update your website privacy policy for facial compliance with the law and make sure that notice is being given at or before the time of collection.
Put procedures in place to respond to consumer privacy requests and ask for consent before processing sensitive information
Gather necessary information to complete data protection assessments.
Identify vendor contracts that should be updated with mandatory data protection terms.

Footnotes

[1] As of date of publication, there are now 17 states that have passed state consumer data privacy laws (California, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Kentucky, Maryland, Massachusetts, Montana, New Jersey, New Hampshire, Tennessee, Texas, Utah, Virginia) and two (Vermont and Minnesota) that are pending.

[2] See, Code of Virginia Code – Chapter 53. Consumer Data Protection Act

[3] This is notably broader than other state privacy laws, which establish threshold requirements based on revenues or the amount of personal data that a business processes. It will also make it more difficult to know what businesses are covered because SBA definitions vary significantly from one industry vertical to another. As a quick rule of thumb, under the current SBA size standards, a U.S. business with annual average receipts of less than $2.25 million and fewer than 100 employees will likely be small, and therefore exempt from the TDPSA’s primary requirements.

For more news on State Privacy Laws, visit the NLR Consumer Protection and Communications, Media & Internet sections.

Recently Effective & Pending State Housing Laws: 2024 Land Use, Environmental & Natural Resources Update

Various state housing bills are currently making their way through the State Legislature that are expected to benefit mixed-income multifamily housing developers. The following summaries reflect the status of the legislation as of May 15, 2024. The legislative process is ongoing and future amendments are expected.

The recently effective state housing laws are also summarized below.

PART I: RECENTLY EFFECTIVE STATE HOUSING LAWS

Governor Newsom approved multiple state housing bills passed by the State Assembly and Senate during the last legislative session. The following is an abbreviated summary of a few of the key bills that are expected to benefit mixed-income multifamily housing developers, with a more detailed summary available in our prior legal alert.

SENATE BILL 423 — EXPANSION AND EXTENSION OF SENATE BILL 35

SB 423 (Wiener) extends the sunset provision for and makes other substantive changes to SB 35. As explained in our prior legal alert, SB 35 provides for a streamlined ministerial (i.e., no CEQA) approval process for qualifying housing development projects in local jurisdictions that have not made sufficient progress towards their state-mandated Regional Housing Needs Allocation (RHNA), as determined by the California Department of Housing and Community Development (HCD).

SB 423 made the following key amendments to SB 35:

Extended SB 35 to January 1, 2036
Expanded SB 35 to apply when a local jurisdiction fails to adopt a housing element in substantial compliance with state housing element law (regardless of RHNA progress), as specified and as determined by HCD
Revised the coastal zone development prohibition to allow for projects in specified urban coastal locations (e.g., property not vulnerable to five feet of sea level rise or within close proximity to a wetland) where the property is zoned for multifamily housing and is subject to a certified local coastal program or a certified land use plan
Removed skilled and trained workforce requirements for projects below 85 feet in height and imposes modified skilled and trained workforce requirements, as specified, for projects at least 85 feet in height. In exchange, projects with 50 or more dwelling units and using construction craft employees to meet apprenticeship program requirements and provide health care expenditures for each employee, as specified

Please see our prior legal alert for information about other SB 35 amendments made by SB 423, including San Francisco-specific amendments.

ASSEMBLY BILL 1287 — ADDITIONAL DENSITY BONUS UNDER STATE DENSITY BONUS LAW

AB 1287 (Alvarez) amended the State Density Bonus Law (Government Code § 65915) by incentivizing the construction of housing units for both the “missing middle” and very-low-income households by providing for an additional density bonus, and incentive/ concession for projects providing moderate-income units or very-low-income units.

The project must provide the requisite percentage of on-site affordable units to obtain the maximum density bonus (50%) under prior law: 15% very-low-income units, or 24% low-income units, or 44% moderate-income (ownership only) units (the Base Bonus). To qualify for an additional density bonus (up to 100%) and an additional incentive/concession under AB 1287, the project must provide additional on-site affordable units, as specified (the Added Bonus). The Added Bonus may be obtained by adding moderate-income units to either a rental or ownership project, but that is capped at a total maximum of 50% moderate-income units.

ASSEMBLY BILL 1633 — EXPANSION OF HOUSING ACCOUNTABILITY ACT PROTECTIONS: CEQA

AB 1633 (Ting) closed a loophole in the Housing Accountability Act (HAA) (Government Code section 65589.5 et seq.) by establishing when a local agency’s failure to exercise its discretion under CEQA, or abuse of its discretion under CEQA, constitutes a violation of the HAA.

To qualify under AB 1633, the project must be a “housing development project” under the HAA and meet other specified requirements, as summarized in our prior legal alert. Under AB 1633, the following circumstances constitute “disapproval” of the project, in which case the local agency could be subject to enforcement under the HAA:

CEQA Exemptions. If (i) the project qualifies for a CEQA exemption based on substantial evidence in the record (and is not subject to an exception to that exemption) and (ii) the local agency does not make a lawful determination, as defined, on the exemption within 90 days (with a possible extension, as specified) of timely written notice from the applicant, as specified.
Other CEQA Determinations. If (i) the project qualifies for a negative declaration, addendum, EIR, or comparable environmental review document under CEQA; (ii) the local agency commits an abuse of discretion, as defined, by failing to approve the applicable CEQA document in bad faith or without substantial evidence in the record to support the legal need for further environmental study; (iii) the local agency requires further environmental study; and (iv) the local agency does not make a lawful determination, as defined, on the applicable CEQA document within 90 days of timely written notice from the applicant, as specified.

AB 1633 includes a limited exception to enforcement where a court finds that the local agency acted in good faith and had reasonable cause to disapprove the project due to the existence of a controlling question of law about the application of CEQA or the CEQA Guidelines as to which there was a substantial ground for difference of opinion at the time of the disapproval.

ASSEMBLY BILL 1485 — STATE ENFORCEMENT OF HOUSING LAWS

AB 1485 (Haney) granted the California Attorney General the “unconditional right to intervene” in lawsuits enforcing state housing laws, whether intervening in an independent capacity or pursuant to a notice of referral from HCD. Under prior law, the Attorney General and HCD were required to petition the court to be granted intervenor status and join a lawsuit, which can be a “lengthy and onerous process.”

PART II: PENDING STATE HOUSING LAWS

Various state housing bills are currently making their way through the State Legislature that are expected to benefit mixed-income multifamily housing developers. AB 2243 (Wicks) would amend AB 2011 (the Affordable Housing and High Road Jobs Act of 2022). AB 1893 (Wicks) and AB 1886 (Wicks and Alvarez) would amend Builder’s Remedy provisions under the HAA. AB 2560 (Alvarez) and SB 951 (Wiener) would help facilitate housing development in the coastal zone. AB 3068 (Haney) would provide for the streamlined ministerial (i.e., no CEQA) approval of qualifying adaptive reuse projects involving the conversion of an existing building to residential or mixed-uses. SB 1227 (Wiener) would help facilitate middle-income housing and other projects in the San Francisco Downtown Revitalization Zone.

The following summaries reflect the status of the legislation as of May 15, 2024. The legislative process is ongoing and future amendments are expected.

ASSEMBLY BILL 2243 — AB 2011 AMENDMENTS

AB 2243 (Wicks) would amend AB 2011 (operative as of July 1, 2023). As explained in our prior legal alert, AB 2011 provides for “by right” streamlined ministerial (i.e., no CEQA, no discretion) approval of qualifying mixed-income and affordable housing development projects along commercial corridors in zoning districts where office, retail, and/or parking uses are principally permitted.

As currently proposed, AB 2243 would:

Project Review and Approval

Require the local government to approve the AB 2011 project within a specified timeframe. Once the project is deemed to be consistent with applicable objective planning standards, the local government would be required to approve the project within 180 days (for projects with more than 150 housing units) or 90 days (for projects with 150 or fewer housing units).
Require the local government to determine project consistency or inconsistency with applicable objective planning standards within 30 days when a project is resubmitted to address written feedback. The otherwise applicable timeframe is within 60 or 90 days, with the longer timeframe applying to projects with more than 150 housing units.
Provide that a density bonus under the State Density Bonus Law, including related incentives, concessions and/or waivers, “shall not cause the project to be subject to a local discretionary government review process” even if the requested incentives, concessions and/or waivers are not specified in a local ordinance. This is important because some local governments purport to require discretionary approval for specified “off menu” incentives, concessions and waivers despite the fact that AB 2011 provides for a ministerial (i.e., no CEQA) project approval process and specifically contemplates utilization of the State Density Bonus Law in conjunction with AB 2011.
Provide that the Phase I Environmental Assessment (ESA) requirement would be imposed as a condition of project approval versus prior to project approval. If any remedial action is required due to the presence of hazardous substances on the project site, that would need to occur prior to issuance of a certificate of occupancy (as specified).

Residential Density

Provide that the AB 2011 (base) residential density, which varies depending on the location and size of the project site, is now the “allowable” density (prior to any density bonus) instead of a minimum (“meet or exceed”) density requirement.
Impose a new minimum residential density requirement, which would be 75% of the greater of the applicable “allowable” residential density.
Specify that the imposition of applicable objective planning standards shall not preclude the “required” (minimum) AB 2011 residential density (prior to any density bonus) or require a reduction in unit sizes. It appears that this new provision is instead intended to apply to the “allowable” AB 2011 residential density pursuant to the cross-referenced subsections.

Commercial Corridor Frontage Requirements

Revise the definition for “commercial corridor” based on the applicable height limit. Where local zoning sets a height limit for the project site of less than 65 feet, the right-of-way would need to be at least 70 feet, which is the current AB 2011 requirement. For all other project sites, the right-of-way would now only need to be at least 50 feet.
Clarifies that the width of the right-of-way includes sidewalks for purposes of determining whether it is a “commercial corridor.”
Expand eligible sites to include conversions of “existing office buildings” that meet all other AB 2011 requirements, even if they are not on a commercial corridor.

Project Site Size Requirements

Waive the current 20-acre project site size limitation for “regional malls” that are up to 100 Regional malls is defined to include malls where (i) the permitted uses on the site include at least 250,000 square feet of retail, (ii) at least two-thirds of the permitted uses on the site are retail, and (iii) at least two of the permitted retail uses on the site are at least 10,000 square feet. Additional criteria for the redevelopment of regional mall sites is expected to be added to the bill.

Setback Requirements

Provide that density bonus incentives, concessions, and waivers permitted under the State Density Bonus Law may be utilized to deviate from specified AB 2011 setback requirements related to existing adjacent residential uses. The HCD previously opined that under existing AB 2011, only the AB 2011 height and density maximums can be modified via the density bonus approval process.

Freeway, Industrial Use, & Oil/Natural Gas Facility Proximity

Eliminate the freeway proximity and active oil/natural gas facility proximity prohibitions and replace those with specified air filtration media requirements.
Revise the AB 2011 limitation on project sites dedicated to industrial uses. Currently, project sites are disqualified where more than one-third of the square footage is dedicated to industrial use or the project site adjoins a site exceeding that threshold. “Dedicated to industrial use” would no longer include sites (i) where the most recently permitted use was industrial, but that use has not existed on the site for over three years; or (ii) where the site is designated industrial by the general plan, but residential uses are a principally permitted use on the site or the site adjoins an existing residential use.
Revise the definition of “freeway” to specify that freeway on-ramps and off-ramps are not included.

Coastal Zone Projects

Newly prohibit AB 2011 projects in the coastal zone that do not meet SB 35 coastal zone siting requirements (as recently amended by SB 423) under Government Code section 4(a)(6), exclusive of the requirement for the project site to be zoned for multifamily housing (since AB 2011 allows for multifamily housing on commercially zoned properties), including (but not limited to) where the applicable area of the coastal zone is not subject to a certified local coastal program or a certified land use plan.
Provide that the public agency with coastal development permitting authority, as applicable, shall approve the permit if it determines that the project is consistent with all objective standards of the local government’s certified local coastal program or certified land use plan, as applicable.
Provide that any density bonus, concession, incentive, waiver, and/or (reduced) parking ratios granted pursuant to the State Density Bonus Law “shall not constitute a basis to find the project inconsistent with the local coastal program.”

Residential Conversion Projects

Eliminate the residential density limit for the conversion of existing buildings to residential use, except where the project would include net new square footage exceeding 20% of the “overall square footage of the project.”
Prohibit the local government from requiring common open space beyond “what is required for the existing project site” versus required pursuant to the objective standards that would otherwise apply pursuant to the closest zoning district that allows for the AB 2011 residential (base) density, where applicable.
Exempt the conversion of “existing office buildings” from the commercial corridor frontage requirement.

Clarifications

Clarify that the AB 2011 on-site affordable housing requirement only applies to new housing units created by the project.
Clarify that the number of on-site affordable housing units required under AB 2011 is based on number of housing units in the project prior to any density bonus (i.e., the “base” project), which is consistent with the State Density Bonus Law.
Clarify the process for calculating the on-site affordable housing requirement under AB 2011 where the local jurisdiction requires a higher percentage of affordable units and/or a deeper level of affordability.
Clarify that the “allowable” density under AB 2011 is calculated prior to any density bonus under the State Density Bonus Law.
Clarify that “urban uses” includes a public park that is surrounded by other urban uses.

Implications

AB 2243 would make important clarifications in advance of the to-be-provided HCD guidance document on the implementation of AB 2011. The bill would make important amendments to the prior freeway and oil/natural gas facility proximity prohibitions by instead requiring installation of air filtration media, consistent with Senate Bill 4 (Affordable Housing on Faith and Higher Education Lands Act of 2023). The bill would also help facilitate AB 2011 projects in specified coastal zone areas. Under existing law, a qualifying AB 2011 project would be subject to streamlined ministerial approval at the local level, but not by the Coastal Commission, which could separately trigger a discretionary (i.e., CEQA) review and approval process. AB 2243 partially addresses that, but only in qualifying coastal zone areas (pursuant to SB 423, as modified) that are subject to a certified local coastal program or certified land use plan, which excludes various coastal zone areas.

ASSEMBLY BILL 2560 & SENATE BILL 951 — COASTAL ZONE PROJECTS

Assembly Bill 2560

AB 2560 (Alvarez) would amend the State Density Bonus Law to partially address coastal zone projects. Currently, the State Density Bonus Law explicitly provides that it “does not supersede or in any way alter or lessen the effect or application of the California Coastal Act of 1976” (Public Resources Code § 30000 et seq.). As currently proposed, AB 2560 would revise that provision to instead provide that any density bonus, concessions, incentives, waivers, or reductions of development standards, and (reduced) parking ratios to which an applicant is entitled under the State Density Bonus Law “shall be permitted notwithstanding the California Coastal Act of 1976” but only if the development is not located on a site that is any of the following:

An area of the coastal zone that is not subject to a certified local coastal program
An area of the coastal zone subject to paragraph (1), (2), or (3) of subdivision (a) of Section 30603 of the Public Resources Code (i.e., within a specified distance of the sea, estuary, stream, coastal bluff, tidelands, submerged lands, public trust lands, or sensitive coastal resources area)
An area of the coastal zone that is vulnerable to five feet of sea level rise, as determined by the National Oceanic and Atmospheric Administration, the Ocean Protection Council, the United States Geological Survey, the University of California, or a local government’s coastal hazards vulnerability assessment
A parcel within the coastal zone that is not zoned for multifamily housing
A parcel in the coastal zone and located on either of the following: (i) on, or within a 100-foot radius of, a wetland, as defined in Section 30121 of the Public Resources Code or (ii) on prime agricultural land, as defined in Sections 30113 and 30241 of the Public Resources Code

Implications

AB 2560 should help facilitate density bonus projects in coastal zone areas, but the coastal zone area would need to be subject to a certified local coastal program (versus either that or a certified land use plan pursuant to SB 423). Again, that excludes various coastal zone areas.

Senate Bill 951

SB 951 (Wiener) would amend the State Housing Element Law (Government Code § 65580 et seq.). Existing law requires rezoning by a local government, including adoption of minimum density and development standards (as specified), when the local government’s Housing Element site inventory does not identify adequate sites to accommodate the applicable state mandated RHNA. As currently proposed, SB 951 would require local governments in the coastal zone to make “any necessary local coastal program updates” to meet the applicable RHNA.

SB 951 would also amend the California Coastal Act to target the City and County of San Francisco. Existing law provides that approval of a coastal development permit by a “coastal county” with a certified local coastal program may be appealed to the California Coastal Commission under specified circumstances, including where the approved use is not “the principal permitted use” under the local zoning ordinance or zoning map. As currently proposed, SB 351 would provide that for purposes of that provision, “coastal county” does not include a local government that is both a city and county.

Implications

SB 951 would effectively require consistency between local coastal programs and any upzoning or rezoning required under State Housing Element Law. The appealability of coastal zone permits approved by the City and County of San Francisco would also be limited by the bill, which could help facilitate new housing development projects.

ASSEMBLY BILL 1893 & ASSEMBLY BILL 1886 — BUILDER’S REMEDY AMENDMENTS

As explained in our prior legal alert, the Builder’s Remedy applies when a local jurisdiction has not adopted an updated Housing Element in compliance with State Housing Element Law (Gov. Code § 65580, et seq.), in which case the local jurisdiction cannot deny a qualifying housing development project even if it is inconsistent with the local general plan and zoning ordinance (subject to limited exceptions).

To qualify for the Builder’s Remedy, the project must currently (i) fall under the definition of a “housing development project” under the HAA (i.e., a project consisting of residential units only, mixed-use developments consisting of residential and non-residential uses with at least two-thirds of the square footage designated for residential use, or transitional or supportive housing) and (ii) dedicate at least 20% of the dwelling units in the project as lower income (or 100% of the units as moderate income), as defined in the HAA.

Assembly Bill 1893

As currently proposed, AB 1893 would (i) reduce the required percentage of affordable units for mixed-income Builder’s Remedy projects from 20% lower income to 10% very low-income; (ii) impose new size and location guardrails on Builder’s Remedy projects; and (iii) authorize local jurisdictions to require compliance with other specified objective development standards so long as they do not reduce the “allowed” residential density or result in an increase in “actual costs.” AB 1893 would also eliminate the affordability requirement for Builder’s Remedy projects consisting of 10 units or fewer, so long as the project site is smaller than one acre with a minimum density of 10 units per acre.

New Basis for Denial & New Project Requirements

AB 1893 would significantly amend the most controversial component of the Builder’s Remedy, which is that a local jurisdiction without a substantially compliant Housing Element (“Non-Compliant Jurisdiction”) cannot deny a qualifying Builder’s Remedy project unless specified findings are made, which are intended to create a high threshold for denial by local jurisdictions.

As currently proposed, AB 1893 would newly authorize a Non-Compliant Jurisdiction to deny a qualifying Builder’s Remedy project if the project fails to meet any of the following “objective” standards. In other words, Builder’s Remedy projects would need to meet all the following new requirements (unless the project is “grandfathered” as explained below):

The project site must be designated by the general plan or located in a zone where housing, retail, office, or parking are “permissible” uses. Alternatively, if the project site is designated or zoned for agricultural use, at least 75% of the perimeter of the project site must adjoin parcels that are developed with urban uses, as defined under AB 2011. Recall that AB 2243 would amend the AB 2011 definition of “urban use” to clarify that urban use includes a public park that is surrounded by other urban uses.
The project site must not be on a site or adjoined to any site where more than one-third of the square footage on the site is “dedicated to industrial use,” as defined under AB 2011. Recall that AB 2243 would amend the AB 2011 definition of “dedicated to industrial use” to no longer include sites (i) where the most recently permitted use was industrial, but that use has not existed on the site for over three years; or (ii) where the site is designated industrial by the general plan, but residential uses are a principally permitted use on the site or the site adjoins an existing residential use.
The residential density for the project must not exceed the “greatest” of the following density calculations, as applicable, prior to any density bonus under the State Density Bonus Law (there is no codified limit under existing law):
- For project sites within “high or highest resource census tracts” (as defined): (i) 50% greater than the “maximum” density deemed appropriate to accommodate (lower income) housing for the local jurisdiction as specified in Government Code section 65583.2(c)(3)(B) (e.g., for a local jurisdiction in a metropolitan county, “at least” 30 dwelling units per acre); or (ii) three times the density allowed by the general plan, zoning ordinance, or state law (prior to any density bonus under the State Density Bonus Law), whichever is greater.
- For other project sites, (i) the “maximum” density appropriate to accommodate (lower income) housing for the local jurisdiction as specified in Government Code section 65583.2(c)(3)(B) (see above); or (ii) twice the density allowed by the general plan, zoning ordinance, or state law (prior to any density bonus under the State Density Bonus Law), whichever is greater.
- For project sites located within one-half mile of a major transit stop, up to 35 dwelling units per acre more than the “amount allowable” specified above, as applicable.
- The project must comply with “other” objective development standards (as defined) imposed by the local jurisdiction that apply in closest zone in the local jurisdiction for multi-family residential use at the “allowed” residential density If no such zone exists, the applicable objective standards shall be those for the zone that allows the greatest density within the city, county, or city and county, as applicable.

AB 1893 would provide that in no case may the local agency apply any objective development standards that will (i) have the effect of physically precluding the construction of the project at the “allowed” residential density (see above) or (ii) result in an increase in “actual costs.” The local agency would bear the burden of proof under these circumstances.

Project “Grandfathering”

As currently proposed, the foregoing new requirements would not apply to Builder’s Remedy applications that are “deemed complete” on or before April 1, 2024. Under existing law, “deemed complete” is defined to mean that the applicant has submitted a SB 330 preliminary application or, if that has not been submitted, a complete development application (as defined) has been submitted. AB 1893 would add that the local agency shall bear the burden of proof in establishing that the applicable application is not complete.

Implications

AB 1893 is an attempt to “modernize” the Builder’s Remedy by providing clarity to developers, local jurisdictions, and courts to avoid the “legal limbo” described by Attorney General Rob Bonta. As part of that compromise, significant new requirements would be imposed on Builder’s Remedy projects, including a new “cap” on residential density where no codified limit currently exists. In return, the clarifications made by AB 1893 and the reduced affordability requirement for mixed-income projects could help facilitate Builder’s Remedy projects in Non-Compliant Jurisdictions.

Assembly Bill 1886

A recent Builder’s Remedy lawsuit exposed some ambiguity regarding when a Housing Element is deemed “substantially compliant“ with State Housing Element Law. Opposing sides of the litigation disputed where (retroactive) self-certification by the local jurisdiction was sufficient. The court ruled that it was not. See our prior legal alert for our coverage of this ruling, which appears to be the impetus for the amendments proposed under AB 1886 (Alvarez and Wicks).

As currently proposed, AB 1886 would:

Clarify the point at which a Housing Element is deemed substantially compliant with State Housing Element Law: (i) the Housing Element has been adopted by the local jurisdiction and (ii) the local jurisdiction has received an affirmative determination of substantial compliance from HCD or a court of competent jurisdiction.
Clarify that the Housing Element shall continue to be considered in substantial compliance with State Housing Element Law until either: (i) HCD or a court of competent jurisdiction determines that the adopted Housing Element is no longer in substantial compliance (e.g., where any required rezoning is not approved in a timely manner) or (ii) the end of the applicable Housing Element cycle.
Specify that Housing Element compliance status is determined at the time the SB 330 Preliminary Application is submitted for the qualifying Builder’s Remedy project, which is consistent with HCD’s prior determination that the Builder’s Remedy is vested on that filing date. If a SB 330 Preliminary Application is not submitted, then the compliance status would be determined when a complete development application (as defined) is filed for the Builder’s Remedy project.
- Require a local jurisdiction that adopted its Housing Element despite HCD’s non-compliance determination to submit the required findings, as specified, to HCD. In any legal proceeding initiated to enforce the HAA, HCD’s determination on the required findings would create a rebuttable presumption of substantial compliance or lack thereof.

Implications

AB 1886 would make it clear that a local jurisdiction cannot “self-certify” its Housing Element. Rather, an affirmative determination must be granted by HCD or, if a local jurisdiction adopts its Housing Element notwithstanding HCD’s determination to the contrary, a court of competent jurisdiction would need to agree with the local jurisdiction, notwithstanding the “rebuttable presumption” in favor of HCD’s non-compliance determination, where applicable.

ASSEMBLY BILL 3068 — ADAPTIVE REUSE PROJECTS

AB 3068 (Haney, Quirk-Silva, and Wicks) would provide for the streamlined ministerial (i.e., no CEQA) approval of qualifying adaptive reuse projects involving the conversion of an existing building to residential or mixed-uses, as specified. Qualifying adaptive reuse projects would be deemed “a use by right” regardless of the applicable zoning district, with the exception of any proposed non-residential uses.

As currently proposed, the following requirements would need to be met:

Threshold Requirements

The project must retrofit and repurpose an existing building to create new residential or mixed-uses (Adaptive Reuse). The Adaptive Reuse of light industrial buildings is prohibited unless the local planning director (or equivalent) determines that the “specific light industrial use is no longer useful for industrial purposes.”
At least 50% of the Adaptive Reuse project must be designated for residential use, which is defined to include housing units, dormitories, boarding houses, and group housing. For purposes of calculating total project square footage, underground spaces, including basements or underground parking garages, are excluded.
Any nonresidential uses must be “consistent with the land uses allowed by the zoning or a continuation of an existing zoning nonconforming use.”
If the existing building is a listed historic resource or is over 50 years old, specified requirements must be met.

Affordability Requirements

For rental projects, either (i) 15% of the units must be lower income (as defined) or (ii) 8% of the units must be very low income and 5% of the units must be extremely low income (as defined), unless different local requirements apply.
For ownership projects, either (i) 15% of the units must be lower income (as defined) or (ii) 30% of the units must be moderate income (as defined), unless different local requirements apply.
Where different local requirements apply, the project must include the higher percentage requirement and the lowest income target, unless local requirements require greater than 15% lower income units (only), in which case other specified requirements apply.
For rental projects, the affordable units must be restricted for 55 years and for ownership projects, the affordable units must be restricted for 45 years.
Affordable units in the project must have the same bedroom and bathroom count ratio as the market rate units, be equitably distributed within the project, and have the same type or quality of appliances, fixtures, and finishes.

Project Site Requirements

The Adaptive Reuse project site must be in an urbanized area or urban cluster (as defined and specified) and at least 75% of the perimeter must adjoin (as defined) parcels that are developed with urban uses (not defined in AB 3068 but separately defined in AB 2011).
Required Phase I ESA and if a recognized environmental condition is found, specified requirements must be met.

Labor Requirements

All construction workers must be paid at least the general prevailing wage of per diem wages for the type of work in the geographic area (as specified), except that apprentices registered in approved programs (as specified) may be paid at least the applicable apprentice prevailing rate.
The prevailing wage requirement must be included in all construction contracts, and all contractors and subcontractors must comply with specified requirements.
If the Adaptive Reuse project would include 50 or more dwelling units, additional requirements would apply (as specified), including but not limited to participation in an approved apprenticeship program and health care expenditures for any construction craft employees.

Project Approval Process

If the Adaptive Reuse project is determined by the local planning director (or equivalent) to be consistent with the foregoing requirements (referred to collectively as “objective planning standards”), the local agency must approve the project. That consistency determination must be based on whether there is “substantial evidence that would allow a reasonable person to conclude that the project is consistent with the objective planning standards.”
If the project is deemed to conflict with any applicable objective planning standards, the local agency must notify the project sponsor within 60 to 90 days of submittal of the development proposal, depending on whether the project contains more than 150 dwelling units. If the local agency fails to provide the required documentation (as specified), the project shall be deemed to satisfy applicable objective planning
Design review may be conducted by the local agency but must be objective (as specified) and must be concluded within 90 to 180 days of submittal of the development proposal, depending on whether the project contains more than 150 dwelling units.

Development Impact Fees

Adaptive Reuse projects would be exempt from all development impact fees “that are not directly related to the impacts resulting from the change of use of the site from nonresidential to residential or mixed-use” and any development impact fees charged must be “proportional to the difference in impacts caused by the change of use.” The project sponsor may also request that payment of development impact fees be deferred to the date that the certificate of occupancy is issued, subject to a written agreement to pay the development impact fees at that time.

Adjacent Projects

A qualifying Adaptive Reuse project “may include the development of new residential or mixed-use structures on undeveloped areas and parking areas on the parcels adjacent to the proposed adaptive reuse project site” if specified requirements are met.

Implications

AB 3068 would be another tool in the growing toolbox available to real estate developers to encourage the adaptive reuse of underutilized commercial buildings, including office buildings. Financial feasibility is likely to remain an issue due to high interest rates and construction costs. There are well-documented design challenges associated with the conversion of existing buildings to residential use due to required compliance with the strict provisions of the California Building Code, the California Residential Code, and local amendments to those codes. Even if alternate buildings standards are available for adaptive reuse projects (see the directive under AB 529), it not clear yet whether alternative standards would be available for required seismic upgrades, which are often cost-prohibitive.

Financial feasibility would be partially addressed by AB 3068, which would authorize local agencies to establish an Adaptive Reuse Investment Program funded by ad valorem property tax revenues (as specified), which could be transferred to the owners of qualifying Adaptive Reuse projects for the purpose of subsidizing the on-site affordable housing units required by AB 3068. The bill would also “align program requirements to encourage the utilization of existing programs such as the Federal Historic Tax Credit, the newly adopted California Historic Tax Credit, the Mills Act, and the California Historical Building Code.”

SB 1227 — SAN FRANCISCO DOWNTOWN REVITALIZATION ZONE PROJECTS

SB 1227 (Wiener) aims to speed the recovery of downtown San Francisco by creating a new CEQA exemption for qualifying student housing and mixed-use residential projects (along with commercial and institutional projects) in the Downtown Revitalization Zone, which includes the Financial District, Union Square, Eastern SOMA, Mid-Market, and Civic Center neighborhoods. Projects that do not meet all the requirements for the new CEQA exemption could qualify for the new CEQA streamlining process proposed under the bill. SB 1227 would also create a new property tax exemption for moderate-income housing in the Downtown Revitalization Zone.

Qualifying Downtown Revitalization Zone Projects

As currently proposed, the following threshold requirements would need to be met:

The project site must be in the San Francisco Downtown Revitalization Zone.
The general plan land use and zoning designations for the project site must allow for commercial, institutional, student housing, or mixed-uses (as specified below), as applicable to the project.
The project must not include any hotel uses, and if residential uses are proposed, the residential square footage must be less than two-thirds the total project square footage (i.e., the project cannot be a “housing development project” already protected under the HAA). The foregoing square footage limitation (see specified calculation requirements) would not apply to student housing.
To the extent that residential uses are proposed, the project must comply with applicable San Francisco inclusionary affordable housing requirements.
The project must not require the demolition of restricted affordable units, rent-controlled units, or a hotel (as specified). See also the specific requirements that apply to other existing and prior tenant-occupied housing.
The project must comply with 24 enumerated San Francisco ordinances related to development impact fees and environmental protection (including but not limited to the reduction of greenhouse gas emissions and water and energy consumption) and specified provisions of the California Green Building Standards Code.
The project site must not be environmentally sensitive, e.g., a delineated earthquake fault zone, habitat for protected species, or a hazardous waste site (as defined and specified).
The project must not result in net additional emissions of greenhouse gases from demolition or construction.

New CEQA Exemption

As currently proposed, the following additional requirements would need to be met to qualify for the new CEQA exemption:

Prevailing wage, skilled and trained workforce, and/or health care expenditure and apprenticeship requirements must be met (as specified), depending on the size of the project.
The project must not include any warehouse uses.
The project must not require the demolition of a building that is over 75 years old (regardless of its historic status) or result in “substantial harm” to a building on a federal, state, or local historic registry.
The project must be LEED Platinum certified (if over 1,000 square feet).
The project must be in an area with a per capita vehicle miles traveled (VMT) level 15% lower than the city or regional VMT.

New CEQA Streamlining Pathway

As currently proposed, San Francisco Downtown Revitalization Zone projects that meet the threshold requirements above, but not all of the additional requirements for the new CEQA exemption, could instead pursue CEQA streamlining whereby the project could be certified by the Governor prior to certification of an EIR for the project pursuant to the Jobs and Economic Improvement Through Environmental Leadership Act of 2021 (Leadership Act), which authorizes the Governor to certify qualifying projects (before January 1, 2032) for CEQA streamlining. One of the benefits of CEQA streamlining under the Leadership Act is that any CEQA litigation must be resolved (to the extent feasible) within 270 days, as specified.

As currently proposed, the following additional requirements would need to be met to qualify for CEQA streamlining:

Prevailing wage, skilled, and trained workforce requirements must be met (as specified).
The project must be at least LEED Gold certified (versus Platinum) if the project contains residential, retail, commercial, sports, cultural, entertainment, or recreational uses.
The project must not demolish a historic structure that is placed on a national, state, or local historic register (versus a building that is over 75 years old, regardless of its historic status).
The project must avoid a substantial adverse change to the significance of a historical or cultural resource.
The project must avoid or minimize significant environmental impacts in a disadvantaged community (as defined) and any required mitigation measures must be undertaken in, and directly benefit, the affected community.
The project must not result in any significant and unavoidable impacts under CEQA that would require adoption of a statement of overriding considerations by the lead agency.
The lead agency must approve a project certified by the Governor before January 1, 2031.

Please see the text of SB 1227 for more information about the proposed CEQA streamlining provisions for qualifying San Francisco Downtown Revitalization Zone projects.

New Property Tax Exemption for Moderate-Income Housing

This new (welfare) property tax exemption would allow for a partial exemption equal to the percentage of the value of the property that is equal to the percentage of the number of units serving moderate-income households. As currently proposed, the following requirements would need to be met to qualify:

The project must be in the San Francisco Downtown Revitalization Zone.
The project must include moderate-income rental units, as defined and specified.
The project must be owned and operated by a charitable organization (as defined), which includes (but is not limited to) limited partnerships in which the managing partner is an eligible nonprofit corporation or eligible limited liability company meeting specified requirements.
A building permit or site permit for the residential units on the property must be filed before January 1, 2035, and the property owner must claim the exemption within five years following the issuance of the first building permit. The new property tax exemption would also apply with respect to lien dates occurring on or after January 1, 2025.

Implications

SB 1227 should help facilitate the development of new housing for the “missing in the middle” in the San Francisco Downtown Revitalization Zone by providing for a new property tax exemption for projects that include moderate-income rental units. That could in turn help increase the financial feasibility of converting underutilized commercial buildings to mixed-uses, including residential uses.

SB 1227 would impose robust labor requirements for both the new CEQA exemption and CEQA streamlining pathway for qualifying projects in the San Francisco Downtown Revitalization Zone, which could inhibit the utilization of those benefits.

Appellate Division Provides Insight Into Rights Inherent to Tidelands Grants and Tidelands Licenses

A new unpublished case decided by the Appellate Division provides insight into how courts view those rights granted to the holder of tidelands grant versus those afforded by a tideland’s license. In the Matter of P.T. Jibsail Family Ltd. P’ship Tideland License involved the appeal of the issuance and modification to a tidelands license affecting properties owned by appellant Janine Morris Trust (“JMT”) and respondent P.T. Jibsail Family Limited Partnership (“Jibsail”) situated along Barnegat Bay. JMT argued that the approval of the modified tidelands license to Jibsail – allowing for the construction of a 300-foot-long dog-legged dock protruding into Barnegat Bay – was arbitrary, capricious, and/or unreasonable because the dock hampered JMT’s access to navigable waters.

In analyzing JMT’s argument the Appellate Division reviewed the fundamental differences between tidelands grants and tidelands licenses, including: (1) that a tidelands grant “is [a] conveyance in fee simple of real property,” Panetta v. Equity One, Inc., 190 N.J. 307, 309 (2007), while a tidelands license allows the licensee only “to rent an area of land . . . depicted on the [associated] plan”; and (2) that a tidelands grant generally extends the full width of the ripa or the width of the adjacent upland parcel whereas a tidelands license grants to the licensee the right to use only the area of tidelands circumscribed by a “license box” or an outline that closely approximates the size of the permitted structure and generally only includes water areas, not uplands. Ibid.

The Appellate Division noted that these differences affect the riparian rights associated with each means of conveyance. More specifically, a tidelands grant conveys to the riparian owner the right to the land under the water with that land extending far enough out to allow the riparian owner to access navigable water. Conversely, a tidelands license conveys to the licensee only the right to use the land under the water contained within the limited “license box”. As such, the licensee’s right to use adjacent water is no stronger outside of the “license box” than the riparian right of any other member of the public.

Applying these principles, the Appellate Division found that JMT’s ownership of a tidelands license did not prevent the State from claiming title to and managing the tidelands outside of JMT’s licensed area, nor did the license grant JMT any greater right than that of the general public to the navigable waters ostensibly impacted by Jibsail’s dock. Accordingly, the Appellate Division found the issuance of the tidelands license to Jibsail to be neither arbitrary, capricious, nor unreasonable.

My Safe Florida Condo Pilot Program: Frequently Asked Questions

On April 24, 2024, Florida Governor Ron DeSantis signed House Bill 1029 into law, marking a pivotal moment in bolstering condominium resilience against hurricane damage. This significant milestone is important for Florida’s condominium owners’ associations to recognize in furtherance of efforts to protect Florida’s infrastructure.

House Bill 1029, also known as the My Safe Florida Condominium Pilot Program, aims to provide condominium associations with a mechanism similar to the My Safe Florida Home Program that was previously made available to single family homes. This initiative establishes the My Safe Florida Condominium Pilot Program, enabling eligible condominiums to apply for various grants to fortify their buildings and minimize the impact of hurricanes.

Who is eligible?

Condominium associations that meet specified criteria can apply for mitigation grants under the program.

What are the voting requirements for Condominium Associations?

Associations must obtain approval through a majority vote of the board of directors or a majority vote of the total voting interests of the association to apply for an inspection. Additionally, a unanimous vote of all unit owners within the structure or building subject to the grant is required prior to apply for a grant.

What information needs to be disclosed?

Prior to conducting the vote of unit owners, associations are required to provide clear disclosure of the program using a form that will be created by the Florida Department of Financial Services. The president and treasurer of the board of directors must sign the disclosure form, which will be kept as part of the association’s official records.

Do Condominium Associations need to provide notice?

Yes, condominium associations are required to provide written notice within 14 days of an affirmative vote to participate in the Program to all unit owners, in accordance with the statutory requirements of Section 718.112(2)(d), Florida Statutes.

How much can a Condominium Association apply for in grants?

The grant is capped at $175,000 per condominium association and can be utilized for various improvements, including opening protection, reinforcing roof-to-wall connections, enhancing roof-deck attachments, and implementing secondary water resistance for the roof.

Can individual units participate?

Mitigation grants are awarded to condominium associations collectively, and individual unit owners may not participate in the Program.

House Bill 1029 creates Section 215.5587, Florida Statutes, further solidifying its significance in the state’s efforts to bolster the tens of thousands of condominiums throughout the state. These legislative enhancements are anticipated to enhance community associations in safeguarding their properties and residents against natural disasters.

Incorporating AI to Address Mental Health Challenges in K-12 Students

The National Institute of Mental Health reported that 16.32% of youth (aged 12-17) in the District of Columbia (DC) experience at least one major depressive episode (MDE).
Although the prevalence of youth with MDE in DC is lower compared to some states, such as Oregon (where it reached 21.13%), it is important to address mental health challenges in youth early, as untreated mental health challenges can persist into adulthood. Further, the number of youths with MDE climbs nationally each year, including last year when it rose by almost 2% to approximately 300,000 youth.

It is important to note that there are programs specifically designed to help and treat youth that have experienced trauma and are living with mental health challenges. In DC, several mental health services and professional counseling services are available to residents. Most importantly, there is a broad reaching school-based mental health program that aims to provide a behavioral health expert in every school building. Additionally, on the DC government’s website, there is a list of mental health services programs available, which can be found here.

In conjunction with the mental health programs, early identification of students at risk for suicide, self-harm, and behavioral issues can help states, including DC, ensure access to mental health care and support for these young individuals. In response to the widespread youth mental health crisis, K-12 schools are employing the use of artificial intelligence (AI)-based tools to identify students at risk for suicide and self-harm. Through AI-based suicide risk monitoring, natural language processing, sentiment analysis, predictive models, early intervention, and surveillance and evaluation, AI is playing a crucial role in addressing the mental challenges faced by youth.

AI systems, developed by companies like Bark, Gaggle, and GoGuardian, aim to monitor students’ digital footprint through various data inputs, such as online interactions and behavioral patterns, for signs of distress or risk. These programs identify students who may be at risk for self-harm or suicide and alert the school and parents accordingly.

Proposals for using AI models to enhance mental health surveillance in school settings by implementing chat boxes to interact with students are being introduced. The chat box conversation logs serve as the source of raw data for the machine learning. According to Using AI for Mental Health Analysis and Prediction in School Surveys, existing survey results evaluated by health experts can be used to create a test dataset to validate the machine learning models. Supervised learning can then be deployed to classify specific behaviors and mental health patterns. However, there are concerns about how these programs work and what safeguards the companies have in place to protect youths’ data from being sold to other platforms. Additionally, there are concerns about whether these companies are complying with relevant laws (e.g., the Family Educational Rights and Privacy Act [FERPA]).

The University of Michigan identified AI technologies, such as natural language processing (NLP) and sentiment analysis, that can analyze user interactions, such as posts and comments, to identify signs of distress, anxiety, or depression. For example, Breathhh is an AI-powered Chrome extension designed to automatically deliver mental health exercises based on an individual’s web activity and online behaviors. By monitoring and analyzing the user’s interactions, the application can determine appropriate moments to present stress-relieving practices and strategies. Applications, like Breathhh, are just one example of personalized interventions designed by monitoring user interaction.

When using AI to address mental health concerns among K-12 students, policy implications must be carefully considered.

First, developers must obtain informed consent from students, parents, guardians, and all stakeholders before deploying such AI models. The use of AI models is always a topic of concern for policymakers because of the privacy concerns that come with it. To safely deploy AI models, there needs to be privacy protection policies in place to safeguard sensitive information from being improperly used. There is no comprehensive legislation that addresses those concerns either nationally or locally.
Second, developers also need to consider and factor in any bias engrained in their algorithm through data testing and regular monitoring of data output before it reaches the user. AI has the ability to detect early signs of mental health challenges. However, without such proper safeguards in place, we risk failing to protect students from being disproportionately impacted. When collected data reflects biases, it can lead to unfair treatment of certain groups. For youth, this can result in feelings of marginalization and adversely affect their mental health.
Effective policy considerations should encourage the use of AI models that will provide interpretable results, and policymakers need to understand how these decisions are made. Policies should outline how schools will respond to alerts generated by the system. A standard of care needs to be universally recognized, whether it be through policy or the companies’ internal safeguards. This standard of care should outline guidelines that address situations in which AI data output conflicts with human judgment.

Responsible AI implementation can enhance student well-being, but it requires careful evaluation to ensure students’ data is protected from potential harm. Moving forward, school leaders, policymakers, and technology developers need to consider the benefits and risks of AI-based mental health monitoring programs. Balancing the intended benefits while mitigating potential harms is crucial for student well-being.

For more news on Artificial Intelligence and Mental Health, visit the NLR Communications, Media & Internet section.

Importance of Negotiating Assignment and Subletting Provisions in Health Care Leases

In our ongoing series of blog posts, we examine key negotiating points for tenants in triple net health care leases. We also offer suggestions for certain lease provisions that will protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our first two blog posts, we considered the importance of negotiating initial terms and renewal terms and operating expense provisions. This latest blog post in our series focuses on negotiating assignment and subletting provisions.

It is imperative for a commercial tenant, particularly a private equity-owned health care tenant, to include provisions in a lease which allow the tenant the flexibility to assign and sublease the commercial space without the necessity of having to obtain the landlord’s consent and/or to meet burdensome landlord conditions.

Most leases prohibit transfers by assignment and subletting or require landlord’s prior written consent subject to meeting certain burdensome conditions. In addition, landlords often include a “change of control” provision which provides that sale of a controlling interest is deemed a transfer requiring landlord consent. A health care tenant looking for flexibility for reorganization or internal transfer subject to private equity control will want to push back on change of control provisions and will want to ensure that their lease allows for certain permitted transfers that do not require landlord consent. Carving out “permitted transfers” customarily includes transfers to: (i) an affiliate of the named tenant under the lease (meaning, any entity, directly or indirectly, which controls, is controlled by or is under common control with tenant); (ii) a successor entity created by merger, consolidation or reorganization of tenant; or (iii) an entity which shall purchase all or substantially all of the assets or a controlling interest in the stock or membership of tenant. If the tenant is a management services organization (MSO), the lease should also include explicit landlord permission for a sublease between the MSO and the provider that will occupy the leased premises.

Landlords may accept the concept of permitted transfers but often seek to impose certain conditions to allowing such transfers. Certain conditions on permitted transfers are reasonable, such as requirements for advance notice, that the proposed permitted transferee assume all obligations under the lease, that the permitted transferee operate only for the permitted use set forth in the lease, and that a copy of the transfer document be provided to landlord. However, other conditions, such as requiring a net worth test for the assignee or financial reporting requirements, can be burdensome and serve to undermine the concept of permitted transfers without landlord consent. We advise our clients in these instances to push back or limit these conditions as much as possible.

Other common assignment and subletting provisions should expressly not apply to permitted transfers. These include recapture provisions which allow a landlord to terminate the lease and recapture the space, excess profit provisions which provide that any excess profits realized as the result of a transfer will be shared between landlord and tenant, and administrative fees and reimbursements to landlord which are often charged to tenants in connection with an assignment or subletting request. Restrictions on transfers should not apply to guarantor entities. Often with private equity, the guarantor is the parent entity and cannot be restricted by a landlord as to transfer, restructuring or reorganization at the top of its organization.

In the case of transfers that do not fall within the definition of “permitted transfers” and require landlord consent, a tenant will want to include language that landlord will not unreasonably withhold, condition, or delay such consent. Other tenant protections should also be considered, including a cap on administrative and review fees reimbursable by tenant to landlord, a reasonably short time period for landlord to approve or disapprove a request (i.e., 30 days) or be deemed to have approved, a reasonably short time period for landlord to exercise recapture rights or be deemed to have approved, and a provision that excess profits will be shared equally rather than all belonging to landlord.

Negotiation of assignment and subletting terms is critical for tenants, particularly with respect to private equity-owned health care tenants. The goal for tenants in negotiating these points is to provide flexibility for addressing future financial and operational needs. As with other highly negotiated lease terms, we recommend addressing assignment and subletting provisions in detail in advance in the letter of intent. This makes expectations of the parties clear, saves time and money by avoiding protracted negotiations, and results in an overall efficient lease negotiation process.

In our next post, we will cover the importance of negotiating maintenance and repair terms and will offer suggestions for limiting a tenant’s exposure.

Amendments to New York LLC Transparency Act Delay Effective Date, Among Other Changes

New York Governor Kathy Hochul last month signed into law amendments to the recently enacted New York LLC Transparency Act (as amended, the “NYLTA”), extending the NYLTA’s effective date from December 21, 2024, to January 1, 2026 (the “Effective Date”).

The NYLTA will require all limited liability companies (“LLCs”) either formed under New York law or foreign LLCs that seek to be authorized to do business in New York to submit certain beneficial ownership information to the New York Department of State. LLCs will be required to disclose their beneficial owners unless the LLC qualifies for an exemption from the requirements. New York LLCs and foreign LLCs registered to do business in New York should evaluate their structure with counsel that is familiar with the NYLTA (and the federal Corporate Transparency Act (the “CTA”)) to determine whether they will have a filing obligation under the new law.

For New York LLCs formed on or prior to the Effective Date, and foreign LLCs authorized to do business in New York on or prior to the Effective Date, the deadline to file the required beneficial ownership report or the statement specifying the applicable exemptions(s) from the filing requirement is January 1, 2027. For New York LLCs formed after the Effective Date, and foreign LLCs authorized in New York after the Effective Date, the NYLTA will require that beneficial ownership information be submitted within thirty days of filing the articles of organization for an LLC formed under New York law or the initial application for registration filed by a foreign LLC. Thereafter, the NYLTA (as amended) imposes an ongoing requirement to file an annual statement with the New York Department of State confirming or updating (1) the beneficial ownership disclosure information; (2) the street address of the entity’s principal executive office; (3) status as an exempt company, if applicable; and (4) such other information as may be designated by the New York Department of State.

The definitions of important terms such as “exempt company,” “reporting company,” “applicant,” and “beneficial owner” used in the NYLTA refer to the equivalent definitions in the CTA but are limited in application only to LLCs. Correspondingly, the NYLTA shares the same 23 exemptions from the reporting requirements as the CTA. If an LLC falls within one or more of the available exemptions, however, in a departure from the CTA, the NYLTA requires the entity to submit a statement attested to under penalty of perjury indicating the specific exemption(s) for which the LLC qualifies.

Potential penalties for failing to comply with the NYLTA include monetary penalties of $500 for every day that a required filing under the NYLTA is past due, as well as a potential suspension or cancellation of an LLC.

The amendments to the NYLTA also provide that the beneficial ownership information relating to natural persons will be deemed confidential except (1) by written consent of or request by the beneficial owner of the LLC; (2) by court order; (3) to federal, state, or local government agencies performing official duties as required by statute; or (4) for a valid law enforcement purpose. This is in contrast to the original New York statute, which provided for beneficial ownership information to be made publicly available in a searchable database.

Dictionaries and the Law – Hunting, Poaching, and the Right to Food

The Law Court’s recent decision in Parker v. Department of Inland Fisheries & Wildlife is fascinating—it is a rare instance when the Court has been called upon to interpret and apply a new constitutional provision. The Maine Constitution has had relatively few amendments, but in 2021 Maine voters approved a “Right to Food Amendment.” Parker involved a challenge to Maine’s Sunday hunting law prohibition under the new amendment.

As is relevant here, the amendment provides that “[a]ll individuals have a natural, inherent and unalienable right to food, including the right to … grow, raise, harvest, produce and consume the food of their own choosing” for certain purposes, including nourishment. It then enumerates limitations on this right, conditioning the right on the requirement that the individual not commit “trespassing, theft, poaching or other abuses of private property rights, public lands or natural resources.”

The question in the case was whether the Maine law banning hunting on Sundays infringes on this right. In an interesting ruling, the Law Court said it did not. After reaching the straightforward conclusion that the plaintiffs could present a justiciable claim given the State’s denial of their request for a Sunday hunting permit, the Court took up the merits—and in so doing, raised some intriguing questions.

First, the Court accorded the Sunday hunting statute a presumption of constitutionality—even though the statute predated the constitutional amendment. But why? Normally the presumption accords the Legislature credit for seeking to act in accordance with existing constitutional limits. That rationale, the Court acknowledged, did not apply. The Court instead suggested that there are other reasons for according this presumption, but relied on cases stating that facial constitutional challenges are disfavored because they lack robust factual records and pose the risk of overbroad rulings. Those concerns seem to go to the particular vehicle for the challenge, not the presumed validity of the enactment itself. Isn’t the right answer, then, to apply the appropriate standard for facial challenges rather than apply a presumption? That point is at least debatable.

Second, the Court’s analysis of the amendment’s language raises interesting interpretive questions. The Court concluded that the term “harvest” includes hunting. The Court buttressed this conclusion by citing several authorities, including dictionary definitions, its own prior precedent, and statutory definitions. Based on these authorities, the Court reasoned, the amendment does include a right to hunt. The Court then observed that this right is subject to express limitations, including that the right does not include engaging in “poaching.” Citing dictionary definitions only, the Court then reasoned that the term “poaching” includes any illegal hunting. Thus, the Court held that the right to hunt does not include the right to hunt on Sundays, because the Legislature has made hunting on Sundays illegal.

One could imagine a potential criticism—does the reasoning in Parker render the right to hunt under the amendment meaningless? If the amendment is meant to protect the right to hunt, but does not circumscribe any law that renders hunting illegal, does the amendment protect hunting at all?

There are arguable critiques of the Court’s reliance on dictionary definitions. Two definitions cited, from Merriam Webster’s Collegiate Dictionary and Webster’s II New College Dictionary, suggest a broad definition of the term that includes any illegal taking of game. But query whether that is the ordinary understanding of the term. Various dictionaries, including Merriam Webster and Cambridge, suggest a primary meaning of “poaching” that relates to illegality in the manner in which the game is taken—i.e., taking game while encroaching on the land of another. Indeed, the Court’s citation to Black’s Law Dictionary, which defines poaching as the illegal taking of game “on another’s land,” supports this ordinary reading. At the very least, the availability of a narrower common meaning suggests the need for careful reliance on dictionaries, including analysis of primary definitions and the word’s context.

As Justice Scalia and Brian Garner note in Reading Law, the availability of multiple meanings for common words places great importance on evaluating not just to dictionary definitions but also the word’s context to determine its most likely meaning. Here, there are multiple hints at the word’s meaning to be found in the amendment’s context. The amendment itself references poaching and “other abuses of private property rights, public lands or natural resources.” The reference to “other abuses of private property” renders a definition of “poaching” that requires some sort of trespass more likely. And broader context might suggest the same; as mentioned above, a reading of “poaching” that includes any law rendering hunting illegal seems (at first blush) to render the amendment circular, and thus meaningless at least in part—a result that is generally discouraged. Of course, there may be rejoinders, but Parker does not provide them.

As Parker illustrates, constitutional and statutory interpretation requires careful, contextual analysis, and it is incumbent on attorneys to equip the Court with thorough arguments. That’s what a good appellate brief—whether by a party or by an interested party filing an amicus—is for. But for now, Parker answers a narrow question under the Right to Food amendment, while leaving many other questions about its scope and application open.

For more news on State Constitution Interpretation, visit the NLR Constitutional Law section.

Governor Signs Bill to Exempt Certain Businesses from Fast Food Minimum Wage

On March 26, 2024, Governor Newsom signed Assembly Bill (AB) 610, which amends the definition of “fast food restaurant” to exempt restaurants in airports, hotels, event centers, theme parks, museums, and certain other locations from the requirements set forth under the Fast Food Council requirements.

Last year, Newsom signed AB 1228, which repeals the FAST Recovery Act but establishes a modified version of the Fast Food Council (Council) until January 1, 2029. The bill also sets forth the minimum wage increases for fast food workers, with an increase to $20.00 effective April 1, 2024.

The bill includes an urgency clause which means it takes effect immediately. As such the exempted businesses will not need to comply with the minimum wage requirements past in 2023.

UNDER SURVEILLANCE: Police Commander and City of Pittsburgh Face Wiretap Lawsuit

Hi CIPAWorld! The Baroness here and I have an interesting filing that just came in the other day.

This one involves alleged violations of the Pennsylvania Wiretapping and Electronic Surveillance Act, 18 Pa.C.S.A. § 5703, et seq., and the Federal Wiretap Act, 18 U.S.C. § 2511, et seq.

Pursuant to the Pennsylvania Wiretapping and Electronic Surveillance Act, 18 Pa.C.S.A. § 5703, et seq., a person is guilty of a felony of the third degree if he:

(1) intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept any wire, electronic or oral communication;

(2) intentionally discloses or endeavors to disclose to any other person the contents of any wire, electronic or oral communication, or evidence derived therefrom, knowing or having reason to know that the information was obtained through the interception of a wire, electronic or oral communication; or

(3) intentionally uses or endeavors to use the contents of any wire, electronic or oral communication, or evidence derived therefrom, knowing or having reason to know, that the information was obtained through the interception of a wire, electronic or oral communication.

Seven police officers employed by the City of Pittsburg Bureau of Police team up to sue Matthew Lackner (Commander) and the City of Pittsburgh.

Plaintiffs, Colleen Jumba Baker, Brittany Mercer, Matthew O’Brien, Jonathan Sharp, Matthew Zuccher, Christopher Sedlak and Devlyn Valencic Keller allege that beginning on September 27, 2003 through October 4, 2003, Matthew Lacker utilized body worn cameras to video and audio records Plaintiffs along with utilizing the GPS component of the body worn camera to track them.

Yes. To track them.

Plaintiffs allege they were unaware that Lacker was utilizing a body worn camera to video and auto them and utilizing the GPS function of the body worn camera. Nor did they consent to have their conversations audio recorded by Lacker and/or the City of Pittsburgh.

Interestingly, Lackner was already charged with four (4) counts of Illegal Use of Wire or Oral Communication pursuant to the Pennsylvania Wiretapping and Electronic Surveillance Act. 18 Pa.C.S.A. § 5703(1) in a criminal suit.

So now Plaintiffs seek compensatory damages, including actual damages or statutory damages, punitive damages, and reasonably attorneys’ fees.

This case was just filed so it will be interesting to see how this case progresses. But this case is an important reminder that many states have their own privacy laws and to take these laws seriously to avoid lawsuits like this one.

Case No.: Case 2:24-cv-00461

It’s Bigger. But is it Better?

More Scope Than You Can Shake a Stick At!

Don’t Mess with Texas Consumers

Controller Hospitality

Assessing the Privacy of Texans

Opting Out and About

Show Me Some Swagger!

Next Steps for TDPSA Compliance

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PART I: RECENTLY EFFECTIVE STATE HOUSING LAWS

SENATE BILL 423 — EXPANSION AND EXTENSION OF SENATE BILL 35

ASSEMBLY BILL 1287 — ADDITIONAL DENSITY BONUS UNDER STATE DENSITY BONUS LAW

ASSEMBLY BILL 1633 — EXPANSION OF HOUSING ACCOUNTABILITY ACT PROTECTIONS: CEQA

ASSEMBLY BILL 1485 — STATE ENFORCEMENT OF HOUSING LAWS

PART II: PENDING STATE HOUSING LAWS

ASSEMBLY BILL 2243 — AB 2011 AMENDMENTS

Project Review and Approval

Residential Density

Commercial Corridor Frontage Requirements

Project Site Size Requirements

Setback Requirements

Freeway, Industrial Use, & Oil/Natural Gas Facility Proximity

Coastal Zone Projects

Residential Conversion Projects

Clarifications

Implications

ASSEMBLY BILL 2560 & SENATE BILL 951 — COASTAL ZONE PROJECTS

Assembly Bill 2560

Implications

Senate Bill 951

Implications

ASSEMBLY BILL 1893 & ASSEMBLY BILL 1886 — BUILDER’S REMEDY AMENDMENTS

Assembly Bill 1893

New Basis for Denial & New Project Requirements

Project “Grandfathering”

Implications

Assembly Bill 1886

Implications

ASSEMBLY BILL 3068 — ADAPTIVE REUSE PROJECTS

Threshold Requirements

Affordability Requirements

Project Site Requirements

Labor Requirements

Project Approval Process

Development Impact Fees

Adjacent Projects

Implications

SB 1227 — SAN FRANCISCO DOWNTOWN REVITALIZATION ZONE PROJECTS

Qualifying Downtown Revitalization Zone Projects

New CEQA Exemption

New CEQA Streamlining Pathway

New Property Tax Exemption for Moderate-Income Housing

Implications

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Who is eligible?

What are the voting requirements for Condominium Associations?

What information needs to be disclosed?

Do Condominium Associations need to provide notice?

How much can a Condominium Association apply for in grants?

Can individual units participate?

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