Zoning Out: Vested Rights Can Cost You
Susan K. Burkhart skb@cshlaw.com

Vested Rights What Are They?

Analogy if you do personnel law:
• At will employment – no constitutional protection to continued employment because you have a mere expectation of continued employment • Contract employment – have constitutional protection to continued employment because there is a protected “property interest” at stake

Essential rule of zoning and vested rights law:
• A zoning ordinance is not a contract between the town and its citizens; a zoning ordinance, including a zoning classification, is subject to repeal or change at the will of the governing body – subject only to “vested rights” of the citizens in the town. McKinney v. City of High Point, 239 N.C. 232, 79 S.E.2d 730 (1954).

/_______/_______/_______/_______/_______ 1 2 3 4 5 1. 2. Landowner bought land – land zoned “GB” in 2000 Landowner confirmed at meeting with Town Planning Director in 2005 that car dealership permitted under GB zoning Landowner spent $100,000 for architect, engineering fees, etc., went to architectural review meetings with Town and obtained architectural approval from Town for proposed building Landowner obtained building permit

3.

4.

5.

Landowner acquired building permit and spent $50,000 in engineering costs and other fees in reliance on the permit

Two Methods for Obtaining Vested Rights:
• Statute • Common law - created by case law (written appellate decisions) rather than the legislature by enactment of a statute

Common Law Vested Rights
• At common law, the VR doctrine evolved as a mechanism to balance competing interests of municipalities, which need orderly, public-interest driven zoning regulations, and the property rights of landowners • The VR doctrine recognizes that where property owners have reasonably made a substantial expenditure of money, time, labor or energy in a good faith reliance on a permit from the government, that they acquire “vested rights” or a protected right to complete the development of their land as originally begun despite any changes in the zoning on the property.

Essential elements COMMON LAW vested rights:
1) the party has made, prior to the amendment of a zoning ordinance, expenditures or incurred contractual obligations “substantial in amount, incidental to or as part of the acquisition of the building site or the construction or equipment of the proposed building;” 2) the obligations and/or expenditures are incurred in good faith;

3. the obligations and/or expenditures were made in reasonable reliance on and after the issuance of a valid building permit, if such permit is required, authorizing the use requested by the party; and the amended ordinance is a detriment to the party. Browning-Ferris Industries of South Atlantic, Inc. v. Guilford County Board of Adjustment, 126 N.C. App. 168, 484 S.E.2d 411 (1997).

First Element: Landowner made “Substantial Expenditures” toward development

Held to be “substantial” expenditures:
• Land acquisition, construction materials and equipment purchased = substantial expenditures
Town of Hillsborough v. Smith, 276 N.C. 48, 170 S.E.2d 904 (1969)

• Costs may be viewed proportionally to overall cost of project: even digging a trench and installing PVC pipe was a “substantial expenditure” given the small scale of the project, i.e., installing satellite dish television Sunderhaus v. Bd. of Adjustment, 94 N.C. App. 324, 380 S.E.2d 132 (1989)

• Whether expenditures were “substantial” may be question of fact: expenditure of $20,000 after receipt of quarry permit was a question of fact for jury. Simpson v. City of Charlotte, 115 N.C. App. 51, 443 S.E.2d 772 (1994).

Second Element: Developer Acted in “Good Faith”

• Owner acting with “undue haste” in a deliberate attempt to avoid newly adopted ordinance does not secure CL vested rights.
EX: Where developer moved at “extraordinary pace with knowledge of community opposition to project, no “good faith” shown. Stowe v. Burke, 255 N.C. 527, 122 S.E.2d 374 (1961).

EX: Where developer made expenditures between date of adoption and effective dates of rezoning, no “good faith” shown.
Warner v. W & O, Inc., 263 N.C. 37, 138 S.E.2d 782 (1964).

EX:

Knowledge of a specific pending change in zoning may defeat “good faith.” After notice of public hearing about rezoning, developers consulted planning staff to determine what to do to get “grandfathered in.” They then proceeded to subdivide the land, record the plat, secure a zoning compliance permit and install roads prior to vote on rezoning. Held: no “good faith” shown. Koontz v. Davidson County Bd. of Adjustment, 130 N.C. App. 479, 503 S.E.2d 108, rev. denied, 349 N.C. 529, 526 S.E.2d 177 (1998).

BUT - knowledge of only a possible ordinance change does not itself defeat “good faith.”
Thomasville of N.C., Ltd. v. City of Thomasville, 17 N.C. App. 483, 195 S.E.2d 79 (1973).

Third Element: Reliance on Valid Permit

Examples of Valid Permits:
• • • • Building permit Special or conditional use permit Preliminary or final plat approvals Quarry permit

Expenditures made on INVALID (mistakenly issued permit) do NOT confer vested rights
• Where owner had operated a bakery in violation of zoning ordinances for 9 years - no VR because permit was mistakenly given in violation of residential zoning district. City of Raleigh v. Fisher, 232 N.C. 629, 61 S.E.2d 897 (1950).

• No vested rights where building inspector issued building permit for sign construction after the owner’s original sign permit expired. • No VR because the building permit was invalid. Morris Communications Corp. v. City of Bessemer City Zoning Bd. of Adjustment, 689 S.E.2d 880 (March 2, 2010).

• Also, city cannot be estopped to enforce its zoning ordinances because of promises or action that the landowner relied upon to its detriment. Morris Communications Corp. v. City of Bessemer City Zoning Bd. of Adjustment, 689 S.E.2d 880 (March 2, 2010).

• Must be reliance on a permit before expenditures were incurred Warner v. W&O, Inc., 263 N.C. 37, 138 S.E.2d 782 (1964).

• Leith v. Town of Southern Pines, No. COA 9-433
N.C. Court of Appeals (decision pending)

/_______/_______/_______/_______/_______ 1 2 3 4 5 1. 2. Landowner bought land – land zoned “GB” in 2000 Landowner confirmed at meeting with Town Planning Director in 2005 that car dealership permitted under GB zoning Landowner spent $100,000 for architect, engineering fees, etc., went to architectural review meetings with Town and obtained architectural approval from Town for proposed building Landowner obtained building permit

3.

4.

5.

Landowner acquired building permit and spent $50,000 in engineering costs and other fees in reliance on the permit

Browning-Ferris Indus. of S. Atl., Inc. v. Guilford County Bd. of Adjustment, 126 N.C. Ap 168, 172, 484 S.E.2d 411, 415 (1997). Held: letters from staff confirming the zoning on a property do not give rise to vested rights. Must have building permit to obtain CL vested rights.

Huntington Properties v. Currituck County, 153 N.C. App. 218, 569 S.E.2d 696 (2002).
• Pltf owned mobile home park; after park in operation for 20 yrs, County amended its zoning ordinances to prohibit mobile home parks and pltf’s park became a lawful “nonconforming use.” Then, pltf wanted to expand its operation. • Ct: Pltf could have obtained vested rights in 2 ways:
– by obtaining building permits from the State to expand its capacity; or – by obtaining a final interpretation from the County planning staff that the park could lawfully expand under UDO provision allowing expansion of a nonconforming use “in volume only.”

REVIEW:
• Common Law Vested Rights arise if:
 Owner makes:
1) substantial expenditures; 2) in good faith;

3) in reliance on a valid permit

prior to the amendment of a zoning ordinance that prohibits the development.

Statutory Vested Rights

BUILDING PERMIT VESTED RIGHTS under N.C. Gen. Stat. §160A-385(b)
(b) Amendments in zoning ordinances shall not be applicable or enforceable without consent of the owner with regard to buildings and uses for which either (i) building permits have been issued pursuant to G.S. 160A-417 prior to the enactment of the ordinance making the change or changes so long as the permits remain valid and unexpired pursuant to G.S. 160A-418 and unrevoked pursuant to G.S. 160A-422 or (ii) a vested right has been established pursuant to G.S. 160A-385.1 and such vested right remains valid and unexpired pursuant to G.S. 160A385.1.

If owner has a valid building permit, he need not prove the elements of common law vested rights. Need not show spent “substantial sums,” or “good faith” or reliance on a “permit.”

Why do common law vested rights even matter?

Common law vested rights can arise from site plan approval, special use permits, conditional use permits, quarry permits, billboard permits, as well as building permits… so they do matter.
* Vested Rights required for every due process (42 U.S.C. §1983) damages claim.

“SITE SPECIFIC DEVELOPMENT PLAN” VESTED RIGHTS - under N.C. Gen. Stat. §160A-385.1

If landowner obtains “site specific development plan” approval from town, he can acquire vested rights before he obtains a building permit.

“Site specific development plan” = plan submitted to town describing with “reasonable certainty the type and intensity of use.” May be:

– a subdivision plan – preliminary or general development plan – conditional or special use permit – conditional or special use district zoning plan – or “any other land-use approval designation as may be utilized by a city.”

City or town’s ordinances will typically define “site specific development plan”
• Must be defined as permit or approval earlier than the issuance of a building permit

“Site Specific Development Plan”
• Must be approved by city/town following notice and public hearing.

Site specific development plan vested rights last minimum of 2 years, but up to 5 years if so provided by the city/town in its ordinances.

NON-VESTED “VESTED RIGHTS” - RIGHT TO HEARING UNDER ORIGINAL ORDINANCE UPON SUBMITTING APPLICATION • Applicants are entitled to complete a hearing on a pending application under the original zoning ordinance; • Towns/cities cannot modify a zoning ordinance to preclude development before voting to approve or disapprove a pending application.

Robins v. Town of Hillsborough, 361 N.C. 193, 639 S.E.2d 421 (2007).

PRACTICE POINTERS:
1) Know your zoning ordinance or UDO, esp. how it defines “site specific development plan” 2) Know your zoning ordinance of UDO, esp. the length of time by which a decision must be rendered on a pending application 3) Train your staff – don’t send “zoning approval letters” or anything equivalent, which could be construed as an “approval”

4) Don’t hasten the rezoning process to avoid an undesirable project; follow all rules for public notice, staff review, etc. If Town/city violates any rules along the way, the Robins rule means that the applicant will get a full review of the application under the original zoning. 5) Don’t communicate by e-mail, esp. about proposed projects – it’s discoverable through a FOIA request and later in a lawsuit. Council should save public debate for public forum. 6) Document the reasons for Town action in the minutes – don’t let citizens’ comment be only record.

7) Invoke benefits of (relatively) new statute: “Zoning regulations shall be made in accordance with a comprehensive plan. Prior to adopting or rejecting any zoning amendment, the governing board shall adopt a statement describing whether its action is consistent with an adopted comprehensive plan and explaining why the board considers the action taken to be reasonable and in the public interest. That statement is not subject to judicial review.”

N.C.G.S.A. § 153A-341 (effective Jan. 1, 2006).

8) Review your town/city’s comprehensive plan. 9) Consider possibility that City/town may be sued for Fair Housing Act violation, under 42 U.S.C. §3601-3619, or “Title VII”) even if no “vested rights” exist.

Fair Housing Act prohibits zoning decisions even based on good faith (laudable and nondiscriminatory) zoning goals, if the zoning results in a discriminatory impact.

Fair Housing Act also prohibits discrimination based on “disability,” – which includes drug and alcohol dependence.