Asserting Vested Rights in Colorado
| Jurisdiction | Colorado,United States |
| Citation | Vol. 12 No. 8 Pg. 1199 |
| Pages | 1199 |
| Publication year | 1983 |
1983, August, Pg. 1199. Asserting Vested Rights in Colorado
Alan E. Schwartz, Aspen, is a partner in the firm of Myler, Stuller & Schwartz, specializing in land use for both developer interests and local governments.
Consider the following scenario: the client, a major real estate developer, owns several hundred acres of expensive property along the Southern California coast which he intends to develop as a resort community. Plans for the development are in conformance with all applicable planning and zoning regulations, and approval has been given to a site plan and subdivision plat. In contemplation of construction, the site is graded pursuant to a county grading permit, and street improvements, storm drains and various utilities are installed at a total cost of $2.8 million.
After all of this activity, but before the client has received any building permits, the state legislature adopts a measure imposing stringent new conditions upon any development within the coastal zone. These conditions severely curtail the client's plans and jeopardize his investment. The client wants to know whether, under the circumstances, his rights in the property have "vested," and whether the authorities are estopped from enforcing the new regulations. Unfortunately for the client, the answer to both questions in most jurisdictions, including Colorado, is "No."
The above scenario was drawn directly from the California Supreme Court's holding in Avco Community Developers, Inc. v. South Coast Regional Commission,(fn1) one of the leading opinions on the subject of vested rights. As decided by the court in Avco, the developer in such circumstances does not possess a vested right to proceed as planned and cannot invoke the doctrine of estoppel to avoid compliance with newly enacted legislation. Notwithstanding his considerable investment, and the great lengths to which he has relied on permits and approvals already issued, this client was not legally insulated from the devastating effects of changing requirements in the law.
The purpose of this article is to alert attorneys to the issues at stake in the vested rights debate, and to provide a practical grasp of an increasingly prevalent land use question. In so doing, the article traces the evolution of the doctrine of vested rights in Colorado, illustrates its operation under various factual settings, and analyzes whether Colorado law is in need of modification, by either judicial or legislative means, to ensure the most consistently equitable results.
Some courts have confused the distinction between vested rights and equitable estoppel, also referred to as estoppel in pais. For the purpose of this article, and as a means of interpreting most cases on the subject, "equitable estoppel" is the doctrine that is invoked to prevent injustice where the facts support a finding of "vested rights." The focus here is on just which facts give rise to such a finding so as to invoke the equitable conscience of the court.
The first case in Colorado to apply equitable estoppel in a land use context was City and County of Denver v. Stackhouse.(fn2) Relying on the doctrine established in an earlier case, Piz v. Housing Authority,(fn3) the Supreme Court ruled that equitable estoppel "is fully applicable against a municipality if it is necessary to invoke it to prevent manifest injustice."(fn4) As later defined by the court in Crawford v. McLaughlin, "the doctrine is founded upon principles of fair dealing, and is designed to aid the law in the administration of justice where, without its aid, injustice might result."(fn5) Specifically, it operates to bar a municipal corporation from taking a position contrary to a previous representation relied upon by individuals to their detriment.(fn6)
In Stackhouse, the doctrine was invoked to protect an individual seeking to have a building permit declared valid and to enjoin the defendant Zoning Administrator from interfering with the construction authorized under the permit. It was established at trial that the plaintiff received assurances from city officials as to the zoning of the subject property and that, in reliance upon their representations, he had purchased the property. He had obtained a building permit authorizing the construction of an apartment building on the site and, in reliance upon the permit, had expended approximately $18,000 in direct construction costs.
Five months after the permit had been issued, and while in the midst of construction, the plaintiff was ordered by the city to cease construction because of an alleged violation of the zoning code. It developed that the permit had been issued in error, and that an apartment building was not a use permitted on the site. With no explanation of the particular facts supporting its ruling, and without couching its opinion
in terms of vested rights, the court held that the city was equitably estopped from contesting the validity of the permit which had been issued.
Even though not identified as such in Stackhouse, the following factual ingredients comprising an estoppel were present in that case: (1) a valid building permit, whether or not issued in error; and (2) detrimental reliance on the permit. Whether wittingly or not, Stackhouse applied the majority rule in the United States as regards vested rights. As subsequent cases attest, the presence or absence of these two critical elements has become a veritable touchstone for establishing vested rights in Colorado. Where these facts exist, rights are deemed to have vested and estoppel is in order---but not otherwise. Although other elements, such as good faith, also come into play, Colorado courts have been almost ritualistic in requiring both a building permit and reliance thereon before declaring rights to have vested.
Before drawing conclusions as to whether such a formula is equitable, it seems appropriate to consider how it has been applied over time. Cline v. City of Boulder(fn7) represents the first occasion that the issue was actually couched in terms of vested rights. The Clines, plaintiffs in the trial court, were the owners of a certain parcel of property that in 1967 was being forcibly annexed to the City of Boulder. One week prior to the effective date of the annexation, the Clines somehow managed to come up with a Boulder County building permit to construct a service station on their property. Upon annexation, the City of Boulder rezoned the Clines' property as multi-family residential, a classification which precluded the construction of a service station. In challenging the rezoning, the Clines argued unsuccessfully that the City of Boulder was estopped to deny the validity of their permit and that they had acquired a vested right upon its receipt.
As framed by Justice Day, the issue was whether "a building permit per se vest[s] such a property right in the owner that subsequent rezoning is ineffective as to the property."(fn8) Noting that the majority rule was that the permittee must take some steps in reliance on the permit before his rights may be said to have vested, the court, quoting from McQuillin, stated:
The general rule is that permits for buildings and businesses are not per se protected against revocation in effect by subsequent enactment or...
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