2007 Autumn, Pg. 18. THE DOCTRINE OF VESTED RIGHTS - A BRIEF SURVEY.

• Author: By Attorney Matthew R. Serge

New Hampshire Bar Journal

2007.

2007 Autumn, Pg. 18.

THE DOCTRINE OF VESTED RIGHTS - A BRIEF SURVEY

New Hampshire Bar JournalAutumn 2007, Volume 48, No. 3Municipal LawTHE DOCTRINE OF VESTED RIGHTS - A BRIEF SURVEYBy Attorney Matthew R. SergeINTRODUCTION

"[A] property owner has no right to the continued existence of any particular zoning classification of his property, because all property is held in subordination to the police power of the municipality."(fn1) Indeed, in balancing the interests of the property owner and a municipality, the latter is afforded significant authority to adopt ordinances and regulations to protect the health, safety, morals and general welfare of the community.(fn2) RSA 674:16, I provides a municipality with authority, for example, to adopt zoning ordinance provisions to "regulate and restrict . . . [l]ot sizes, the percentage of a lot that may be occupied, and the size of yards, courts and other open spaces . . . [and] location and use of buildings, structures and land used for business, industrial, residential, or other purpose." These regulations are designed "to secure safety from fires, panic and other dangers; to promote health and the general welfare; to prevent the overcrowding of land; to avoid undue concentration of population; [and] to assure proper use of natural resources."(fn3)

Nevertheless, private property ownership rights have been recognized as fundamental rights under the New Hampshire and United States Constitutions.(fn4) Part I, article 12 of the New Hampshire Constitution provides that "no part of a man's property shall be taken from him, or applied to public uses, without his own consent, or that of the representative body of the people."(fn5) The same principle is embodied in the Fifth Amendment to the Constitution of the United States, which provides that "no person shall ... be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."(fn6) One way in which a municipality may take private property is through the adoption of zoning ordinances or other regulations that have the effect of significantly limiting a landowner's use of property.(fn7)

To combat this potential deprivation of constitutional rights, a property owner is protected, or vested, from the retroactive application of a zoning ordinance provision, or other regulation, that may operate to prohibit a use of property that the owner has in good faith, begun to develop in the absence of the regulation. This is not to be confused with the doctrine of non-conforming uses, which is defined as:

A use of land which, at the time a restriction on that use went into effect, was established (or `vested'), and has not been discontinued or abandoned, can continue indefinitely, unless it includes activity which is a nuisance or harmful to the public health and welfare; but the use cannot be changed or substantially expanded without being brought into compliance.(fn8)

Like the doctrine of vesting, the doctrine of nonconforming uses evolved for the purpose of protecting property rights that antedated the existence of an ordinance from what might be an unconstitutional taking. (fn9) While the doctrines of vested rights and non-conforming uses are interrelated, they are mutually exclusive concepts, on a temporal level. Thus, at the point a particular project is deemed vested, the doctrine of non-conforming use takes over and governs the continuation of that use.

Developed in common law, the doctrine of vesting serves to insulate a property owner who has begun the task of developing his or her property for a use that was permitted at the time he or she received a building permit, or subdivision or site plan approval. In 1975, the New Hampshire legislature adopted RSA 674:39 (formerly RSA 36:24-a), which the New Hampshire Supreme Court has held codified the common law doctrine of vested rights. This statute, which has been the subject of only a handful of Supreme Court opinions, has been amended numerous times since its adoption. The purpose of this article is to track the evolution of the vesting doctrine, with a particular focus on RSA 674:39, to its present form. In examining both the common law and RSA 674:39, this article will question some of the Supreme Court's opinions and attempt to harmonize what some may consider to be an inconsistent jurisprudence.

THE EVOLUTION OF THE COMMON LAW DOCTRINE OF VESTED RIGHTS

The Beginning

In 1956, the doctrine of vested rights was adopted by the New Hampshire Supreme Court in Winn v. Lamoy Realty Corp.(fn10) In that case, the question presented was whether a property owner, who had received a permit to build a commercial store in the City of Nashua, lost the right to develop the property as planned after the City adopted an amendment to its zoning ordinance prohibiting the project, 14 days after the landowner received the permit.(fn11) The Supreme Court, having not previously recognized the vesting doctrine, properly looked to holdings from other jurisdictions for guidance.(fn12) In examining these cases, the Supreme Court noted that "[t]he decisions in the different states . . . [were] by no means harmonious and even appear conflicting in some instances within the same jurisdiction."(fn13) Nonetheless, the cases did seemingly share the common ingredient that a landowner was deemed vested from a later zoning amendment if he or she incurred substantial expenditures or legal obligations relying in good faith upon the permit.(fn14)

Although the state had not previously adopted the vested rights doctrine, the Court found that its precedent supported, indirectly, the rationale of vested rights.(fn15) It is the seriousness of the restriction upon the private right, the Court recognized, that is to be considered in balance with the expediency of the public interest.(fn16) It is for this reason that the Court, in adopting the vesting doctrine, expressly rejected the suggestion in some cases that actual construction must be commenced before vesting relief may be granted.(fn17) The Court characterized this actual construction standard as "too rigid," and that in many instances the policy may deny relief where the owner has suffered great detriment because of his or her reliance on the permit, and allow it where his or her damage was slight.(fn18) Following the guidance of the out-of-state decisions, as well as its own precedent, the Supreme Court held that a landowner is vested from a later-enacted zoning ordinance amendment or other regulation that would prohibit the use, if "the owner, relying in good faith upon a permit and before it has been revoked, ha[d] made substantial construction on the property or ha[d] incurred substantial liabilities relating directly thereto, or both, the permit may not be cancelled."(fn19)

Applying the newly adopted standard to the facts before it, the Court held that the landowner had not achieved vested status because he had incurred expenses and liabilities of less than $1,000.(fn20) Further, actual physical construction was not started until four days after the amendment was passed, and the landowner's purchase of the lot was not based on receiving the permits.(fn21) The Court decided that that the landowners' expenditures and legal obligations were small in relation to the very substantial total cost of the proposed store and, therefore, he was not vested from the City of Nashua's zoning amendment.(fn22)

Thus, in Winn, the Court, while not advocating for an actual construction standard, was promoting, what appeared to be, a cost versus completion analysis. In doing so, the Court considered both whether the landowner performed any actual construction activities or spent money towards development, and then whether the amount of work performed or money spent was substantial when compared to the entire project. This analysis will be called into question, however, in subsequent cases when the Supreme Court interprets RSA 674:39.

DEFINING THE SCOPE OF THE COMMON LAW DOCTRINE

Piper v. Meredith

Another early and oft-cited case regarding the common law doctrine of vesting is Piper v. Meredith.(fn23) In Piper, a landowner purchased property and buildings for $160,000 and leased it to another company, owned by the landowner, to erect numerous condominium towers at the site.(fn24) Less than one month later, the citizens of Meredith petitioned for a special town meeting to adopt a local ordinance that would both limit the height of buildings in town to five stories, or seventy-five (75) feet; and require that no building exceeding three stories or 45 feet in height be erected within 50 feet of any other building or within 100 feet of the shore of any lake in Meredith.(fn25) The first special town meeting, which was held in 1968, passed the petitioned article but, because of intervening court action challenging the legality of the meeting, the Town held another meeting in April 1969 and ratified its October 1968 vote.(fn26)

Plaintiffs filed a petition for declaratory judgment, arguing that the newly enacted zoning ordinance was not enforceable.(fn27) The master agreed, ruling that the Town failed to follow the proper procedural steps for adopting a zoning ordinance.(fn28) The Supreme Court reversed, holding that the Town's regulation could be construed as a police-power regulation and, therefore, was adopted legally.(fn29) The Court then turned to the question of...