Daily Development for
Wednesday, July 10, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

The Reporter for today's Daily Development is Professor Darryl C. Wilson of the Stetson Law School.

ZONING AND PLANNING; MANDAMUS; VESTED RIGHTS: Where an agency changes zoning during the pendency of a landowner's development activities, the landowner will not be viewed as having established a "vested right" sufficient to support mandamus when the landowner never submitted a complying building permit application, notwithstanding the developer's expenditures on good faith efforts to meet application requirements. Lake Bluff Partners v. So. Milwaukee, 540 N.W. 2d 189 (Wis. 1995).

Plaintiff developer purchased land with intent to construct a multi-family development in conformance with the then existing zoning classification. Negotiations with the city planning agency ensued for some time as plaintiffs sought to comply with the requirements necessary for construction, incurring substantial expenditures in the process. Part of these activities required obtaining approvals from a statewide environmental agency. As the negotiations continued, a neighboring landowner sought a rezoning of the developer's land to single-family housing. Shortly thereafter the city imposed a moratorium on building permits. The moratorium applied only to the land in question, and was enacted without notice to plaintiff. Although the moratorium was of questionable validity, plaintiff did not challenge it in this proceeding and the court assumed that it was valid.

Within a month of the moratorium, the plaintiff received a conditional approval of its plans from the statewide agency and other ancillary approvals. It had revised its plans a number of times following conversations with city officials, and thus proceeded to file a request for a building permit. The building permit was denied and correspondence was exchanged between the defendant city and the plaintiff regarding the rejection. The plaintiff sought political assistance from a number of perceived allies instead of pressing the city for explanation and expedition on its permit. The indicated that the permit application had certain deficiencies, but that it would not expedite reviewing with any special dispatch plaintiff's attempts to cure these deficiencies in light of the pending moratorium. While the plaintiffs were seeking to acquire some political leverage, hearings were held changing the zoning to residential, thus precluding the multi-family development.

The plaintiffs then submitted a new application and simultaneously filed a complaint seeking a writ of mandamus to compel issuance of the permit. The plaintiffs claimed to have vested rights in the prior zoning classification.

Trial and intermediate appeals courts held form plaintiff, but the Wisconsin's Supreme Court found that no vested rights were present, thus mandamus was not proper since the writ must be based on a "clear specific legal right which is free from substantial doubt." The court noted that courts have viewed the presence of a building permit as a central factor in determining when a builder's rights have vested, although this did not mean that one had to have actually issued. The application for the permit, however, had to be in conformance with all zoning and building code requirements. The court cited to several treatises in support of its strict compliance requirement finding that to be the general rule for applicants seeking mandamus.

The theory behind vested rights also supported the holding as it was noted that the argument is based on the belief that a builder is proceeding on the basis of a reasonable expectation. Thus a builder going forward in violation of applicable requirements cannot reasonably expect relief. As the plaintiff's earlier application did not strictly comply with the original requirements and their present application could not comply with the new zoning change they were left without any satisfactory recourse.

Reporter's Comment: This case certainly puts developers on alert to move diligently toward compliance with all existing ordinances at the time their projects are approved. This deliberation should include an exploration of ways in which the developer can recoup its expenditures should negotiations break down. Many jurisdictions feel comfortable recognizing vested rights only after expenditures on actual construction have been incurred but cases such as this show that there can be an outlay of a substantial sum of money, here well in excess of $300,000, without any foreseeable way to recoup the funds if such a strict interpretation is given to the vested rights doctrine.

Editor's Comment: The requirement that a developer must file a conforming building permit application, although consistent with law in many jurisdictions, certainly puts developers in a ticklish position in cases like this. Zoning authorities often play the role of "high priests" guarding a sacred temple - the temple containing information as to what will and will not satisfy the discretionary elements of the building and zoning process. The building permit application process necessarily involves a great deal of give and take - inquiry and response. If such activity is occuring in the shadow of a pending rezoning threat, then the agency appears to be holding all the cards.

There probably was some level of total capitulation that would have resulted in the developer's having a conforming application. Even if the developer really could not or would not build such a project, it probably would have been wise to submit an application for such a project. At least then it would have had a conforming application at the time of the zone change, and the developer then would have had a stronger bargaining position.

The developer was seeking mandamus here, not takings damages. But the vested rights decision likely will prevent a takings claim also, unless the developer can show that the City actually dragged its feet on reviewing the applications because of the moratorium. Complying with building permit requirements for a major project is an expensive undertaking. An argument might be made that vested rights ought to arise at least with regard to substantial good faith expenditures undertaken to prepare a conforming permit application based upon existing zoning. Here, this might have resulted in the developer's at least being able to recover costs expended before the rezoning application was set for hearing.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Laprica Mims at the ABA. (312) 988 6233.

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