Supreme Court Provides Broad Interpretation Of Exactions Under Protest Provision Of Mitigation Fee Act

February 18th, 2014

By: Chris Butcher



In Sterling Park, L.P. v. City of Palo Alto, a developer agreed to provide below-market rate units and pay an in-lieu fee as a condition of the City’s approval of its condominium development. Over a year later, the City asked the developer to convey the below-market rate units to the City per the agreement. The developer responded with a notice of protest, contending the below-market rate requirement was invalid. The developer subsequently filed suit under section 66020 of the California Government Code (“§ 66020”), requesting relief from “the compelled conveyance of houses under restrictive terms.” The trial court granted City’s motion for summary judgment, finding that § 66020 did not govern the suit and that the suit was untimely under the governing statute—§ 66499.37. The court of appeal later affirmed the lower court’s dismissal.

The California Supreme Court reversed. The only question it addressed was which of the two statutes governed this action. Section 66499.37 (part of the Subdivision Map) provides that any action to attack the conditions attached to a subdivision approval must be commenced within 90 days after the date of the decision. Section 66020 (part of the Mitigation Fee Act) allows a party to protest “the imposition of any fees, dedications, reservations, or other exactions imposed on a development project…by a local agency” by complying with specified procedural requirements at the time of approval or within 90 days of the imposition of fees. Significantly, the limitations period does not begin to run until the local agency provides the applicant with a written notice of his right to protest within a 90-day period. A party can then file an action to set aside the challenged fees or exactions within 180 days of the delivery of the notice.

Under § 66499.37, plaintiff’s suit would be barred since the 90-day limitations period would have run. However, under § 66020, plaintiff’s suit would not be barred on limitations grounds because plaintiff alleged City had never sent him the required written notice that triggers the running of the limitations period. Therefore, determining which statute controlled plaintiff’s action was vitally important in this case.

The Court considered the legislative purpose behind § 66020 to ensure that developers could pay fees or agree to other exactions in the present and proceed with their projects, while retaining the ability to challenge those fees or exactions after project approval. Without this option, developers would have to halt all progress on their development in order to challenge these exactions, which might jeopardize their ability to complete the project in a timely fashion. The Court found that those circumstances applied to the developer in this case; by agreeing to the below-market rate housing requirement, the developer was able to proceed with construction of the condominiums, yet still challenge the legality of the City-imposed exaction.