A Santa Monica apartment complex owned by a religious group did not fall within a statutory exemption from local historic preservation regulations because the property has always been a commercial enterprise, the Second District Court of Appeal has ruled.

Designed by architect Stanford Kent and built in 1949 and 1950, the Teriton Apartments consist of a 28-unit, rent-controlled garden-style apartment complex in a single two- and three-story structure, arranged in a pinwheel around landscaped courtyards. The complex is one of the few other examples of this pinwheel design remaining the Los Angeles area.

The corporation that owns of the property, Or Khaim Hashalom ("Living Light of Peace," in Hebrew), filed an application with the City of Santa Monica in 2006 to demolish the complex and construct a new building. When the application triggered a review by a city's Landmarks Commission on the issue of historic preservation, the owner withdrew the application and re-formed itself into a not-for-profit religious corporation. Or Khaim then restated its intention to demolish and rebuild. Or Khaim said that it planned to use the property to house Jewish refugees from Iran and Iraq, but it refused to answer questions as to whether it was operating as a synagogue.

The property owner then submitted a "notice of exemption" from the city's landmarks ordinance pursuant to Government Code § 37361. Nevertheless, the city designated the complex as a historic landmark in late 2006. Or Khaim then filed lawsuit seeking an order compelling the city to set aside its designation. The owner contended the property was "noncommercial" and qualified for the statutory exemption from local historic preservation contained § 37361, subdivision (c). A Los Angeles County Superior Court judge disagreed with OKH and denied the petition. The Court of Appeal affirmed that decision.

Government Code § 37361 governs cities' ability to preserve historic landmarks. Subdivision (c) of the section permits religiously affiliated organizations to exempt their "noncommercial" property from local historic preservation laws – an exemption the state Supreme Court ruled was constitutional in the pivotal case East Bay Asian Local Development Corp v. State of California, (2000) 24 Cal.4th 693 (see CP&DR Legal Digest, January 2001).

For a property to qualify as "noncommercial" under the exemption in § 37361, subdivision (c), the Court of Appeal explained, the property's use must be related to the religious owner's fulfillment of its religious mission. The property may not be used for profit-making. In addition, the noncommercial use must predate the landmark designation and the exemption application.

Here, the court held that the Teriton Apartments did not qualify for the exemption in § 37361, subdivision (c), because the property had been a commercial and for-profit apartment building since it was built; because the property had never been used for a religious entity's mission and has never been a nonprofit concern; because the owner had no religious purpose either at the time it purchased the property or when it initially sought to demolish the building; and because even the newly created religious corporation was no more than a landlord of a conventional, commercial apartment building that has no purpose related to any religious mission.

The Court explained that its holding – that noncommercial use must predate the exemption application – is intended to avoid two kinds of manipulation by property owners: First, without this rule, a nonsectarian owner could thwart a landmark designation merely by incorporating as a religious association and declaring an exemption on its commercial property. Second, if this rule did not exist, a religious entity could trump a historic preservation determination by purchasing a landmark and later declaring the exemption so as to demolish the landmark and erect a commercial building for financial advantage. 

"Under either scenario, the exemption would eviscerate the historic preservation statutes," Justice Richard Aldrich wrote for the unanimous three-judge panel.

In an unpublished portion of the decision, the court upheld the validity of Santa Monica's landmark ordinance and the city's decision to designate the Teriton Apartments as a historic landmark.


The Case:
Or Khaim Hashalom v. City of Santa Monica, No. B212733, 2010 DJDAR 17625. Filed November 22, 2010.


The Lawyers:
For Or Khaim Hashalom: Rosario Perry, (310) 394-9831.

For the city: Alan Seltzer, city attorney's office, (310) 458-8691.