Roseville Picked a Buyer Before Offering Its Land for Housing

You have a deal on public land. A city owns a big parcel, they've picked you to develop it, and you're deep into a purchase agreement. Then a letter from the state lands on the city's desk saying the whole disposition skipped a step — and a penalty worth nearly a third of the sale price is on the table. That is not a hypothetical.

Before a California local agency disposes of surplus land, it has to offer that land for affordable housing first. A written Notice of Availability (NOA) goes to HCD and to the list of housing sponsors before the agency signs anything — or even enters negotiations with a buyer. That's the Surplus Land Act (Gov. Code § 54220 et seq.), tightened by AB 1486 effective January 1, 2020. An agency can skip the NOA only by formally declaring the parcel "exempt surplus land."

Here's the thing: the order matters. You offer first, then you deal. HCD's position is that Roseville did it backwards.

What HCD found in Roseville

In a December 4, 2023 Notice of Violation, HCD addressed the City of Roseville's proposed disposition of approximately 236.26 acres of land located at 6382 Phillip Road. Per HCD's account, on November 18, 2020 the City entered into an Exclusive Right to Negotiate Agreement (ERNA) with PDC Sacramento LPIV, LLC to develop an industrial park, and later approved an Option and Purchase and Sale Agreement with the same buyer.

As of the effective date of that negotiating agreement, HCD's position is that the City — as fee simple owner — was obligated to issue an NOA for developing low- and moderate-income housing under Gov. Code § 54222, or to declare the land exempt under § 54221(f)(1). HCD found it did neither. The bright line, in HCD's words:

HCD finds that the City violated the SLA by selecting a developer

Roseville had sent seven letters to public entities back in November 2019. HCD didn't count those: it found the City never showed that the required NOAs were sent to affordable housing developers or HCD for housing purposes.

Verified against: HCD Notice of Violation to the City of Roseville, "Disposition of the Property at 6382 Phillip Road," dated December 4, 2023.

The "we noticed it in 2019" defense didn't hold

Roseville's argument came down to timing — the 2019 letters predated AB 1486. HCD's position was that the older rules didn't save the deal. The SLA's grandfathering path required a binding disposition agreement by September 30, 2019 (Gov. Code § 54234(a)(1)). The City's first agreement came in November 2020, nearly a year after AB 1486 took effect, so HCD treated the disposition as subject to the amended Act.

What's actually at stake

This is the part that makes practitioners pay attention. HCD gave the City 60 days to cure or correct, with a deadline of February 4, 2024. If it did not cure and elected to proceed with the sale, HCD wrote, a penalty would be assessed equal to 30 percent of the final sales price under Gov. Code § 54230.5(a)(1) — on 236 acres, a very large number. HCD also flagged additional remedies and urged the City to suspend any further actions to dispose of the property.

Two takeaways for anyone touching a public-land deal:

• If you're the buyer or developer, the agency's SLA compliance is your problem too. A missing NOA can expose the transaction to penalty and delay long after you've signed.
• If you're the agency or its planner, an exclusive-negotiation or option agreement can itself be the triggering action. The NOA — or a defensible exempt-surplus finding — comes before you pick anyone.

One caveat worth stating plainly: an HCD Notice of Violation is HCD's interpretive position, not a court ruling. HCD enforces the SLA and can refer violations to the Attorney General, but courts are the final word on what the statute requires. If you're on either side of a surplus-land disposition, confirm the current requirements with your jurisdiction and run the specific deal past your own counsel before relying on any of this.

What CrossBeam does with it

When the letter lands on your desk, CrossBeam turns it around the same day: what each item is actually asking, the code or law behind it, and a written response you can hand to your team or your attorney — the back-and-forth that used to eat weeks, done in a couple of hours.