Monday, October 8, 2012

The Bright Line Rule regarding Permits

Whenever I have a chance to lecture concerning the issuance of building permits, I always distinguish between the general rule across the United States known as vested rights, and a doctrine that I call the “bright line” rule which only a handful of states follow.

Generally speaking, the majority rule is that an applicant vests rights under a building permit only if the permit has actually been issued, and if substantial construction has taken place based on the issuance of the permit. Unfortunately, when you look at the majority of the cases which have been decided under this rule, the developer almost always loses. Certainly, there are a few cases where the courts have determined that substantial construction had taken place, but for the most part, the courts conclude that no substantial construction has been accomplished, and as a result, any change in zoning which took place after the permit was issued, may now legally prevent the construction.

Frankly, most developers have no idea that the law of vested rights is this conservative. Furthermore, I frankly think it makes little or no sense.

Contrast that with what I call the “bright line” rule. In those jurisdictions which follow this rule, if a building permit has been applied for, and the application is complete, then even if the permit had not been issued before a change in zoning, it can still be issued based on the law as it was at the time that the application was submitted.

Maybe I should call this the common sense rule, because it seems too common sensical for the courts or the legislatures to adopt it. Why shouldn’t the developer who has submitted an application which is essentially complete before a change in zoning, get the benefit of the law as it was at the time he submitted the application? There is no good reason for it. The applicant should be able to rely on the law as it existed at the time he submitted the application.

I saw an interesting case just in the last few weeks, Engley Diversified v. City of Port Orchard, 2012 WL 4023333 (USDC WD Wash. 2012), which exemplifies the bright line doctrine.

In that case, Engley applied for permits for billboards in March and April 2010 which were denied by the city. In June of 2010, the city passed new legislation which prohibited billboards within the city. The applicant which had already filed an appeal from the denial of the permits pressed forward with its fight and ultimately filed a lawsuit in state court challenging the city Council decision that the rights had not vested. That lawsuit was removed to federal district court by the city and the District Court concluded that the applications submitted in March and April 2010 had the effect of vesting the rights before the change in the law in June even though no actual permit had been issued.

It is interesting to me that the city removed this case to federal court. Here in Nashville, it would be somewhat unusual to see this kind of a case get removed. I did have a case within the last two or three years where the city removed only my allegations of a civil rights violation to federal court, but left the remainder of the case (a common law writ of certiorari) in the state court. I’m not sure you can do that either – it seems to me that you have to remove all or nothing. But surely, most cities and towns here in middle Tennessee would see federal court as not wanting to be involved in these types of zoning controversies. So, the removal by the city in this case is interesting, I wonder why they felt that they would get a better reception in federal court than they would in state court.

As it turned out, the reception federal court wasn’t very good. The city’s main defense seemed to be that because the applications were technically for sign permits, the applicant did not actually submit applications for building permits, and only building permits would have the effect of vesting rights under Washington law.

The federal court concluded that the request for sign permits instead of building permits was a distinction without a difference. The city failed to show that it treated the application any differently in any meaningful way, than it would have an application for a building permit. In addition to the permit applications, the applicant submitted sketches, site plans, engineered drawings from a professional engineer, and structural calculations for the proposed billboards. Furthermore, the city charged the applicant fees under the provisions of the building code for at least four of the permits and could not explain why such a fee would be charged if the applications were for “sign permits” as opposed to building permits. Finally, although the city argued that additional information was needed, the city failed to say what additional information was missing from the applications.

The federal court concluded that the applications were complete and that the city’s decision to the contrary was erroneous; as a result, Engley’s applications had vested under the terms of the controlling Washington statutes.

As I mentioned above, the fact that the city removed the case to federal court seems unusual to me; but the case is nevertheless an interesting application of the bright line rule applicable in Washington state. The other interesting factor here is the city’s fight to prevent the billboards from being constructed. It seems pretty clear when you read the case, that the city was trying to do anything to avoid having those billboards constructed after the adoption of its new ordinance prohibiting such billboards within the city limits.

Truly, this kind of a fight seems ill-advised and it is the kind of thing that makes owners, developers, and building permittees distrustful of all government regulation. Ultimately, it seems like the local government tries to use regulation to subvert legal construction activity, rather than to apply it in a fair and honest manner.

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