Chapter 6 - § 6.3 • COMMON LAW VESTED RIGHTS

• Jurisdiction: Colorado

§ 6.3 • COMMON LAW VESTED RIGHTS

§ 6.3.1—Legal Theories

At common law, a right to use and develop property "vested" upon the giving by the government of an approval for that development, followed by reliance by the owner. Three distinct legal theories have been used by the courts to establish common law vested rights: equitable estoppel, due process, and taking of private property. The equitable estoppel and due process theories frequently rely on the factors of fairness and reasonable reliance and often result in the same decisions. A taking of property by the government occurs if a change in the process, rules, or decisions of the government prevents a landowner from using its property for all economically beneficial purposes, or in specific other circumstances outlined in Chapter 5. To the extent any of these theories succeed in preventing the local government from enforcing a rule, regulation, or decision that would have set aside a prior land use approval, that prior approval can be considered to have obtained a common law vested right.

Equitable Estoppel

Equitable estoppel exists if: (1) a representation is made by the government; (2) the developer reasonably and in good faith relies on that representation; and (3) it would be unjust to the developer to allow the government to repudiate or modify the representation.⁴

Consideration of each of these factors is important. The representation made by the government can be in the form of a zoning decision, a subdivision plat approval, a site plan approval, issuance of a building permit, or other approval. In some circumstances, it can be an oral statement by a representative with authority to bind the government (e.g., a planning director interpreting the zoning code). The developer's reliance must be reasonable; the developer cannot rely on statements made by employees who lack the requisite authority.⁵ The Colorado Court of Appeals has held that a landowner could not estop a county because of incorrect statements made by one county commissioner that approval of the subdivision plat was a ministerial act, especially since the landowner did not change his position in reliance on the statement.⁶ The developer's reliance must be reasonable in scope and time. No good faith reliance can be found if the government was fraudulently induced by the landowner to grant the approval.

In estoppel cases, the courts frequently consider whether the landowner or developer has expended substantial sums of money or otherwise detrimentally changed his or her position in reliance on the government's action. Obtaining a building permit but taking no other action to commence construction is not sufficient to establish reliance.⁷ Where reversal of the government's action after the fact would not prevent manifest injustice, an estoppel claim may be denied.⁸

In practice, Colorado courts have been reluctant to find estoppel in land use cases unless a building permit has been issued and there have been significant expenditures in reliance on that permit.⁹ Case law also supports the notion that the Colorado Governmental Immunity Act (CGIA)¹⁰ can be used as a bar to equitable estoppel claims if the claim is based on negligent or intentional misrepresentation of a governmental employee. The rationale is that the CGIA protects governmental entities from being sued for a tort (or a claim that could be tried as a tort), regardless of how the claimant characterizes the action.¹¹

However, governmental entities are not immune from every estoppel claim under the CGIA.¹² In one case, a city official correctly stated to a landowner that the actual policy of the city was to make exceptions to a city ordinance. Upon later review, the city decided not to make an exception in that particular case. The Colorado Court of Appeals held that the landowner could assert estoppel because the landowner's claims were based on actual city policy and not on the torts of negligent or intentional misrepresentation. Since the landowner's claims could not lie in tort, the city was not able to assert a defense under the CGIA, and the city was estopped from enforcing an ordinance that differed from its actual policy.¹³

Another Colorado case makes the distinction between how the CGIA applies to misrepresentations that occur when a governmental employee performs a primary, as opposed to an ancillary, function of the governmental entity. If it is not the primary purpose of the agency to maintain accurate records and answer inquiries from the public (i.e., when these functions are merely ancillary), the government is protected from suit under the CGIA.¹⁴

A final distinction is made between equitable and promissory estoppel claims. Promissory estoppel claims are analogous to contract claims, and if they cannot be characterized as tort claims, they are not barred by the CGIA.¹⁵ Claims of estoppel are often accompanied by a claim of denial of due process under a federal law, 42 U.S.C. § 1983. The essence of a § 1983 claim is an assertion by a landowner that a government employee, acting within the scope of his or her employment, has applied local land use laws to the landowner's situation unfairly, resulting in a denial of due process and equal protection. To prove a denial of due process, the claimant must show the existence of a property interest that is protected by the Constitution. A protected property interest under the Due Process Clause only arises when a legitimate claim of entitlement exists (as opposed to a unilateral expectation),¹⁶ stemming from an independent source, such as state law. In land use cases, this means the landowner must be entitled to a particular use of the property under state law before a § 1983 claim will succeed. Often, claimants assert that the independent source of law entitling them to a particular use is estoppel, but these claims rarely succeed.¹⁷ Colorado's CGIA is not a defense to a § 1983 claim. Section 1983 claims are discussed further in the Introduction.

Due Process

A due process analysis is used primarily when courts are reluctant to estop a local government from doing something that, on its face, would be within the local government's power. A due process analysis can result in a finding of vested rights if the application of new land use regulations to a project is not reasonably necessary to protect the public health, safety, and welfare.¹⁸ The essence of the analysis is whether it is fair to impose the restrictions. Determinations of fairness sometimes turn on the court's view of whether the act in question could have promoted the achievement of a legitimate public purpose. In the early 1960s, the Colorado Supreme Court reasoned that mandatory off-street parking requirements as a condition of zoning approval for a private development were an unreasonable restriction and violated due process.¹⁹ As development increased and the needs for off-street parking became more apparent, however, the court reversed its position and followed the majority of the states in holding that off-street parking requirements were not per se unconstitutional and were essential for public safety.²⁰ The court's opinion of what was fair had changed over time.

Takings

The third legal theory for establishing a common law vested right is the takings analysis. Regulatory takings are discussed in detail in Chapter 5, "Exactions, Dedications, Impact Fees, and Regulatory Takings." If a local government regulation is found to involve an unconstitutional taking, the local government can sometimes reduce its liability by repealing the unconstitutional provision, with the result that the previous development rights are again available to the landowner. While technically not a "vesting" of development rights (since the local government may still try to achieve its goal through different, constitutionally defensible regulations), the end result is similar.

§ 6.3.2—Who Has Common Law Vested Rights?

The landowner or developer claiming vested rights can be an individual, a partnership,²¹ or a corporation.²² In Colorado, reliance by a prospective purchaser of property on the representations of the city regarding zoning and permitted uses for a site and the subsequent purchase of the property was sufficient to establish a vested right to develop in accordance with the city's representation.²³ A lessee of property may be able to claim vested rights for...