Appeals Court Rejects Laguna ‘Granny Flat’ Law : Housing: Ruling against city crackdown on bootleg second units on single-family lots could affect hundreds of homeowners.

SANTA ANA —  Ruling on one of the most divisive issues in Laguna Beach, an appeals court has rejected an attempt by city officials to crack down on bootleg apartments, known as “granny flats.”

The decision, handed down Monday by California’s 4th District Court of Appeal, could affect more than 300 property owners who have built and rented second units on single-family lots.

“This is a significant victory,” said Philip Smith, the attorney who represented the property owners in the class-action lawsuit against the city. “It’s a victory for the little people . . . whose rights were being trampled upon by the city.”

But Laguna Beach Mayor Robert F. Gentry said the decision was a defeat for the majority of residents in the city because the granny flats, usually converted garages or guest homes, create parking problems.

“I’m very concerned that the court did not respect the wishes of the majority of residents in South Laguna who are trying to solve a congestion problem,” Gentry said.

City officials are expected to discuss whether to appeal the ruling at the City Council meeting on May 19.

The dispute between some South Laguna property owners and the city began in 1988 soon after that area was annexed to Laguna Beach. Gentry said that the granny flats were a primary concern to residents of the city during the annexation.

“A lot of residents wanted us to take a strong stand against (the units),” he said. As a result, the city adopted strict requirements regulating granny flats, many of which were difficult to meet. For example, one provision required that each unit have two off-street parking spots.

When the owners were unable to comply, the city began ordering them to remove the second units or face criminal prosecution.

Granny flat owners, led by resident Harold Wilson, sued in December, 1988, alleging that the city “embarked on an illegal scheme” to eliminate South Laguna’s bootleg apartments. The suit further contended that the city’s action violated the spirit of a state law named the Chacon Act, which encourages the construction of second units to provide more housing and sets more lax standards for them.

The appellate court opinion Monday overturned a 1990 lower court ruling, which let stand the city’s action although it criticized the conduct of city officials.

According to the 29-page published opinion issued Monday, current owners of granny flats will be able to apply to the city to have their units legalized under state law. After a certain period of time, however, the city’s stricter requirements will go into effect for approval of future second units.

Another lawsuit challenging the merits of the city’s requirements is pending, said attorney Smith, whose law firm, Morrison & Foerster, has been handling both cases for free.

On Monday, the appellate justices, like the trial judge, sharply criticized the city’s actions.

“We hope this case does not represent a trend on the part of local agencies to circumvent both the spirit and letter of state law,” the opinion stated. “California municipalities are not fiefdoms unto their own.

” . . . Here Laguna Beach spent considerable tax dollars in an effort to deprive some of its own citizens of the benefits clearly accorded them by state law.”

Wilson, the main plaintiff in the class-action lawsuit, said Tuesday that the appellate ruling was “a relief.”

“I didn’t realized what a burden it had all been until the appeals court finally reached a decision,” Wilson said. “It’s been four years in the making, but I’m glad (at the result.) I hope this will be the end of it.”