Posted by: Patricia Salkin | September 20, 2011

TX Appeals Court Finds Moratorium Improperly Issued as applied to Already Approved Development

After plaintiff developer’s preliminary plat including infrastructure details was approved by the city Council, plaintiff began constructing infrastructure within the subdivision.  The final plat was approved by the City Council, signifying that the sewer taps on each lot were connected to the City’s sewer system and the subdivision was ready for residential construction.  However, after the infrastructure was fully completed, the City determined that it was operating above its sewer capacity and imposed a moratorium on the connection of any new residential and commercial buildings to its sewer system until a new plant could be constructed.  Although the City exempted several of plaintiff’s lots from the moratorium, plaintiff sought a declaratory judgment that the moratorium did not apply to its subdivision and that the City could not deny building permits for any of the lots based on the moratorium.  Plaintiff also sued for inverse condemnation of the property resulting from the moratorium.  At issue was whether the plaintiff’s property was “approved for development” such that a moratorium could not be imposed upon it and summary judgment in favor of the City was improper.  The Texas appeals court held that it was, and reversed the grant of summary judgment in favor of the city regarding the applicability of the moratorium to plaintiff’s property and granted plaintiff summary judgment instead.  The court also reversed the grant of summary judgment in favor of the City regarding the inverse condemnation claim and remanded for further proceedings to determine whether a taking of plaintiff’s property occurred.

 Under the Texas statute, a moratorium imposed to prevent a shortage of essential public facilities must be accompanied by evidence that the moratorium is limited to property that has not been “approved for development.”  The City claimed that it only granted plaintiff approval to complete the subdivision and infrastructure, not connections between buildings and the sewer system, and could therefore impose a moratorium on such additional development.  The court found “absurd” the City’s reading of the statute, which allowed it to approve the construction of infrastructure in a subdivision and later prevent plaintiff from building homes due to inadequate sewage facilities-particularly since adequacy of sewage facilities was a factor in the City approving the subdivision in the first place.  Thus, plaintiff was entitled to a declaration that the moratorium was inapplicable to the previously approved subdivision, and that the City could not deny building permits for the lots based on the moratorium.

As a result, the court held that summary judgment in favor of the City of plaintiff’s inverse ondemnation claim was improved.  Because the City’s motion for summary judgment on this claim was premised upon the applicability of the moratorium to plaintiff’s property, the court reversed judgment on the issue and remanded for further proceedings.  Though the court did not cite Tahoe-Sierra Preservation Council, it indicated that an analysis of the Penn Central factors should be conducted under Texas law to determine whether a compensable taking occurred.

BMTP Holdings v. City of Lorena, No. 10-09-00146-CV, 2011 Tex. App. Lexis 4207 (Tex. App. 6/1/2011)

The opinion can be accessed at: http://www.10thcoa.courts.state.tx.us/opinions/htmlopinion.asp?OpinionID=10654

Special thanks to Gus B. Bauman & Aron H. Schnur of Beveridge and Diamond for providing this summary for the 2011 ALI-ABA Land Use Institute.


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