Friday, August 12, 2016

Vested Rights: Neighbors of Old Hickory v Ind Land Develoers

As I have mentioned previously on this blog, the Tennessee Vested Rights Act became effective on January 1, 2015. So far as I know there have not been any appellate court decisions and I am unaware of any trial court decisions except for a case recently decided by the Davidson County Chancery Court, Neighbors of Hickory v Industrial Land Developers, a case which involved an application for permits to operate a rock quarry on Burnett Road in Davidson County. I should mention that I was involved in this case.

I won't go through all the facts, but suffice it to say the property owner made early contact with representatives of the Metro Codes Administration, to make sure that the zoning was appropriate for the rock quarry, and then in the early part of 2015, submitted an application for a building permit for certain accessory structures related to the operation of the quarry. In connection with that application, a development plan was submitted showing the phases of the development, access points, surrounding land uses and the proposed construction.One of the arguments of the neighbors was that the building permit application did not list the quarry as a land use, but this argument was certainly much less significant given the fact that there was correspondence between the owner and Codes detailing exactly what the owner planned to do and making sure that the zoning was appropriate.

Further, after obtaining the building permit, but before the buildings were completed, the property owner also submitted an application for a use and occupancy permit which was issued, specifically for the quarry. Temporary occupancy permits for the buildings were issued another month later, and about six months after the original applications were made, the Metro Council changed the zoning in an effort to prevent the quarry from opening.

The trial court concluded that the owners had used a "belt and suspenders" approach to vesting their rights: both the building permit and the development plan were sufficient, standing alone, to vest the rights from the perspective of the Judge.

The plaintiffs had argued that the failure of the building permit to reference the land use activity (rock quarry) prevented the application of the Vested Rights Act. Although the court did not address this in particular, it certainly found that both the building permit and the development plan were sufficient standing alone and thus impliedly rejected that argument.

There was a secondary argument concerning who had the burden of proof. The plaintiffs, adopting the standard from non-conforming use case law, suggested that the party asserting vested rights had the burden of proof. The court, in what I think is a very appropriate methodology, concluded that while the initial burden might be on the party asserting vested rights to prove that either a building permit or a development plan was approved, that the burden would then shift to the challengers to demonstrate some reason why the permits or plans were not appropriate in order to defeat the application of the statute.

Finally, running through parts of the plaintiff's argument was that for certain kinds of out-of-doors activities, rock quarries, landfills, agricultural uses, the Vested Rights Act did not apply because there is really no way to obtain a building permit for one of those types of uses. Further, the plaintiff suggested that even though accessory construction might be necessary, that the relatively small size of the accessory construction vis-à-vis the size of the principal use made it inappropriate to apply the act under such circumstances. Again, the court did not directly rule on this argument. However, there's no authority within the statute to conclude that any type of a building permit would not vest the rights to proceed, and if the rights could not vest on those types of uses, rock quarries, landfills, and others, the Vested Rights Act might be of little use. It is those very controversial types of land uses which require protection of this kind.

This case is a great example of the problems that property owners frequently encounter. As soon as it became known that a quarry was being proposed for this property, activity began to change the zoning on the property to prohibit that use. From my perspective, dealing with my clients, usually, we are glad to meet whatever requirements have been set up by the local government. What makes things difficult is a change in the rules once the application has been submitted. And that very often is exactly what happens. As soon as it became known that the rock quarry was being proposed, immediate action was taken to change the zoning. While this is perhaps understandable, it makes it very difficult and risky to engage in land development under such circumstances.

There's no word on appeal at this time.

The trial court opinion may be found here.

Tuesday, August 2, 2016

Speedy Cash: Vested Rights, Estoppel and Standing

In a decision filed on April 22, 2016, Chancellor Ellen Hobbs Lyle ruled that a cash advance financial institution had established an equitable estoppel which prevented Metro Nashville from revoking a permit which had erroneously been issued. The case, Concord Finance, Inc., d/b/a Speedy Cash v Metro Board of Zoning Appeals and Tennessee Quick Cash, Inc., Docket #15-1362-III, is extremely interesting inasmuch as its result is very unusual.

I will summarize the facts quickly although the opinion is quite lengthy and in these vested rights/estoppel cases, the factual setting is always the most important. Having said that, the essential  facts are that Speedy Cash applied for a building permit in September 2014 to renovate and remodel an existing convenience market on Dickerson Pike. While the application for the building permit was pending, the Metro Council amended the zoning ordinance in a way which would prohibit the location of a cash advance retail store at that location. Ultimately Metro Codes decided to go ahead and issue the permit notwithstanding the passage of the new zoning regulation. The construction was virtually completed when on April 21, 2015, the Metro Zoning Administrator issued a stop work order and revoked the building permit. The stop work order noted that the permit had been issued in error. Speedy Cash had spent approximately $600,000 in the construction effort.

Speedy Cash appealed the decision to the Metro Board of Zoning Appeals, but the administrative body upheld the decision of the Metro Zoning Administrator. From there, an appeal was taken pursuant to the common law writ of certiorari.

The court looked at three different issues: vested rights and the pending ordinance doctrine, equitable estoppel, and standing. It is worthwhile to read the entire opinion, but again, I will very briefly summarize the decision of the court.

The court found against Speedy Cash with regard to the vested rights doctrine. The court found that the undisputed facts indicated that the new zoning ordinance became effective on November 19, 2014. The building permit was not issued until December 2, 2014. "Issuance of a permit for a building that does not comply with the law renders the permit illegal and, therefore, invalid and of no effect as of the date of its issuance…" Slip Opinion at 12.

The court engaged in some additional analysis based on the pending legislation doctrine, but frankly, I think the summary above encapsulates the significant holding. Ultimately, if a building permit is issued in violation of the existing law at the time of issuance, it is simply void and of no effect. It doesn't make any difference how much construction was completed or how much it cost.

The court then turned to the equitable estoppel argument. Once again, the law is not favorable for Speedy Cash. The equitable estoppel doctrine applies only very rarely to governmental entities. The court cited Sexton v Sevier County, 948 S.W. 2d 747, 751 (Tenn. App. 1997) as an example. There are many others.

However in this case, the court concluded that Metro's conduct clearly induced and caused detrimental reliance by Speedy Cash and given the fact that the building was completely constructed and its design customized for use as a cash advance retail outlet, the doctrine should apply. The important facts related to the original hesitation by Metro Codes to issue the permit, a review by Metro Codes, and a final decision indicating that the permit would be issued and in fact was issued, because it was "grandfathered" in. Most likely, that determination was incorrect; but its effect was to induce the applicant to move forward with the construction effort and spend a very significant amount of money.

Accordingly, the court found in favor of the applicant (Speedy Cash) and reversed the decision of the Metropolitan Board of Zoning Appeals.

Finally, one remaining issue was determined by the court. A competitor, Tennessee Quick Cash appeared before the Board of Zoning Appeals and also participated in the arguments before the Chancery Court. Tennessee Quick Cash admitted that it did not have a store within a quarter mile of the Speedy Cash location. The court noted that in order to have standing, Tennessee Quick Cash must show a direct and palpable injury, a special injury not common to the public generally. City of Brentwood v Metro Board of Zoning Appeals 149 S.W. 3d 49, 58 (Tenn. App. 2004). Tennessee Quick Cash argued that its status as a business subject to the same regulatory structure as the petitioner gave it standing. The court concluded however that the threatened injury necessary to confer standing in a zoning case must be related to the use of the property – dust, noise, traffic, or something similar. Nothing like that appeared in the record with regard to Tennessee Quick Cash, and it certainly didn't flow simply from being a business competitor. Therefore, the court concluded that Tennessee Quick Cash had no standing to speak before the Board of Zoning Appeals and had no standing before the Chancery Court.

This final holding is somewhat unusual, but certainly understandable. It reinforces the concern that any land use attorney has when representing a business competitor who is not located within a short distance from the project itself. In this case, the court used a quarter of a mile, and as it happens, that is my usual rule of thumb: I always look to see if my client (or conversely, an opponent to my client's project) is located within a quarter of a mile of the proposed project. There are some Tennessee cases which suggest 2000 feet, and certainly if your opponent is located that far away that's even better, but a quarter of a mile has always seemed to me to be a reasonable distance. If the objecting party is located more than a quarter of a mile away from the project, there's a pretty strong likelihood that there is no standing.

Anyway, this case gives us three valuable lessons on zoning law. First, vested rights are hard to establish under the Tennessee common law, where you need both a building permit and substantial construction. But more than that under the circumstances of this case, even if you obtain a building permit and even if you engage in substantial construction, if the building permit itself did not comply with the existing law at the time of the issuance of the permit, the permit is most likely void and there are no rights to vest.

Remember also, that the Tennessee Vested Rights Act became effective after the events in this case, on January 1, 2015, but it probably would not have made any difference. The Tennessee Vested Rights Act,  Tenn. Code Ann. §  13-4-310 (b)-(k), requires only the issuance of a building permit, and unlike the common law, it does not require any construction in order to vest. But, once again, if the building permit was void at the time of issuance by virtue of the fact that it did not comply with the zoning or other land development regulations in effect at the time of its issuance, then there are probably no rights which have vested even pursuant to the terms of the statute. The building permit must comply with the local regulations, and if not, it is not very helpful in future litigation.

The second lesson is that even though it is extremely unusual, every once in a while, given unusual facts, an equitable estoppel can be made out against a local government. It doesn't happen often, but from time to time it can be very effective.

Finally, and perhaps a more frequent issue which can come up in virtually any zoning board hearing, the standing of a business competitor is certainly undercut by the Chancellor's decision. The business competitor needs to demonstrate that it is within a short distance from the project, like anyone else, or have some other overwhelming reason that it should have the right to contest the project. Otherwise it simply lacks standing to participate.

Monday, August 1, 2016

Hindu Temple and the Tenn RFRA

The Tennessean reported last Thursday that the Metro Board of Zoning Appeals will hear an application for a special exception for a Hindu temple, of approximately 500 seats in size, on 5.8 acres to be located at 355 Haywood Lane here in Nashville. It will be interesting to see how this process works out; the zoning board certainly hears a good many cases involving religious uses but a Hindu temple is certainly a little unusual for Nashville.

In addition, there is the potential application of the Tennessee Religious Freedom Restoration Act, Tenn. Code Ann. § 4-1-407, which places the burden of proof on the local government when dealing with a religious institution, and requires that there be some “compelling governmental interest” in order to deny an application.

Although I hardly have a list of religious institutions which have been approved by the board over the past five or 10 years, I don’t recall too many being turned down. Possibly because of the impact of the Religious Freedom Restoration Act.

The board will hear the case on August 4, 2016 at 1 PM. It may be interesting to watch if you have time; the proceedings before the board are broadcast on Metro Channel 3.