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Property Owners Rights: The Vest That You Can Hope For

Posted on August 3, 2011 by William Shewmake

Will ShewmakeCongratulations, you got your property zoned for general business (B-1) years ago and under that zoning there are no restrictions on the square footage of a building.  However, the local Board of Supervisors has learned that you are in negotiations with a large retailer, and the Board wants to nix your multi-million dollar deal because it fears the retailer will put local stores out of business.  To stop you, the Board has begun the process to amend the B-1 zoning classification ordinance to limit the size of any given building.  Should you worry about the new ordinance change?  Not at all – if you don’t mind losing your multi-million dollar deal.

The Supreme Court of Virginia has repeatedly held that zoning property does not guarantee that the property rights associated with that zoning will always remain.  In the language of land use, zoning, without more, normally does not “vest” your pre-existing rights.  With certain exceptions, localities can change the general rules that apply to a zoning district.  So in the above example, you probably would be out of luck if you simply relied on your pre-existing zoning and idly stood by as the Board amended its zoning ordinance.  Hale v. BZA, 277 Va. 250 (2009).

However, the General Assembly recognizes the prejudice that can result when localities change “the rules,” and has enacted some protection for property owners.  Under Va. Code § 15.2-2307, your rights are vested if:

  1. The landowner obtains or is the beneficiary of a significant governmental act;
  2. Relies in good faith on the governmental act;
  3. Incurs extensive obligations or substantial expenses diligently pursuing a specific project in reliance on the governmental act.

In essence, the General Assembly wanted to protect people who have substantially relied upon their zoning and would be unfairly hurt if a locality were allowed to change the rules.  The Supreme Court of Virginia initially appeared to take a broad intrepretation of §15.2 – 2307 in light of its policy and purpose.  See, City of Suffolk v. BZA, 266 Va. 137 (2003).  But the make up of the Court has changed, and in recent cases the Court has appeared to raise the threshold a landowner must satisfy to invoke the protection of Virginia’s vesting statute.  Hale v. BZA, 277 Va. 250 (2009); Board of Supervisors v. Crucible, 278 Va. 152 (2009).

There are two very recent appointments to the Supreme Court of Virginia, which may in turn impact vesting law.  But for now, my advice is threefold: 

  1. If you have obtained zoning for a property, do not sit on your rights.  I suggest you file site plans and take other actions that will vest your rights, if need be
  2. Stay current on any proposed local ordinance changes and lobby the locality if those changes could impact or impair your rights.
  3. Keep apprised of current laws and vesting rules because they may evolve over the next few years. 

In fact, this area of the law is so important, I intend to blog on different aspects of it often.  Personally, I am fundamentally bothered by a system in which a landowner is going forward with a project, a locality doesn’t like the project and the locality can rush through an ordinance amendment before the site plan is approved in order to deprive the landowner of his rights.

Section 15.2 – 2307 provides vested rights if, among other things, the owner as part of his zoning made certain proffers.  In addition, the General Assembly enacted Va. Code §15.2 – 2298, which provides certain vested rights if the developer as part of  zoning made cash payments or included certain offsite improvements, the need for which was not caused by the proposed development.
The Court in Crucible held that obtaining a zoning confirmation letter was not a significant governmental act for vesting purposes.  In response, the General Assembly amended Va. Code §15.2-2307 to expressly identify a zoning confirmation letter as a governmental act.
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Cash Proffers: Pay now or later?

Posted on April 28, 2011 by William Shewmake

Will ShewmakeLocalities are understandably concerned about a development project’s impact on infrastructure, and they want money to offset the project’s impact on roads and schools.  To help defray such costs, Virginia enacted a voluntary cash proffer system.  Under that system, a developer as part of a rezoning can “voluntarily” agree to pay a specified amount for each residential lot permitted under the approved zoning.  When the cash proffer system initially began, the proffers often were typically paid on a specific lot when a builder applied for a building permit on that lot.  Requiring the payment at building permit instead of the certificate of occupancy accomplished two things.  The locality received the money sooner, and it helped conceal from the home buyer (and future voter) that he was paying the locality up to tens of thousands of dollars for the privilege of living in the locality.

While proffer payments would eventually pay for the necessary infrastructure, the improvements lagged the demand for such infrastructure because the locality had to accumulate the cash proffer money over time before it had sufficient funds to pay for the improvements.  During the economic boom, developers, impatient to have their zoning cases approved, tried to allay the localities’ concerns about the impact on existing infrastructure.  They did so by agreeing to front load a significant portion of the “voluntary” cash proffers that the developer agreed to pay.  By the end of the boom, developers were agreeing to pay hundreds of thousands and sometimes millions of dollars up front based on the number of lots recorded, irrespective of when the lots would be actually finished or sold.   Developers, believing that lot prices inevitably rose and that lots would sell immediately, thought they could quickly recoup the initial massive payments through quick lot sales.  In fact, some developers thought the up front payments could accelerate improvements which in turn could be used to market the development.  Of course, when the market crashed, all that changed.  Developers could no longer afford to pay massive proffer payments up front and certainly no bank was going to finance them.  The accelerated proffers killed any possibility that the project could proceed.

In response, Virginia’s General Assembly, effective July 1, 2010, enacted Va. Code § 15.2 – 2303.1:1, which provides that through July 1, 2014, a locality can accept and collect a cash proffer for a residential dwelling “only after completing the final inspection and prior to the time of the issuance of any certificate of occupancy…”  The Virginia Attorney General has recently opined that the new law applies to any existing zoning cases that required up front payments.

Cash strapped localities have naturally taken issue with that opinion.  Stay tuned.  The issue may be coming to a court near you.  And as the economy begins to thaw, the outcome of the dispute may determine whether a particular project survives or dies.

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In Virginia, Dillon Rules

Posted on April 27, 2011 by William Shewmake

I confess I’m a Dillon fan.  Not Matt or Bob, but an arcane rule of law. And while my friend the Dillon Rule has been out of vogue for awhile, in these difficult economic times, it is making a concerted come back.

In most states, localities are presumed to possess the authority to act unless prohibited by the state.  Anyone familiar with local politics can appreciate how troubling such a relatively blank check can be.  Thankfully for those of us in the Commonwealth, Virginia has adopted a fundamentally different scheme.  In Virginia, a locality has “only those powers that are expressly granted, those necessary or fairly implied from expressly granted powers, and those that are essential and indispensable.”  City of Chesapeake v. Gardner Enters, Inc., 253 Va. 243, 246 (1997).  The Dillon Rule represents a necessary check on local power, which sometimes is exercised by politicians who may not enjoy substantial land use experience, or local planners that may try to take advantage of part time elected officials who are ignorant of a particular agenda being advanced by staff.

The Supreme Court of Virginia recently applied the Dillon Rule in two land use contexts.  In Marble Technologies v. Hampton, 279 Va. 409 (2010), the City of Hampton adopted an ordinance establishing criteria to determine whether a stream was deemed perennial.  If the stream was considered perennial, then the landowner had to maintain a hundred foot buffer on both sides of the stream.  The City of Hampton’s criteria differed from the one established by a state agency.  Hampton’s criteria would have required the plaintiff, Marble Technologies, to establish a stream buffer which was unnecessary under the states agency’s methodology.  The Supreme Court of Virginia struck down Hampton’s more restrictive ordinance.  In doing so, the Court explained that a locality lacked authority to enact an ordinance that was different from the criteria allowed and promulgated by the state.

In County of Chesterfield v. Tetra Associates, LLC, 279 Va. 500 (2010), the Court applied the Dillon Rule to Chesterfield County’s subdivision ordinance.  In Tetra, Chesterfield’s agricultural zoning ordinance permitted one dwelling per acre.  But the County’s subdivision ordinance provided that when agriculturally zoned property was subdivided for residential purposes, any resulting residential lot had to contain a minimum of five acres. The Court struck down the portion of the subdivision ordinance that required a five acre minimum lot.  As the Court explained, Chesterfield’s subdivision ordinance could only include restrictions permitted by the State’s enabling statutes that authorized subdivision ordinances.  Because the enabling statute did not mention lot size, a locality could not incorporate lot size restrictions in a subdivision ordinance, and Chesterfield was therefore prohibited from using its subdivision ordinance to restrict lot sizes permitted under a property’s applicable zoning.

So the next time a Virginia locality informs you that you cannot (or must do) something, and it cites a local ordinance as proof, remember the old adage not to believe everything you read.  You instead may want to confer with a land use attorney before accepting the locality’s edict.

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Welcome to Land Use and the Law Blog

Posted on April 27, 2011 by William Shewmake

The purpose of my blog is to provide insights on a host of issues that impact how land can be used, developed, preserved and even taxed. These issues range from conservation easements to zoning laws, environmental regulations and real estate tax assessments―just to name a few. Most posts will cover the current state of the law as well as trends and issues I perceive are on the horizon. Some of my posts may be relevant generally, but many of my musings will focus on Virginia law and issues confronting us here in the Commonwealth. As a former planning commissioner, I also hope to provide insights on the perspectives of the private sector and local government.

As anyone familiar with the real estate industry can attest, the news lately has been pretty grim. I will, therefore, try to inject a little humor (gallows and otherwise) wherever possible and, to the extent I can, provide a glimmer of hope to those who have suffered through the biggest real estate meltdown since the Great Depression. If I can accomplish this, I will consider my blog a success.

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