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Vested Rights - Property Development Agreements And Vesting Tentative Maps In California |
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| Daniel J. Curtin, Jr. | |||
| Session: | Author Info | ||
One of the most important goals a developer must achieve is to protect its ability to complete the project once all land use and discretionary approvals have been obtained. For example, after the developer has received a general plan amendment, rezoning, tentative and final map and then has obtained all other various discretionary land use permits in order to develop over a period of time, the developer should try to guarantee its rights to complete the project as approved. Land use laws affecting the project might change while the project is underway either because of switch in local government legislative policy or by revisions made by the people through the initiative process. This is becoming more common in very recent years because city, county, state and national governmental leaders have jumped on the anti-sprawl bandwagon. Today, many cities have adopted strict land use regulations under banners of "Smart Growth," "Sustainable Growth," "Livable Communities, "New Urbanism" and "Stopping Sprawl." When this occurs, a developer many times cannot rely on common law vested rights and, therefore, must secure the protection of a development agreement to ensure vested rights to develop. This paper outlines that method in California and also another vesting procedure method, the use of a vesting tentative map.
On occasion, at planning commission and/or city council meetings, a property owner will speak in opposition to a proposed general plan and/or zoning change and claim that the city (2) has no right to change the law governing his project because he has done significant planning and construction work on the project. The property owner raises the issue of vested rights.1. The Avco Rule
The basic rule is that if a city changes its land use regulations, a property owner cannot claim a vested right to build out a project unless he has obtained a building permit and performed substantial work and incurred substantial liabilities in good faith reliance upon the permit. This common law vested rights rule in California was reaffirmed when the California Supreme Court stated:
It has long been the rule in this state and in other jurisdictions that if a property owner has performed substantial work and incurred substantial liabilities in good faith reliance upon a permit issued by the government, he acquires a vested right to complete construction in accordance with the terms of the permit. [Citations omitted.] Once a landowner has secured a vested right the government may not, by virtue of a change in the zoning laws, prohibit construction authorized by the permit upon which he relied.Avco Community Developers, Inc. v. South Coast Reg'l Comm'n, 17 Cal. 3d 785, 791 (1976).
The Avco court stated further:
Our conclusion that Avco has not acquired a vested right under the common law to proceed with its development absent a permit from the commission is not founded upon an obdurate adherence to archaic concepts inappropriate in the context of modern development practices or upon a blind insistence on an instrument entitled "building permit."Other cases have applied the same principle. See Hill v. City of Manhattan Beach, 6 Cal. 3d 279, 286?87 (1971) (upholding the application of a subsequent zoning ordinance to a previously divided parcel, thus prohibiting the development or the sale of one of the lots unless a variance was obtained); Oceanic Cal., Inc. v. North Cent. Coast Reg'l Comm'n, 63 Cal. App. 3d 57 (1976). In Morehart, the court stated that the Map Act merger provisions (Gov't Code §§ 66451.10 et seq.) do not affect the applicability of zoning ordinances requiring minimal parcel size for development as long as the requirements are not conditioned upon parcel merger. Morehart v. County of Santa Barbara, 7 Cal. 4th 725 (1994); see also Golden State Homebuilding Ass'n v. City of Modesto, 26 Cal. App. 4th 601 (1994) (holding that because a city had no established fee policy when a map application was completed, the city could not have conditioned its approval of the map on payment of impact fees, and therefore could subsequently require payment of the fees as a condition of issuance of building permits).If we were to accept the premise that the construction of subdivision improvements or the zoning of the land for a planned community are sufficient to afford a developer a vested right to construct buildings on the land in accordance with the laws in effect at the time the improvements are made or the zoning enacted, there could be serious impairment of the government's right to control land use policy. In some cases the inevitable consequence would be to freeze the zoning laws applicable to a subdivision or a planned unit development as of the time these events occurred.
Thus tracts or lots in tracts which had been subdivided decades ago, but upon which no buildings have been constructed could be free of all zoning laws enacted subsequent to the time of the subdivision improvement, unless facts constituting waiver, abandonment, or opportunity for amortization of the original vested right could be shown. In such situations, the result would be that these lots, as well as others in similar subdivisions created more recently or lots established in future subdivisions, would be impressed with an exemption of indeterminate duration from the requirements of any future zoning laws. Id. at 797?98.
In summary, as a general rule, a developer must comply with the laws in effect at the time the building permit is issued. Hazon-Iny Dev., Inc. v. City of Santa Monica, 128 Cal. App. 3d 1, 10?11 (1982).
Limitations to the Avco Rule
Courts have carved out certain limitations to the Avco rule. First, the rights which may vest upon reliance on a governmental permit are no greater than those specifically granted by the permit itself. Santa Monica Pines, Ltd. v. Rent Control Bd., 35 Cal. 3d 858 (1984). This rule was followed in Powers, where the court held the city was not estopped from imposing a later-enacted ordinance restricting the resale price of units on a previously approved condominium conversion. People v. Thomas Shelton Powers, M.D., Inc., 2 Cal. App. 4th 330 (1992). Noting that the developer's right to convert the apartment was unaffected by the city's code amendments, the court held that no vested rights were affected and the rule in City of W. Hollywood v. Beverly Towers, 52 Cal. 3d 1184 (1991) (a city may not impose conditions on condominium conversion after a developer secures all necessary discretionary approvals and satisfies all the requirements established by the state law), did not apply. Id. at 338.
Second, an owner of undeveloped land has no vested right in existing zoning, more valuable zoning which may have been anticipated, or zoning for the highest and best use of the property. Gilliland v. County of Los Angeles, 126 Cal. App. 3d 610, 617 (1981).
Third, an invalid permit vests no rights. The California Supreme Court held that a developer could claim no vested right in reliance upon a permit when he had reason to know that the permit might be defective. Strong v. County of Santa Cruz, 15 Cal. 3d 720 (1975). In Pettitt, the court held that a property owner who had constructed improvements in reliance upon an invalid building permit could be required to remove the structure, even though the permit was regular on its face and the property owner acted without knowledge of any defect in it. Pettitt v. City of Fresno, 34 Cal. App. 3d 813 (1973).
The following year, the appellate court held that a property owner could obtain no vested rights in reliance upon an approval obtained in accordance with the requirements of the county where the rules and practices adopted by the county did not conform strictly to the requirements of state law. People v. County of Kern, 39 Cal. App. 3d 830 (1974). Also a property owner or applicant cannot rely on written statements made by a public official unless the official is authorized to make them. Burchett v. City of Newport Beach, 33 Cal. App. 4th 1472 (1995).
In Burchett, the petitioner alleged a breach of a "written agreement with Defendant City of Newport Beach whereby said City agreed to allow Plaintiffs to improve said real property with a two story condominium structure and retain the existing driveway to said property. . . ." Id. at 1479.
The allegation was based on a letter from the Burchetts to the planning department asking for a permit to use an existing, nonconforming driveway, on which letter an assistant planner had marked a notation that the facts were "correct." The court noted that first, the city's charter provided it cannot be bound by any contract "unless the same shall be in writing, approved by the city council and signed on behalf of the city by the mayor and the city clerk or by such other officer or officers as shall be designated by the City Council." Id. at 1479. Second, the assistant planner was neither the person to contact for an "encroachment permit," nor a member of the correct department. The court cited Horsemen's Benevolent & Protective Ass'n v. Valley Racing Ass'n, 4 Cal. App. 4th 1538, 1563?64 (1992), for the proposition that "no government, whether state or local, is bound to any extent by an officer's acts in excess of his authority." Id. The court held that "one who deals with a public officer stands presumptively charged with a full knowledge of that officer's powers, and is bound at his peril to ascertain the extent of his powers to bind the government for which he is an officer, and any act of an officer to be valid must find express authority in the law or be necessarily incidental to a power expressly granted." Id. (quoting Horsemen's, 4 Cal. App. 4th at 1564).
Fourth, a vested right may be impaired or revoked to prevent the operation of the use from being a menace to the public health and safety or a public nuisance. Davidson v. County of San Diego, 49 Cal. App. 4th 639 (1996).
Fifth, a city-promulgated administrative regulation relied on by an owner in proceeding with a condominium conversion may be a valid basis for estoppel against the city, even though the city later enacts an ordinance which would have prevented the conversion. Hock Inv. Co. v. City and County of San Francisco, 215 Cal. App. 3d 438 (1989); see alsoCity of W. Hollywood v. Beverly Towers, Inc., 52 Cal. 3d 1184 (1991). In Beverly Towers, several apartment building owners had obtained final map approval from Los Angeles County to convert their rental units into condominiums. The owners had also obtained permission to sell individual units as condominiums from the California Department of Real Estate. The owners did not need any further permits to complete the conversion. The court held that a newly incorporated city could not enforce new condominium regulations after final map and Department of Real Estate approval. The court also said that it made no difference that the owners had not sold any units.
While creating the above limitations, the California courts have continued to rely on Avco. For example, subdivision approval for condominium conversions does not give a developer a vested right against later-enacted police power ordinances. See, Santa Monica Pines, 35 Cal. 3d at 858 (converter had to obtain a permit from the rent control board); Consaul v. City of San Diego, 6 Cal. App. 4th 1781 (1992) (reaffirming Avco). In H & H Properties, the developer was required to comply with the county's rent control ordinance even though he had obtained tentative and final map approval. People v. H & H Properties, 154 Cal. App. 3d 894 (1984). The court stated: "Vested rights is not the question here. H & H is free to proceed. It simply must pay somewhat more than it expected for the privilege of engaging in a condominium conversion in Los Angeles County in the 1980's." Id. at 902.
In a California Supreme Court case, developers were ordered to comply with a transit impact development fee even though they had acted on building permits and begun construction before the fee ordinance went into effect. Russ Bldg. Partnership v. City and County of San Francisco, 44 Cal. 3d 839 (1988). The fee was imposed pursuant to a generally worded condition of approval requiring the developer's participation in some type of transportation funding. The court held that the developers did not have a vested right to develop free of imposition of the transit impact fee under the Avco rule, because of the "open ended" condition attached to the earlier approval. Id. See also Blue Jeans Equities W. v. City and County of San Francisco, 3 Cal. App. 4th 164 (1992).
In summary, the authorities suggest that when a property owner with a building permit acts in reliance upon that permit as a guarantor of the validity of all acts taken or done in connection with the issuance thereof, the owner acts at his own peril, even as to questions of law which may arise after the building has been erected. If the developer's reliance proves to have been misplaced, the city can require him to remove the building.
In 1979, in an attempt to soften the impact of the Avco decision through the legislative process, the Legislature enacted a statute establishing a development agreement procedure. Gov't Code §§ 65864 et seq. The California Supreme Court described development agreements as follows:
The principal provisions of the legislation governing development agreements are:
• Cities are given express authorization to enter into a development agreement and may adopt procedures to do so by resolution or ordinance. Gov't Code § 65865.Since entering into a development agreement is clearly a legislative act under the statute, a city's decision not to enter into a development agreement need not be supported by findings. Native Sun/Lyon Communities v. City of Escondido, 15 Cal. App. 4th 892 (1993); but see 78 Ops. Cal. Atty. Gen. 230 (1995) (concluding that a development agreement was a contract for the purposes of Government Code section 1090, concerning contractual conflict of interest for officials (although the opinion did not refer to the Native Sun case or to Government Code section 65867.5, which states that such an agreement is a legislative act)). A "fully negotiated" development agreement is a "project" under CEQA (Pub. Res. Code §§ 21000 et seq.) that is subject to environmental review, even when the development agreement is not directly approved by a city but is instead submitted by the city to the electorate for approval. Citizens for Responsible Gov't v. City of Albany, 56 Cal. App. 4th 1199 (1997).• The development agreement is enforceable by any party thereto, notwithstanding any change in any applicable general or specific plan, zoning, subdivision, or building regulation adopted by the city. Gov't Code § 65865.4.
• Unless otherwise provided by the development agreement, the applicable rules, regulations, and policies are those which are in force at the time of the execution of the agreement. Gov't Code § 65866.
• A development agreement is a legislative act which must be approved by ordinance, be consistent with the general plan and any specific plan, and is subject to repeal by referendum. Gov't Code § 65867.5. However, the opportunity for such referendum expires 30 days after the city's adoption of the ordinance approving the agreement, and thereafter the project is immune to subsequent changes in zoning ordinances and land use regulations which are inconsistent with those provided for in the agreement. Elec. Code § 9141. In Midway Orchards, the court held a development agreement was invalid because the general plan amendment relied on for consistency was timely referended. Midway Orchards v. County of Butte, 220 Cal. App. 3d 765 (1990). The court stated:
The development agreement was therefore unlawfully approved and executed. A contract entered into by a local government without legal authority is 'wholly void', ultra vires and unenforceable. [Citations]. Such a contract can create no valid rights. Therefore, Midway can claim no right to develop its property based on a development agreement void from the beginning. Id. at 783. See also 216 Sutter Bay Assocs. v. County of Sutter, 58 Cal. App. 4th 860 (1997) (holding that an interim urgency zoning ordinance and a parallel "ordinary" urgency ordinance, adopted by a newly elected board of supervisors within the 30-day "referendum period," successfully stopped a development agreement adopted by the preceding, lame-duck board). • There is a 90-day statute of limitation to challenge the adoption or amendment of a development agreement approved on or after January 1, 1996. Gov't Code § 65009 (c)(4).• The city may terminate or modify a development agreement if it finds and determines, on the basis of substantial evidence, that the applicant or successor in interest thereto has not complied in good faith with its terms or conditions. Gov't Code § 65865.1.
• A city is authorized to enter into a development agreement for property outside the city limits but within its sphere of influence; the development agreement, however, does not become operative until annexation proceedings are completed within the period of time specified by the agreement. Gov't Code § 65865(b).
• If, prior to incorporation of a new city (or annexation to a city), a county has entered into a development agreement with the developer, that development agreement shall remain valid for the duration of the agreement, or for eight years from the effective date of the incorporation or annexation, whichever is earlier, or for up to 15 years upon agreement between the developer and the city. Gov't Code § 65865.3. This statute applies to incorporations where the development agreement was applied for prior to circulation of the incorporation petition and entered into between the county and the developer prior to the date of the incorporation election. The statute also allows the newly incorporated or annexed city to modify or suspend the provisions of the development agreement if it finds an adverse impact on public health or safety in the jurisdiction. However, as to annexations, if the proposal for annexation is initiated by a petitioner other than a city, the development agreement is valid unless the city adopts written findings that implementation of the development would create a condition injurious to the public health, safety, or welfare of the city's residents. Id.
A development agreement is generally "enforceable by any party thereto notwithstanding any change in any applicable general or specific plan, zoning, subdivision, or building regulation adopted by the city, county, or city and county entering the agreement." Gov't Code § 65865.4; see also City of W. Hollywood, 52 Cal. 3d at 1193 n. 6 (discussing the law generally); Native Sun, 15 Cal. App. 4th at 910; Midway Orchards, 220 Cal. App. 3d at 773; 76 Ops. Cal. Atty. Gen. 227 (1994).
Not infrequently, those who challenge projects governed by development agreements will argue that such agreements are invalid because the city is "contracting away" its police power. The courts have not been persuaded by this argument.
In the Stephens case, the Stephenses purchased property in 1973 to develop an apartment complex of approximately 140 to 150 units. Stephens v. City of Vista, 994 F.2d 650 (9th Cir. 1993). Subsequently, the City of Vista lowered the access street to the property, frustrating their contemplated use, and downzoned the property. The Stephenses sued. The city and the Stephenses eventually entered into a settlement agreement providing for a specific plan and zoning that permitted construction of a maximum of 140 units. After rezoning the property, the city denied a site development plan, in part because it wanted the Stephenses to reduce the density. The Stephenses then renewed their lawsuit against the city.
The city argued that the settlement agreement unlawfully contracted away its police power. The court disagreed. The court first noted that when the city entered into the settlement agreement, it understood it was obligated to approve 140 units. Further, relying on Morrison Homes, which upheld the validity of an annexation agreement, the court held that while generally a city cannot contract away its legislative and governmental functions, this rule only applies to void a contract which amounts to a city's "surrender" of its control of a municipal function. Stephens, 994 F.2d at 655 (discussing Morrison Homes Corp. v. City of Pleasanton, 58 Cal. App. 3d 724 (1976)). Therefore, the city could contract for a guaranteed density and exercise its discretion in the site development process without surrendering control of all of its land use authority. The court awarded $727,500 in damages for breaching the agreement based on the difference between the value of the property with an entitlement of 140 units and the value of the property with a developable density of 55 units (the current zoning). Id. at 657; see also City of Glendale v. Superior Court, 18 Cal. App. 4th 1768 (1993). In Glendale and cases cited therein, the court held that in entering into a fixed-term lease as a lessor, a city did not contract away its eminent domain power to take back the property by condemning the lessee's leasehold interest. Note that unlike the Stephens case, where the city agreed to approval of 140 units as part of a settlement, in Glendale the issue of possible condemnation was not addressed either in the contract or in the negotiations. Accordingly, the court could not imply a waiver of the eminent domain power.
In light of Dolan, some cities have turned to the use of development agreements to obtain exactions that might not be legal under Nollan's nexus test and Dolan's "rough proportionality" test. Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374 (1994). Because they are adopted as a result of negotiations between a city and a developer, development agreements are not subject to the Dolan decision. See Leroy Land Dev. Corp. v. Tahoe Reg'l Planning Agency, 939 F.2d 696 (9th Cir. 1991) (holding settlement agreement not subject to Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987)).
In summary, a development agreement offers a developer substantial assurance that his project can be completed "in accordance with existing policies, rules and regulations, and subject to conditions of approval." Gov't Code § 65864(b). Since the vested rights continue on for some time, from a practical standpoint it is advisable for the developer to retain a complete set of the local ordinances, policies, and standards in effect when the development agreement becomes effective. If a dispute should arise years after the agreement has been executed, it may be difficult to piece together the operative law without such a record.
As another legislative response to Avco, in 1984, the Legislature adopted Chapter 4.5 (Development Rights) of the Subdivision Map Act, which established a new form of tentative map for subdivisions in California-the "Vesting Tentative Map." Gov't Code §§ 66498.1 et seq. The rights accruing to a subdivider upon approval of a vesting tentative map are expressly deemed to constitute "vested rights" to proceed with the development in substantial compliance with the local ordinances, policies, and standards in effect at the time the application for approval of the vesting tentative map is deemed complete. Gov't Code § 66498.1. These vested rights extend for substantial periods of time beyond the filing for recordation of a final map and, therefore, add a critical new dimension to the approval process connected with such maps.
The purpose of the vesting tentative map statute is to give a statutory vested right that will be effective earlier than a vested right established pursuant to Avco, 17 Cal. 3d 785. The vesting tentative map process starts when the subdivider files a tentative or parcel map with the words "Vesting Tentative Map" presented conspicuously on the face of the map. Gov't Code § 66452(c). For a general discussion of the legislative history of the statute and its application, see Bright Dev. v. City of Tracy, 20 Cal. App. 4th 783 (1993); and Kaufman & Broad Cent. Valley, Inc. v. City of Modesto, 25 Cal. App. 4th 1577 (1994).
A vesting tentative map differs in some respects from a development agreement. In particular, a vesting tentative map approval is unilateral, and a development agreement approval is bilateral. This means that cities must process a properly submitted vesting tentative map application and approve or deny it based on statutory criteria; whereas a development agreement is purely the result of what is bargained for at the table, and a city could even refuse to accept one for processing. A vesting tentative map will vest rights earlier than a development agreement, i.e., with a vesting tentative map rights vest on the date the application is found complete. (With a development agreement, rights vest on the date the agreement is executed). Finally, as a legislative act, a development agreement is subject to referendum; a vesting tentative map approval is not.
A vesting tentative map does not provide a mechanism for controlling the city's future exercise of discretionary approvals. For example, if a subdivider needs a discretionary approval, such as a use permit, after the subdivider's tentative map vests, there is no guarantee of such approval. In approving or denying the use permit, however, the city will be governed by the ordinances, policies, and standards in effect at the time the tentative map application was complete. Gov't Code § 66498.1(b).
Because a development agreement may provide for the conditions and requirements that will govern the processing of future discretionary approvals (Gov't Code § 65865.2), its use is likely to provide a broader range of benefits than those obtained solely through the use of a vesting tentative map.
When a vesting tentative map is used, as when a development agreement
is used, it is advisable, from a practical standpoint, for the subdivider
to retain a complete set of the local ordinances, policies, and standards
in effect when the vesting tentative map application was deemed complete,
since the rights vested continue on for some time. If a dispute should
arise years after the vesting tentative map was deemed complete, it may
be extremely difficult to piece together the operative law.
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Gov't Code §§ 65864 et seq. |
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1. See 'What Do You Mean I Can't Build!?' A Comparative Analysis of Why Property Rights Vest, Pelham, Lindgren, Weil, 31 The Urban Lawyer (Fall 1999).
2. When the word "city" is used, it also means "county;" "city council" also means "board of supervisors."
3. See David L. Callies, Development Agreements,
Zoning and Land Use Controls, Chap. 9 (Matthew Bender 1997); Daniel J.
Curtin, Jr., Protecting Developers' Permits to Build: Development Agreement
Practice in California and Other States, 18 Zoning and Planning
Law Report 85 (1995); Daniel J. Curtin, Jr. and Scott A. Edelstein, Development
Agreement Practice in California and Other States, 22 Stetson Law Review
761 (1993); reprinted in 1994 Zoning and Planning Handbook 491, (Kenneth
H. Young, editor, Clark, Boardman, and Callaghan); Knight and Schulte,
Current
Issues Relating to Vested Rights and Development Agreements, 25The
Urban Lawyer 779 (Fall 1993).
Copyright 2000 By Author
DANIEL J. CURTIN, JR. McCutchen, Doyle, Brown & Enersen, LLP Walnut Creek, California
Daniel J. Curtin, Jr. concentrates his practice on local government and land use law representing both private and public-sector clients. He is a partner in the Walnut Creek office of McCutchen, Doyle, Brown & Enersen, LLP.
Mr. Curtin serves as Vice Chair and on the Council, the governing body, of the State and Local Government Law Section of the American Bar Association. He was Past Chair of the Land Development, Planning & Zoning Section of the International Municipal Lawyers Association (formerly NIMLO). He is past Vice-Chair of the Executive Committee of the Real Property Law Section of the State Bar of California. Mr. Curtin has also served as President of the City Attorneys' Department of the League of California Cities, as a member of the Board of Directors of the League, and as Regional Vice President of the International Municipal Lawyers Association.
In recognition of his extensive contributions to NIMLO and to the entire municipal law community nationwide, as well as his years of leadership and service to the legal profession, Mr. Curtin was honored in 1992 with NIMLO's Charles S. Rhyne Award for Lifetime Achievement in Municipal Law. In 1988, he was the recipient of the American Planning Association's National Distinguished Leadership award for 20 years of writing, teaching, encouraging and supporting planning ideas. In 1972, he was named Honorary Life Member of the California Park and Recreation Society in recognition of his exceptional service to the field of parks and recreation.
Mr. Curtin is the author of numerous publications on California land use and subdivision law, which have been cited frequently by the California Courts, including "Curtin's California Land Use & Planning Law," published and revised annually by Solano Press, "Subdivision Map Act Manual," published by Solano Press and "California Subdivision Map Act Practice," published by California Continuing Education of the Bar, supplemented annually. He is a frequent lecturer for the University of California Extension and Continuing Education of the Bar (CEB) and was an adjunct professor for the University of San Francisco Law School teaching Land Use Law.
Mr. Curtin graduated from the University of San Francisco in 1954 and from its School of Law in 1957. He has served as assistant secretary of the California State Senate, Counsel to the Assembly Committee on Local Government, and Deputy City Attorney of Richmond. In 1965, he was appointed City Attorney of Walnut Creek and served until 1982.