I am sure the law requires some means of stabilizing the soil. And I am not an engineer, nor have I experience in landslide prone areas. I think you should prepare for whatever drainage will happen and channel the water where you want it to go when heavy rains happen. They will. If you can grow weeds, you can grow grass. Clay or not, (Provided you have enough sunlight). Since you mention shade. It is likely, grass will not survive long in the shade. You need a locally adapted ground cover like myrtle, ivy, euonymous, aguga, lamium, goutweed.
Sod does not do well in shade, not suited. Reseed the sunny bare spots and this year keep it moist during dry spells. Irrigation may be needed. Have a soil test and fertilize according to expert recommendations. More fert the first year so you can improve the thickness of the grass. Show us your soil test report, lot of experts will tell you what to do. Then the only question is telling the real experts from the pretenders, and worse yet from the educated fools that don't ever leave their office.