HomeMy WebLinkAboutItem 7.1 Vacant &Underutilized Pty
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CITY CLERK
File # DrLllr7lrnl-mrnl
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AGENDA STATEMENT
CITY COUNCIL MEETING DATE: March 2, 1999
SliBJECT:
Vacated and Underutilized Property
(Report prepared by Elizabeth H Silver, Cify Attorne:v
and Adam U. Lindgren)
EXHIBITS A TT ACHED:
RECOMMEKDATION:~
FL\'ANCIAL
STATEMEI\T:
None
Consider report
None
DESCRIPTIO:\": Mayor Houston recently asked Staff to consider what legal and
planning tools the City could use to prevent long-term vacancies or under use of conm1ercial areas that
result from long-ten11 leases or deed restrictions.
BACKGROli:\"D:
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Commercial propenies in the City have occasionally remained vacant for extended periods of time. Some
of these vacancies have not been caused by economic conditions. Rather. some properties have
apparently remained unoccupied because of leases. private agreements or other arrangements betyveen
property O\Vners or tenants.
One example of this situation is the former Lucky's Store in the San Ramon Road Shopping Center.
Lucky's was the anchor tenant of the complex for a number of years, drawing shoppers to the Center each
day. These shoppers supported other business<1s in the complex. These other businesses are located on
property O\vned by a different owner than the owner of the Lucky's store. In 1994, Lucky's closed and
moved to San Ramon. Lucky's, however, continued to hold a long term lease on the propeny. Under
Lucky's control, the property remained vacant for three years and was sub-leased in 1998 to a furniture
wholesaler/retailer. As long as Lucky's paid its lease payments, the owner of that portion ofthe
Shopping Center formerly occupied by Lucky's apparently had no incentive to fill the vacancy, and now
apparently has no incentive to find a tenant that might better support the other businesses in the complex.
In addition to being restricted by long-term leases, development may also be restricted by conditions,
covenants and restrictions (CC&Rs) and other property-related agreements that limit the rights of ov.rners
of commercial propeny with respect to the use of such property. Staff understands that in some cases
CC&Rs give property owners and, in some cases, major tenants, the right to veto potential uses that might
otherwise be allowed under the City's Zoning Ordinance. For example, a large retail store in the Dublin
Place Shopping Center recently vetoed the use ofthe Shopping Center's parking lot for a farmer's market.
Further, Staff is aware that recently, a vacant former gas station site was offered for sale by a leading
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COPIES TO:
1.1
ITEM NO.
gasoline company on the condition that the purchaser of the site agree not to operate a gas station or
convenience store on it. This condition was essentially an anti-competition clause.
DIscrSSIO;\':
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Through zoning, the City can prohibit certain uses of property. However, the City does not have the legal.
power to force a property O\\l1er or tenant to use his property for a particular use or to use it at all. Thus.
although a property O\Vner may use his property for a variety of uses permitted by the zoning, the City
cannot compel him to use it for one specific use. Similarly, if a property owner wishes to let property sit
vacant. that is the property o\\11er's right, as long as the property does not become a public nuisance due
to lack of maintenance. Finally, the Citi as a city does not have the legal power to eliminate lease
prov.isions or covenants that limit uses of property.
Although the City's pO\vers in this regard are limited, a redevelopment agency has broader pmvers than a
city if the redevelopment plan provides such powers. For example, if the redevelopment plan so provides,
a redewlopment agency could acquire (through purchase or condemnation) the leasehold interest where
use of a commercial property is limited by terms of a long term lease. After acquiring the leasehold
interest. the agency could lease the site for the remaining term of the lease. Alternatively, an agency could
acquire the property outright in this situation and lease or sell it as long as the lessee or purchaser agrees
to use it for purposes which further the goals of the redevelopment plan.
.tu1 agency could also acquire (through purchase or condemnation) any restrictive covenants which limit
or prohibit uses of property which are considered desirable by the redevelopment plan. Once these
restrictive covenants are eliminated, the property O\\l1er would be able, although not required, to use the
property for the formerly prohibited uses. .
Although a redevelopment agency could have such powers legally, there are significant practical matters
which, in reality, limit the legal possibilities. An agency would need money to carry out such activities.
Redevelopment agencies' funding comes from tax increment monies. If there are no tax increment
monies available (as would be the case for quite a few years after formation of an agency and
establishment of a plan area), the agency wou~d not have funds available for such activities.
Moreover, in order to use redevelopment powers as described above, the property would have to be in a
redevelopment plan area. There are a number of requirements for establishing redevelopment areas,
including the existence of both physical and economic blight. The exact factors which constitute
economic and physical blight are quite technical and are beyond the scope of this report.
RECOMl\1:E~DA TION:
Staff recommends that the City Council consider the report and provide Staffwith additional direction, if
desired.
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