Daily Development for
Thursday, August 27, 1998

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

SUBDIVISIONS; FEES: Michigan court strikes down "true cost escrow" fees for planned unit development approval. A fee without a certain amount is not a permitted "fee" under Michigan enabling statutes.

Cornerstone Investments, Inc. v. Cannon Township, LC No. 94004782CZ (7/31/98).

Township initiated a subdivision approval process that involved a preliminary assessment of planned unit development proposals. Once the township was satisfied that it was fully aware of all the details of the proposals, then it would authorize an application for a rezoning to implement the subdivision proposal.

As a condition to the preliminary assessment process, the developer was required both to pay a fixed $350 fee and to contribute to an escrow from which the Township would draw monies to compensate itself for the cost of review of the information provided by the developer. If the escrow proved inadequate, the developer was required to replenish it and ultimately to pay over the the Township any additional amount to defray actual costs of processing the application prior to the granting of any building permit or zoning approval.

The policy provided that the basic application fee would cover the costs awssociated with the regular Commission meetings and providing legal notice for a public hearing. All other expenses were to be paid by the developer through the escrow account or on final accounting as described above. These expenses included, but were not limited to: costs associated with subcommittee meetings, additional public hearings, and review by the Township attorney, planner and engineer.

The court here pointed out that the township was an entity of limited powers only those lawfully delegated to it by State law. The Michigan statutes authorized the assessment of "reasonable fees for zoning permits," and the court concluded that the process involved here in fact was a process leading to a "zoning permit" within the intendment of the statute. But the court further held that the open ended escrow was not a "reasonable fee" authorized by the statute because the court's definition of "fee" is a "fixed, defined charge." The escrow charges here were open ended and unpredicable in amount.

Comment 1: Although developers' lawyers may love this case, is there really any logic to it? Is there any reason to conclude that a charge= based upon actual costs is not a "reasonable fee?" Does it make more sense to impose on the developers as a group or on the public at large the costs entailed in one developer's approval process?

Comment 2: Note that the court's focus was on the uncertainty of the fees, and not the escrow feature.

Comment 3: Would it make any sense to divide the issue along other lines, such as differentiating between those costs that are created by the complexity and detail, or lack of detail, in the developer's plans, and= those costs created by the need to have a public process to apply policy analysis to the plans once they are clear? The former costs those associated with evaluation of the proposal and identification of the need for additional information before the proposal goes forward are properly chargeable in toto to the developer. The latter costs costs of public hearings in which the public authorities make policy decisions, ought to be borne by the public or at worst by the developers as a group. Just a thought.

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 six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 16, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.