The subject of vested rights can be critical to developers who, in good faith, invest substantial sums of money in a particular project, only to find that land use regulations change after the start of the project. The rules for when rights vest vary from state to state. Some states require simple a “shovel in the ground,” other states require a substantial investment. In Arkansas, the law requires both a showing of good faith on the part of the applicant and a substantial use of the property (as opposed to simply substantial investment). The following case discusses both elements of the Arkansas test.
Following the purchase of 19 acres of land outside the city limits, the plaintiffs applied to the county planning board for a permit to construct an RV park (they had applied to the City at first, but withdrew their application believing that only the County had jurisdiction). The County granted preliminary approval in October 2006 with the following caveat, “[c]ity of Tontitown’s jurisdiction for this project is currently under debate. If Tontitown is found to have jurisdiction for this project-all County approvals shall be null and void.” Notwithstanding the admonition, the plaintiffs began work on their RV Park. The reason for the uncertainty was a scheduled election in November in the City where a proposed annexation was on the ballot that included the plaintiff’s property. Litigation ensued immediately in federal and state courts. In December 2006 the City was granted a preliminary injunction by the state circuit court to prevent the plaintiffs from constructing under the permit granted by the County. After dealing with a number of procedural and statutory construction issues, the Supreme Court turned to the plaintiff’s claim that they had a vested right in the property.
The plaintiffs argued that they were constructing the park in good faith and that they maintained a substantial use of the park prior to the injunction, spending $967,571.20. The Court said that the plaintiffs did not act in good faith because they had knowledge of the conditional approval by the county and the fact that it would be considered null and void if the City was found to have jurisdiction, yet they began developing the property anyway. With respect to the question of substantial use, the Court found that the plaintiffs did lay gravel for road construction, but that there were no steps taken beyond preliminary work, planning or substantial investment to effectuate the contemplated use. The plaintiff testified that the Park was ready for electricity and for the pouring of concrete, and that construction work as well as moving of dirt had already begun. The Court did not find this persuasive to constitute work of a substantial nature to satisfy their burden of proving substantial use.
Potter v. City of Tontitown, 2007 WL 2874780 (Ark. Sup. Ct. 10/4/07).
The opinion is also available at: http://courts.state.ar.us/opinions/2007b/20071004/07-161.pdf
Interesting – if they couldn’t rely on the County permit, what could they do with the land? Is there an automatic moratorium on all use of property in Arkansas that is subject to an annexation?
Under what sane rule of law could the County legally impose such a “caveate” on the validity of a permit issued for land that is under its jurisdiction? Would the County have the authority to issue a permit with the caveat that if a Republican is elected to the White House, the permit it no good? What’s the principled difference between the two situations absent a statute that provides for a pre-annexation moratorium?
By: Robert Lincoln on October 23, 2007
at 3:06 am
The City and County of Honolulu tried the “notice” tactic a while back, putting a clause in its permits that said (I’m paraphrasing here) “this permit may be subject to appeal and/or other challenges — don’t rely on it, or if you do, it’s at your peril.” When permit holders claimed they were vested, the City claimed that any expenditures were not in good faith because, hey, “they were warned.” At least under Hawaii law, “good faith” in vested rights law is an objective standard, and can be presumed if the official assurances are coming from a government official who is in a position to give them.
One federal court questioned the U.S. Army Corps of Engineers’ attempt to issue a “provisional” permit that was labeled a “permit,” but cautioned “NOT VALID . . . DO NOT BEGIN WORK.” See Cooley v. United States, 324 F.3d 1297, 1301 (Fed. Cir. 2003).
By: Robert Thomas on October 24, 2007
at 8:31 am