An appeal by a housing advocacy group could settle whether a proposal to build 39 condominiums in Sausalito qualifies as a “builder’s remedy” project.

If the legal challenge succeeds, it could also open the door for other developers to assert that their Sausalito projects qualify for the builder’s remedy. The case is being submitted to the 1st District Court of Appeal in San Francisco.

The builder’s remedy, which was established by a provision of the Housing Accountability Act, mandates that if a city or county lacks a “substantially compliant” housing element, the jurisdiction is precluded from using its zoning or general plan to deny it.

At the end of last month, the group known as Yes In My Backyard, or YIMBY, submitted a notice to appeal a decision on a suit that it filed against Sausalito in March 2023.

In that action, YIMBY asserted that Sausalito had failed to complete an environmental impact report compliant with the California Environmental Quality Act, known as CEQA, before certifying its housing element. The group also contended that the city’s inventory of building sites included too many parcels that were infeasible for building.

The California Department of Housing and Community Development, known as HCD, certified Sausalito’s housing element on April 28, 2023, despite YIMBY’s objections.

Judge Sheila Shah Lichtblau denied the group’s challenge in February, ruling that the lawsuit was moot because, during the course of the case, Sausalito completed an environmental review.

“But there are a few issues with that,” said Jack Farrell, a YIMBY attorney. “One is that it leaves unanswered the question of whether the housing element was valid in the intervening period and if there were any builder’s remedy projects filed during that time period, whether they are actually builder’s remedy projects.”

Sausalito adopted its new amended housing element on May 27, 2025, while simultaneously rescinding its earlier housing element. The state didn’t certify the new housing element until July 1, 2025.

Matthew Shroder, a cryptocurrency executive who has filed a pre-application to build 39 condos at 83 Princess St., is attempting to use this gap to obtain “builder’s remedy” status for his project.

“That is the city’s understanding of the applicant’s position,” said Matthew Mandich, a Sausalito planner.

Under Sausalito zoning, Shroder would be allowed to build up to 13 dwellings at the site. Under the builder’s remedy, however, Shroder asserts he is entitled to 39.

Shroder did not respond to a request for comment.

Ryan Patterson, a lawyer representing YIMBY in the case against Sausalito, said that during this gap, Sausalito also received a preliminary application to build 53 condos at 605-613 Bridgeway.

An earlier preliminary application for the same half-acre site in Sausalito’s historical district, submitted by the same developer in February 2024, called for 59 condos and attracted considerable opposition. More than 420 people signed a petition opposing it, noting that it would stand 85 feet tall and span seven stories.

In a Sept. 30 letter to Sausalito, Brian O’Neill, a lawyer representing the owner of the Bridgeway property, wrote, “The city’s amended housing element was not certified by HCD as in substantial compliance until July 1, 2025. This means that the city did not have a housing element in effect that was in substantial compliance with the housing element law between the dates of May 27, 2025 and July 1, 2025.”

O’Neill and Patterson are law partners. O’Neill said he is working with Patterson on the YIMBY appeal and is no longer representing any Sausalito developers.

YIMBY is asserting that because Sausalito failed to do an environmental impact report before adopting its initial housing element, it actually lacked a compliant housing element for a much longer period, until its amended element was approved by the state on July 1, 2025.

In an October court filing, YIMBY’s lawyers wrote that the city had received “multiple housing development project applications prior to the date that HCD certified the amended housing element,” and would have to make findings “regarding whether the city was in substantial compliance with the housing element law on the date the applications were submitted.”

The city maintains that its housing element has remained in compliance since HCD approved it the first time.

“That is not only the city’s position, that’s also the state’s position,” said Sausalito Mayor Steven Woodside. “That’s important.”

The city quotes from a letter from Melinda Coy, a state housing official, in which she wrote, “On April 28, 2023, HCD found the city’s housing element in substantial compliance with state housing element law and that compliance status continued through this amendment process.”

Woodside said, “The city has been concerned from the very beginning about builder’s remedy and has complied with the state housing laws in order to avoid builder’s remedy. That’s the bottom line.”

YIMBY contends that CEQA empowers courts to void decisions made without complying with the law, making them as if they never existed.

“HCD certifies housing elements, but it does not regulate CEQA,” Patterson said. “So the fact that the city’s element was certified does not mean that the city was actually in compliance.”