Chapter 20 Vested Rights

• Library: The Zoning and Land Use Handbook (ABA) (2016 Ed.)

Chapter 20 Vested Rights

A. Introduction

Typically, property owners have no vested rights in a particular zoning classification.¹ If a local government amends or changes the zoning ordinances while a developer is mid-construction, the government is protected under the historical rule that a government cannot be estopped while acting in a government capacity.² However, courts generally find some way to give relief if the owner would otherwise suffer a hardship, under the equitable estoppel doctrine or by recognizing the legal defense of vested rights.

The doctrine of Vested Rights is something the courts and legislatures use to determine whether landowners have developed their land sufficiently enough such that the local government should not be allowed to retroactively enforce newly enacted zoning ordinances against them.³ However, the doctrine generally does not give a developer permanent protection for his land.⁴ It is a concept that has evolved from the Fourteenth Amendment's Due Process Clause in the United States Constitution, which prohibits the illegal "taking" of an individual's property without just compensation.⁵

B. Definition

A vested right is defined as a "right which the law recognizes as having accrued to an individual by virtue of certain circumstances and that as a matter of constitutional law cannot be arbitrarily taken away from that individual."⁶ On the other hand, equitable estoppel is a defense derived from equity and defined as "the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and equity, from asserting rights which might perhaps have otherwise existed, either of property, of conduct, or of remedy, as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, of contract, or of remedy."⁷

When courts use vested rights as a remedy, they focus on whether the landowner reached a point whereby his rights in the real property can no longer be taken away by governmental regulation. When courts use equitable estoppel, they focus on whether it would be inequitable to allow the government to rescind its prior permission granted through the permit and freeze the landowner's project. Whether the courts rely on vested rights or equitable estoppel, the theoretical foundation is the same: fairness.

Regardless of what doctrine the court relies on to reach its conclusion, to decide on a landowner's zoning rights, courts turn to the black-letter rule, which provides that a landowner will be protected when (1) relying in good faith, (2) upon some act or omission of the government, (3) he has made substantial changes or otherwise committed himself to his substantial disadvantage prior to a zoning change.⁸

The rule in a majority of states requires, at the very least, the issuance of a building permit and substantial construction or other actions in reliance upon the permit, in order to vest one's rights.⁹ Other states review each incident on a case-by-case analysis, using subjective tests to determine what constitutes substantial reliance or a material change in position.¹⁰

Some states recognized the subjective elements in the test early on and addressed this problem by introducing legislation that further clarifies the point when landowners' rights vested.¹¹ A number of states now recognize vested rights based upon the filing of a complete application that is in compliance with regulations in effect at the time of filing.¹²

As an example, in New York there is a statute that exempts approved subdivisions from changes in local zoning ordinances for a period of three years after the landowner's application has been approved.¹³ Rather than relying on any subjective definition of substantial reliance, this statute eliminates the need of the court to get involved and determine whether the landowner's vested rights claim is valid.

Other states allow local governments and landowners to hold a public hearing and enter into "development agreements"¹⁴ as part of the land use approval process.¹⁵ Development agreements can shield the landowner from traditional land use regulations and place him in a supportive and encouraging relationship with the local government where both parties can negotiate the terms and reduce risk.¹⁶

C. Legal Test Elements

1. Relying in Good Faith

When using the legal defense of vested rights, the landowner's reliance on the governmental act of omission is a requirement,¹⁷ but the test does not stop there. It requires good faith reliance on the part of the landowner.¹⁸ As a theory stemming from common law and based on constitutional principles, the landowner's "clean hands"¹⁹ should not be an element of the test. However, vested rights and equitable estoppel have become deeply intertwined and most courts look for a landowner's good faith before granting his defense under vested rights, such that even if the court does not use the term "good faith," the concept is still embedded in the court's opinion.²⁰ Therefore, a landowner must be able to show that he has relied or changed his position in good faith in order to make a winning case.²¹

For example, rushing to complete or begin a project once the landowner obtains knowledge of a possible change in the zoning classification of his project merely to avoid the upcoming change has been held to constitute bad faith.²²

When looking for good faith on the applicant's part, courts look to many of the following factors: the purchase of the property in question for the specific use indicated in the application for the building permit; the relative usefulness of the subject property for other purposes; the duration or stability of the zoning classification existing when the application was filed; and the applicant's openness in dealing with municipal officials, including inquiries into the current zoning status of the applicant's property and into the existence of any proposals to change the zoning, and free and full disclosure of the applicant's plans.²³

Similarly, courts will also look to the government's act or omission for signs of good faith, such as inordinate or unexplained delay in processing the subject application or its flat refusal to issue the requested permit at a time when its issuance was lawful; affirmative efforts to mislead the applicant or lull him into believing his permit would be issued as a matter of course; the fact that the rezoning process was initiated solely because of the applicant's proposed construction and was aimed at thwarting his plans; and the imposition of frivolous, technical, or previously unenforced requirements with respect to the permit application or the applicant's plans and specifications.²⁴

2. Upon Some Act or Omission of the Government

Generally, the adoption of a zoning ordinance alone does not vest rights in a landowner.²⁵ The landowner has no vested right in a zoning ordinance unless the ordinance is created or passed primarily to frustrate a land development project.²⁶ The rights of a landowner vest when the zoning ordinance is passed or created in response to an application for a permit or other approval.²⁷ The failure of a landowner to apply for a required permit will typically be fatal to a vested rights claim.²⁸

For states...