It's time to simplify vested rights: clearer land-use rules will encourage needed development.

• Author: Chad Essick
• Position: Law Journal 2014

Ask any real-estate developer what he or she wants most in the development-approval process and, undoubtedly, you will hear certainty, fairness, predictability and consistency. These terms are what drive the legal doctrine of vested rights, which protect those who have relied in good faith on existing land-use regulations in preparing for and beginning development. The doctrine is intended to keep local governments from taking legislative or other actions that substantially impair or even prohibit development projects that are well into the review and approval process. Recent North Carolina appellate decisions, however, have muddied the waters of vested rights. It's time to simplify vested rights and provide landowners, developers, lenders and investors the certainty they need to make sound business decisions.

Vested rights created by statute

There are two methods by which vested rights may be obtained in North Carolina. The first is by complying with one of several statutes that automatically create a vested right. Once a building permit is issued, for example, the owner has a vested right to develop the property consistent with that permit so long as it remains valid. Vested rights also can be obtained, with certain limitations, once a site-specific or phased-development plan is approved or through a development agreement with a local government.

As land-use regulation has become more complex and the approval process longer, these statutory vested rights no longer provide adequate protection. For example, in 1985, when the legislature granted building permits statutory vested rights, the process for obtaining a building permit was significantly different than it is today. In fact, 30 years ago, some jurisdictions would have issued a building permit based on a hand-drawn sketch on a napkin the same day it was submitted. Today, local land-use regulation is sophisticated. Receiving approval for a project requires numerous steps, submitting various plans and lengthy proceedings. A building permit can take months or years to obtain, and it typically is the last permit a developer receives before construction. The same also can be said about the approval of site-specific development plans. At that point, depending on the project, the developer already has thousands of dollars invested in, among other things, site acquisition, interest, due diligence, design work, plan preparation and consulting fees. Therefore, while vested rights should be...