Daily Development for Monday, August 25, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

Here’s a contribution from the keyboard of Roger Bernhardt: 

ZONING AND LAND USE; DEVELOPMENT AGREEMENTS; UNIFORMITY REQUIREMENTS: Although process for approving development agreements is the same as the process for validly altering consequences of zoning (such as modification of zoning map or permitting conditional uses), California counties nevertheless cannot use development agreements to avoid uniformity requirements, and any development agreement must be consistent with existing zoning.

Neighbors in Support of Appropriate Land Use v County of Tuolumne 157 CA4th 997, 68 CR3d 882 (2007)

Landowners submitted an application to use their property, located in an exclusive agricultural zone, to host weddings and similar events. The local ordinance, dit not permit commercial use, even with a  conditional use permit.  After public opposition surfaced, county staff and the county planning commission recommended denial and the Petersons withdrew their application.

Landowners later submitted a revised application and a request for a conditional use permit, anticipating  proposed amendments to the county zoning ordinance then pending before the county government.  But the County Board of Supervisors did not adopt the proposed amendments. Nevertheless, acting on staff recommendation, the Board granted the proposed use as an ad hoc exception to the zoning ordinance, by adopting a development agreement.  The staff viewed such procedure as appropriate under Cal. Govt C §§65864-65869.5. Neighbors sought judicial review by writ of mandate.

The trial court ruled that the board's actions violated the Planning and Zoning Law (Govt C §§65000-66499.58) because the use granted to the Petersons was not permitted under existing zoning ordinances; therefore, the adoption of the development agreement was an ultra vires act and void ab initio. Tuolumne County appealed.

The court of appeal affirmed, emphasizing that the uniformity rule of Govt C §65852 requires that all zoning regulations be uniform as to use throughout each zone, even though the regulation in one zone may differ from that in another type of zone. An “ad hoc exception” violated the principle of uniformity. 

The appeals court rejected the development agreement (and the associated conditional use permit) between the county and the landowners because, the court held, it was inconsistent with the county's zoning ordinance.

The development agreement purported to permit the Petersons to host lawn parties and weddings on their 37-acre property.  Lawn party hosting was neither a permitted nor a conditionally allowed use under the 37-acre minimum lot size agricultural zoning classification the county had previously applied to the property. That made the conditional use permit (CUP) almost ipso facto invalid; a permit cannot be issued to cover what has never been declared an appropriate conditional use in the authorizing ordinance.

More important, issuance of the CUP could not be justified under the ordinance on which the development agreement was based, because that ordinance violated Govt C §65852, the uniformity requirement of the Planning and Zoning Law (Govt C §§65000-66499.58), which states that "all [zoning] regulations shall be uniform for each class or kind of building throughout each zone."        

Reporter’s Comment 1:  The philosophic aspects of the controversy must have been deemed important, since the actual fight was more of the tempest-in-a-teapot variety. The landowner’s property was bounded by commercially usable property on three sides. So the property might have been rezoned. The county supervisors were considering a text amendment to the zoning ordinance that would have reclassified lawn parties as conditional uses in its 37-acre agricultural zones.  No one appeared to contend that either of those acts would have been invalid. In other words, the same result could have been reached, just by a different route, and the politics would probably have been the same, since the same procedural features (public notice, hearing, and vote) would have remained applicable-e.g., same public supporters and opponents, same supervisors. So why did it matter so much that the county attempted to achieve this result by development agreement rather than by zoning amendment?

Reporter’s Comment 2:  On their face, zoning laws would seem to violate the principle of equal protection: X is permitted to build a factory on his land because it is zoned industrial, whereas Y, a block away, can erect only a house on hers, because it is zoned residential instead. Endorsers of zoning dodge this problem by claiming that there is the necessary uniformity inside each zone, even if it is lacking outside each zone. Without that proposition, all zoning would fail.

But uniformity does not always make for good planning; it too easily leads to a ticky-tacky, monotonous neighborhood where no one wants to live, or even visit. As a consequence, combined with our two-value zoning rules-where every use should be either permitted or prohibited-are escape routes. Land use regulation includes mechanisms designed to reduce rigidity: amending zoning ordinances and maps, conditional uses, and (although not exactly intended to have that effect) variances.

While those devices have been part of the system since its start, more came along later: design review, planned unit developments, floating zones, and historic preservation. The departure from as-of-right zoning has become even more dramatic as the zoning process has become more like that of subdivision regulation, where predetermined rules that had set forth known predictable standards have been replaced by after-the-fact reaction and negotiation from local officials to development proposals that are initiated by developers rather than by planners. We may still pay lip service to the earlier notion of uniformity, but there is no longer much realism behind the idea that all properties are being treated equally now that each proposal is judged separately and independently. Flexibility has won out over equality.

Reporter’s Comment 3: Among the many risks that land development entails is the danger that the legal climate that existed while the development was being planned will change for the worse before the project has been completed and taken off the developer's books. If you have already purchased and paid for the land (and perhaps also for, e.g., the building plans), where will you be if the town alters its local height, space, or use limits before your construction has started?

 The doctrine of vested rights is designed to protect the finished product from most changes that could materially hurt it thereafter; it is unlikely that a new height limit can have much effect on a completed and tenanted building (although, even then, there is the power to prohibit alteration of nonconforming structures, and the possible right to "amortize" them away over time). But at the front end of the calendar, a vested right generally does not come into being until after there has been substantial reliance upon the right building permit, which is an event that may not occur until after many millions of dollars have been spend on "preliminary" costs. See, e.g., Avco Community Developers, Inc. v South Coast Reg'l Comm'n (1976) 17 C3d 785, 132 CR 386, where $2.8 million had been spent before the rules changed.

Since any real estate development inevitably needs significant time from start to completion, a developer has to feel pretty certain that those horribles are unlikely to occur, and the local officials who want to increase their tax revenues through development need to make sufficient assurances to encourage the necessary risk-taking. How can a community cross its heart in that way?

The traditional legal answer was that it cannot be done. Binding assurances can't be given because the police power cannot be bargained away. A local government cannot hamstring itself from passing new laws when new contingencies arise, or prevent its citizens from voting the rascals out of office in order to undo their machinations. But that rule, like the old-fashioned uniformity doctrine, is too detrimental to growth. Developers just cannot afford to take sought-for risks unless there is a way to fetter the police power to ensure that the rules don't change.

Thus, in California (and some other jurisdictions), we now have the statutory Development Agreement Law (Govt C §§65864-65869.5) to provide a different solution to that problem. Government Code §65865.4 creates a way to give assurance to the developer that it may carry out its project in accordance with the rules operative at that time, "notwithstanding any change in any applicable general or specific plan, zoning, subdivision, or building regulation adopted" thereafter. The need to give assurances has prevailed over the sanctity of the police power and the inability to bargain it away.

Since the purpose of the development agreement statutes is to give such agreements the unambiguous protection that developers need to eliminate the uncertainties inherent in the vested rights and sanctity of police powers doctrines (and the gap between them), it would not seem to require that the process also must include a way for allowing additional nonuniform flexibility into the real estate projects created under them. The developer makes sure, independently, that all of the other conditions of the governmental land use regulatory scheme are satisfied, and then seeks the development agreement to guarantee that this current compliance will not be rendered obsolete by a later rule or rule change.

The agreement reached in this case, however, does not seem to have been intended to deal with any problem of developer risk; it is unlikely that lawn party hosting entails much start-up capital investment. Rather, it was contrived to overcome the fact that commercial lawn party hosting was not a permitted use for that property under the existing zoning ordinance. That puts it under the flexibility issues that I earlier discussed, rather than the stability issues. The county had in fact toyed with the idea of amending its zoning ordinance to make lawn parties conditional uses in the 37-acre agricultural zones, which would have had exactly the same effect. (The opinion said that a CUP would have been different because it would have allowed all other owners to make similar requests, although that danger could have easily been avoided by making one of the conditions for this activity a finding that no similar use was too close by.)

But does the fact that a development agreement looks like an inappropriate method to deal with an "inflexible" zoning ordinance make it also an illegal method? Under Govt C §65866, all other land use rules continue to apply in the case of a development agreement "unless otherwise provided," which might make one think that the agreement could thus otherwise provide as to a zoning rule. Government Code §65867.5 mandates that a development agreement can be approved only if it complies with the "general plan and any specific plan," which also does not appear to require compliance with zoning ordinances. Given those provisions, is the legislature really prohibiting a development agreement that carries its own zoning regime with it?

Many California authorities had assumed that the Development Agreement statute in fact permitted departures from zoning requirements, since the agreements in effect constituted zoning ordinance amendments. It is no wonder that Tuolumne County planning staff, and perhaps even county counsel, thought the development agreement was a lawful alternative at the time the deal was drafted.

But none of that persuaded the court in this case. A development agreement could not be its own source of zoning regulations. In order to get around all of the contrary authorities just mentioned, the court had to dance around the statutes and dismiss the Development Agreement Manual on the ground that it contained no legal arguments, even though it was drafted by lawyers.

The chief reason given by the court for refusing to treat a development agreement as an independent source of land use authority (despite a special enabling statute) was the uniformity requirement I earlier discussed: Allowing a parcel to be regulated by a development agreement rather than a zoning ordinance would give its owners a benefit not shared by the owners of other properties similarly zoned. The fact that this already occurs whenever neighboring owners are differently zoned, or a single parcel is rezoned, or a conditional use permit (or variance) is granted to one but not another, was not enough to persuade it to abandon that principle. The fact that such outcomes are also upheld in contract zoning and conditional zoning situations fared no better-those cases were cited by the court, but distinguished away. The rules must be uniform within a district, despite all of these examples to the contrary. Flexibility can go only so far in vanquishing equality.

The Reporter for this item was Roger Bernhardt of the Golden Gate Law School, writing in the California CEB Real Property Reporter.  Reprinted with permission. 

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