Vested Rights

• Author: David L. Callies/Daniel J. Curtin Jr./Julie A. Tappendorf
• Pages: 128-159

ment.748 The argument states that the “rational nexus” and “substantial ad-

vancement” standards of Nollan are not limited to just those instances where

the municipality requires an exaction from an uncooperative landowner, but

also apply to voluntary permit conditions. Under this view, the type and extent

of exactions permissible under annexation agreements would not differ from

the type and extent available under other traditional exaction mechanisms such

as impact fees.

The rationale supporting such a view is that requiring the Nollan standard to

be satisfied serves to prevent governmental abuse of the mechanism, as it is

“difficult to tell whether a landowner’s acceptance of a condition is truly volun-

tary or is instead a submission to government coercion.”749 In the case of annex-

ation agreements, however, it is the developer’s choice to annex and protect it-

self by attempting to freeze zoning or land use regulations. The developer does

not require annexation or any guarantee in order to exercise his right or privi-

lege to build, and may certainly choose to proceed without it. To the extent that

the developer chooses to annex its property to the local government and to ne-

gotiate for any regulatory freezes, arguably the annexation agreement does

convey a “governmental benefit” upon the developer, since “[i]t is well estab-

lished that there is no federal Constitutional right to be free from changes in

land use laws.”750 The municipality should therefore be free to negotiate its best

terms in exchange for the benefit conferred, regardless of nexus.

V. Vested Rights

This section discusses the principles of law and equity that permit a landowner

to continue with or complete a land development or land use activity in the face

of a change in regulations that would otherwise prohibit or limit that develop-

ment or activity. Although typically the issue of continuing a use is covered by

the general topic of “nonconforming uses” and the issue of completing a devel-

opment falls under “vested rights,” the two are closely related in equity if not al-

ways in law. This issue most typically arises in litigation, either raised as a de-

fense against an enforcement action or used as the basis for a claim for relief.

Of course, to the extent that landowner and local government execute a de-

velopment agreement or annexation agreement, as described in parts III and IV,

the issue of vested rights ought not to arise. After all, a principal purpose of a de-

velopment agreement is to vest the rights of a landowner to proceed with what-

ever development is the subject of the agreement, as many development agree-

ment statutes clearly contemplate.751 The so-called common law of vesting de-

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748. See Crew, supra note 670.

749. Id. at 46. See also Collis v. City of Bloomington, 310 Minn. 5, 17-18, 246 N.W.2d

19, 26 (1976) (upholding as constitutional a statute authorizing municipalities to re-

quire dedication of land or payment of fees as condition of subdivision approval

since enabling legislation and implementing ordinance limited the amount of land

to be dedicated to a “reasonable” percentage of the property).

750. Lakeview Dev. Corp. v. City of S. Lake Tahoe, 915 F.2d 1290 (9th Cir. 1990).

751. See, e.g.,Cal. Gov’t Code §65864.

velopment rights in the absence of such an agreement, much as the section on

land development conditions deals with the common law of such conditions in

the absence of a development agreement or annexation agreement on the sound

legal ground that the presence of such an agreement renders the application of a

nexus or proportionality theory moot.752

A. Introduction and Background

The point at which a landowner may continue with a land development project

despite new land development regulations that now prohibit such development

generates an inquiry into vested rights and its close cousin, equitable estoppel.

The two legal doctrines arise from very different principles.753 Vested rights tech-

nically focuses only upon whether a landowner has acquired sufficient real prop-

erty rights to proceed with a development project, or some phase thereof, unaf-

fected by subsequently promulgated government regulation. Equitable estoppel,

sometimes also called zoning estoppel, focuses on the conduct of government

and whether it would be equitable under the circumstances to permit government

to repudiate some official action upon which the landowner has relied to proceed

with a land development project.754 The former is often said to be based upon

common law and constitutional principles dealing with rights in property,

whereas the latter is said to be derived from equitable principles.

As appears below, the results may often be the same whichever doctrine is

applied, leading most courts to treat the two doctrines as interchangeable.755

However, there is a critical difference between the two doctrines that should

significantly affect the pleading and trial of cases where either might apply, if

not their outcomes: good faith. Obviously a landowner proceeding on the basis

of equitable estoppel must be proceeding in “good faith.” He who seeks equity

must do equity. Pursuing an equitable remedy requires “clean hands,” as every

first-year law student knows. But what of vested property rights based upon

common law and constitutional principles? Do we legally care whether such a

landowner has clean hands?756 Does it matter,legally, what a landowner knows,

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752. See, e.g., David L. Callies & Julie A. Tappendorf, Unconstitutional Land Develop-

ment Conditions and the Development Agreement Solution: Bargaining for Public

Facilities After Nollan and Dolan, 51 Case W. Res. L. Rev. 663 (2001).

753. Robert M. Rhodes & Cathy M. Sellers, Vested Rights: Establishing Predictability

in a Changing Regulatory System,20Stetson L. Rev. 475, 476 (1991);

Mandelker, supra note 5; Charles L. Siemon et al., Vested Rights: Bal-

ancing Public and Private Development Expectations 9 (ULI 1982).

754. Rhodes & Sellers, supra note 753, at 476; David G. Heeter, Zoning Estoppel: Appli-

cation of the Principles of Equitable Estoppel and Vested Rights to Zoning Dis-

putes, 1971 Urb. L. Ann. 65; Mandelker,supra note 5, §6.13.

755. Id.

756. For a discussion of the distinction between equitable or zoning estoppel and vested

rights, particularly the elimination of equitable principles, including reliance, from

the latter, see Morgan R. Bentley, Effects of Equitable Estoppel and Substantial De-

or should have known, if his theory of the case rests on vested rights and not

estoppel? After all, no less an authority than the Court recently held that “no-

tice” of a strict land use regulation does not prevent a purchaser of land so re-

stricted from challenging the restriction as a regulatory taking of property with-

out compensation.757 It would, therefore, seem reasonable to keep the theories

separate, though it is likely the case law is too far gone in joining the two, as ap-

pears in the sections below. Therefore, except where noted, the term vested

rights will include, for all practical purposes, equitable estoppel for the remain-

der of this section.

After a brief description of the elements necessary to establish vested rights,

the remainder of this section sets out the common circumstances under which

claims for vested rights arise, together with a selection of cases illustrating each

circumstance or situation. Since an increasing number of states have passed

statutes codifying vested rights in their jurisdiction, the statutes of California

and Colorado are appended for further information and guidance. For a list of

those states that have chosen to deal with vested rights by passing development

agreement legislation, and for a discussion generally of development agree-

ments and annexation agreements, see parts III and IV on development agree-

ments and annexation agreements, and Appendices VII, VIII, IX, and X.

B. Elements of Vested Rights

There are essentially three parts to a vested rights claim against government in-

terference with respect to a land development project:

1. a governmental act or omission;

2.landowner changeof positionor relianceupon thatgovernmental actor omis-

sion; and (in the case of estoppel)

3. in good faith.758

1. Governmental Act or Omission

Nearly all commentators and cases are agreed that there must be some govern-

mental act or omission upon which a landowner relies to his detriment in order

for there to be a legitimate claim for vested rights,759 and the more recent that act

or omission the better. It is, therefore, generally considered to be a matter of

black letter law in this area that a landowner has no vested right in a zoning

classification760 unless the classification is either relatively recent, passed at the

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viations to Vested Rights in DRI Projects: A New Approach,43Fla. L. Rev. 767,

774 (1991).

757. Palazzolo v. Rhode Island, 533 U.S. 606, 32 ELR 20516 (2001). See, for comment,

David L. Callies & Calvert G. Chipchase, Palazzolo v. Rhode Island: Ripeness and

“Notice” Rule Clarified and Statutory “Background Principles” Narrowed,33

Urb. Law. 907 (2001).

758. Mandelker,supra note 5, §6.13; Rhodes & Sellers, supra note 753, at 478.

759. Mandelker,supra note 5, §6.14; Rhodes & Sellers, supra note 753, at 482-86.

760. Mandelker,supra note 5, §6.14.