Fed. Dist Court of NC Denies Return of Payments-in-Lieu Under Inclusionary Zoning Ordinance

This post was authored by Matthew Loescher, Esq.

In 2014, Epcon’s predecessors in interest submitted a revised Special Use Permit (“SUP”), for the Courtyards at Homestead, a planned development consisting of 63 dwelling units and a clubhouse/pool on 18.2 acres. In the 2014 SUP, pursuant to the Inclusionary Zoning Ordinance (“IZO”), the Town required 15% of the proposed dwelling units to be provided as affordable, which was equivalent to 9.45 of the 63 units. Instead of this, Epcon’s affiliates opted for payments-in-lieu at a rate of $85,000.00 per unit, bringing the total amount to $803,250.00. After Epcon fulfilled its obligations under the IZO and sold all 63 units in the Courtyards at Homestead, it filed its Complaint in Superior Court, requesting a return of the $803,250.00 under North Carolina and common law.

The court first noted that Epcon knew or should have known of the IZO’s mandates, including the payment-in-lieu alternative, by the time the SUP was issued in October 2014, when it—or its affiliates—agreed to abide by the Ordinance’s terms. Despite the fact that Epcon had not paid the fees and could have opted to discontinue the project, the court found that it had a complete cause of action at that time because it knew it had been injured by the payment-in-lieu mandate in the amount of $803,250.00. Additionally, there was no question that the IZO would apply to the Courtyards at Homestead development even before the SUP was issued.

The record reflected that Epcon made its incremental payments towards the agreed-upon total according to the timeline in the SUP in order to receive certificates of occupancy for its completed homes. The court noted that these were not separate and distinct fees required by an ordinance, but were partial payments towards a predetermined total that operated as an alternative option under the terms of the IZO. Thus, these payments were inapplicable to the continuing wrong doctrine laid out in the SUP. As the continuing wrong doctrine did not apply the statute of limitations on Epcon’s §1983 claims expired. After dismissing Epcon’s federal claims under 42 U.S.C. § 1983, the court declined to exercise jurisdiction over the state law claims.

EPCON Homestead, LLC v Town of Chapel Hill, 2021 WL 2138630 (MD NC 5/26/2021)