AALRR Attorneys Prevail in Lawsuit That Holds All Interior Space in an Apartment Building is Assessable for Purposes of Developer Fees

04.02.2018

Under Education Code section 17620 et seq., school districts are authorized to levy a fee against construction within the school district’s boundaries. The purpose of these fees, known as developer fees, is to offset the costs incurred by school districts to provide school facilities for the new students resulting from the new development. For residential projects, the city or county must calculate “all the square footage within the perimeter of a residential structure” and provide the calculation to the school district. The school district then levies the fee on the development project.

With regard to apartment projects, some developers believe that only the square footage of the individual apartment unit may be counted. In turn, these developers have argued that interior hallways and storage areas inside the apartment building were exempt from developer fees.

On March 29, 2018, in the case of 1901 First Street Owner, LLC, v. Tustin Unified School District, Case No. G054086, the Court of Appeal of the State of California, Fourth District, held that California cities and counties must include all of the area within an apartment building in calculating “assessable space” for purposes of assessing developer fees under Government Code section 65995. In so holding, the Court ruled that such internal areas include not only the apartment unit, but also interior hallways, storage rooms, mechanical rooms, fitness centers, and lounges that are within the perimeter of the residential structure. Government Code section 65995 also lists specific areas that must be excluded from the calculation of “assessable space.” In that regard, the Court held that excluded “walkways” refer to an “external walkway, not an interior hallway.”

This opinion may have major implications in the amount of developer fees that a school district can levy on residential development within its jurisdiction.

Should you have any questions or comments regarding this case, or the levying of developer fees, please contact in Southern California Wendy H.Wiles (wendy.wiles@aalrr.com) or Jeff Frey (jeff.frey@aalrr.com) or for Northern California Lisa Allred (lallred@aalrr.com).