Owners of Laguna waterfront home ordered to pay $1-million fine over renovations and remove seawall

The California Coastal Commission hit a pair of Laguna Beach homeowners with a $1-million fine Thursday for keeping an illegal seawall to protect unpermitted renovations at their beachfront house.

The renovations, which increased the value of the already-tony home from $14 million to $25 million, can’t be undone. But the seawall shielding 11 Lagunita Drive from the ocean’s waves must come down, the commission decided.

The owners, Jeffrey and Tracy Katz, must demolish the wall and pay the fine within 60 days.

Commissioner Donne Brownsey said the dispute between the state and the Katzes could have been avoided had the couple worked with the Coastal Commission to reimagine their property on Victoria Beach. But they didn’t, she said.

“I think this was willful, intentional disregard of the law,” Brownsey said. “I’m not going to question why they did it, but the facts are very clear.”

Those facts, according to Coastal Commission staff, are that the Katzes, who also own the home next door, bought 11 Lagunita in 2015 and promptly went to work gutting and rebuilding the house as an investment property with approval from the city but not the state.

As the arbiter of coastal development across California, the Coastal Commission takes a dim view of seawalls on the beach. Staff members say the walls protect private property at the expense of natural sand flow and access to public beaches.

In this case, commission staff says, 18 dump trucks worth of sand is trapped behind the seawall, unable to “nourish” the beach.

The saga of the Lagunita seawall goes back to 2005, when the commission allowed a previous owner to build an emergency wall 11 feet tall by 80 feet long to protect the then-redwood-clad, 1952-vintage home from heavy weather. The wall was meant to be temporary and its permit lapsed. The home went into foreclosure.

In 2014, a new owner wanted to do a major remodel on the house and reinforce the then-9-year-old wall. The commission challenged the city’s approval of the plans, in part because of the seawall. The owner’s architect acquiesced and said there would be only cosmetic interior touch-ups.

The next year, shortly before the Katzes bought the house, the commission ruled the seawall could be reinforced as long as the house — which was built before the California Coastal Act set standards for coastal development — was generally unchanged. If the owners wanted a major remodel, the wall would have to come down, the commission said.

According to a commission staff report, the Katzes carried on with their reconstruction project, though staff contacted them by letter and phone throughout 2017 calling for the work to stop, the seawall to be removed and the owners to seek a permit for the new development.

Staff said it wanted to resolve the situation amicably, but the couple sued the commission this year, alleging it was interfering with their property rights over what they said was only “repair and maintenance.”

Steve Kaufmann, the Katzes’ lawyer, said the work freshened what was once an “old and dowdy” home but that the house got only new skin, not new bones.

He said the end product did not add square footage, height or stories and did not expand the footprint or convert storage spaces into living space. He contended it was a minor remodel over existing framing on a house that stood on artificial fill, not sand. He said the project was completed in January.

But the commission wasn’t swayed, voting unanimously Thursday to issue a cease-and-desist order barring further building and to levy the $1-million penalty.

Commission staff said the penalty could have been millions of dollars but that it took a “conservative approach” and recommended a $500,000 fine payable a year and a half after the cease-and-desist order or when the house sells, whichever comes first.

Brownsey said the violations were egregious enough for a firmer response.

Environmentalist Steve Ray, one of about 15 people who spoke Thursday in favor of punishing the Katzes, said it was too bad the commission couldn’t also fine the city of Laguna Beach for allowing the remodel, which he said was clearly not minor.

“If it looks like a duck and it walks like a duck, quack, quack,” Ray said.

Commissioners asked Kaufmann for his idea of a fair penalty, but he had nothing to add.

hillary.davis@latimes.com

Twitter: @Daily_PilotHD