A Case Summary of a Recent
Judicial Development in
Agriculture & Urbanization

Designation of Ag Preservation District
Does Not Stop Housing Development

Randal Busby
National Aglaw Center Research Assistant

In an action involving a developer that was in the process of obtaining a permit for a housing development project when an adjacent parcel of land was approved as an agricultural preservation district which, pursuant to the Delaware Agricultural Lands Preservation Act, Del. Code Ann. tit. 3, §§ 901-930 (the "Act"), required the developer to abide by a setback requirement in constructing the housing development, the Supreme Court of Delaware has ruled that the developer's good faith pursuit of all of the necessary steps to secure permits for the development precluded, as a matter of law, the development from being characterized as a "new subdivision development" subject to the setback requirement under the Act. In re 244.5 Acres of Land, 808 A.2d 753, 754 (Del. 2002).

The Village, L.L.C. (the "Village"), was in the process of obtaining permits for a planned residential development when the Delaware Agricultural Lands Preservation Foundation (the "Foundation"), a state agency, approved another landowner's application to create an agricultural preservation district on approximately 244.5 acres of land adjacent to the planned residential development. See id. The Act required any "new subdivision development" adjacent to a preservation district to observe a fifty-foot setback that precluded the erection of any structure within the fifty-foot setback. See id. (citing Del. Code Ann. tit. 3, § 910(a)).

The Village brought an action against the Secretary of the Delaware Department of Agriculture and Farm Lands, requesting that the court waive the fifty-foot setback requirement for its property or that money damages be awarded for an inverse condemnation pursuant to 42 U.S.C. § 1983. See id. The Village claimed that "the additional setback requirement render[ed] it unable to build on certain lots and significantly impair[ed] the value of twenty-eight lots" resulting in a total diminished value in excess of $400,000.00. Id. Although at the time of the trial the Village had not applied for a building permit nor could it do so under the applicable city ordinance, it claimed expenditures of $312,479.88 on the project in preparation for the building permits. See id.

The trial court concluded that the Village did not have a vested right for a specific land use since it lacked the proper building permits at the time of the approval of the preservation district and was therefore subject to the setback requirement. See id. It also rejected the Village's inverse condemnation claim and a "due process" claim raised by the Village in which the Village argued that there was a lack of fair notice and fair process with respect to the hearings before the Foundation. See id. The Village appealed the trial court's decision to the Supreme Court of Delaware. See id.

The Village argued that "it had a vested right to develop its land free of the fifty-foot setback requirement and that the proceedings before the Foundation were lacking in constitutionally required fair notice and fair process." Id. at 756. The Supreme Court of Delaware stated that "[i]n view of our determination that the Village was not a 'new subdivision,' and thus had acquired vested property development rights prior to the establishment of the preservation district, we find it unnecessary to address the claim of unfair process and notice." Id. Thus, the only issue before the court was whether the Village had a vested right to develop its land free of the fifty-foot setback requirement. See id.

The court reviewed the Village's claim of vested rights under the "permit plus" rule, which states that "the issuance of a building permit does not, alone, confer any right against a later zoning change . . . . The acquisition of vested rights requires more." Id. (quoting Shellburne, Inc. v. Roberts, 224 A.2d 250, 254 (Del. 1960)). The Village argued that "in light of changes in land use development and regulation over the last forty years, this Court should abandon the . . . permit plus rule . . . in favor of a more liberal approach that focuses on whether there has been an expenditure of funds and effort in good faith reliance on existing regulations." Id.

In the alternative, the Foundation argued that the "permit plus" rule was still recognized in most jurisdictions and sufficiently protected property owners. See id. It also argued that "[i]f the rule is to be modified at all . . . it should be relaxed only to include those who have applied for a building permit and have substantially relied upon its likely issuance." Id. Thus, according to the Foundation, "the Village secured no vested rights because its plans had not reached the level of administrative approval sufficient to seek a building permit by the time that the agricultural district was approved." Id. at 756-57.

The court was attentive to the Village's argument, stating that "where the building application process is 'validly brought and pursued in good faith' its completion should not depend on the issuance of a permit under subsequently enacted regulations." Id. (citations omitted). It noted that courts "have granted relief to property owners and enforced vested rights in the face of subsequent adverse zoning regulations where a building permit has been applied for in good faith but not issued." Id. (citations omitted).

The court noted that the Village's actions and participation in the process up to the time that the preservation district was created as follows:

(1) In August 1996, meetings were held with the City Planning staff to discuss the design plan; (2) In December 1996, a conceptual plan was filed with the City; (3) In February 1997, a conceptual site plan was submitted to the City Planning Commission; (4) In April 1997, a conditional use application was filed with the Planning Commission; (5) In June 1997, the developer met with the Planning Commission to consider the site plan and requested waivers; (6) In October 1997, the Development Advisory Committee met to consider and comment on the project and that same month the Planning Commission held a public meeting on the project; (7) In November 1997, the Dover City Council considered the plan for the project at its regularly scheduled meeting and the following month gave its preliminary approval and granted the necessary waivers. The final approval, a required step before securing building permits, did not occur until June 1998. There is no indication, however, that the Village delayed its efforts to secure all approvals necessary to begin construction. During this almost two year process the Village expended more than $300,000, a figure the Superior Court assumed correct for summary judgment purposes. The case illustrates the essential unfairness in a rigid application of the "permit plus" rule without taking into consideration the complexity of present day real estate development.blockquote>

Id. at 757.

The court stated that this case "illustrates the essential unfairness in a rigid application of the 'permit plus' rule without taking into consideration the complexity of present day real estate development." Id. It also stated that while the permit plus rule "may continue to have viability in situations where the obtaining of a building permit is a mechanical process accomplished in a short period of time," the rule "is not dispositive of the issue of vested rights in situations such as we confront here involving a development that could only be approved after the completion of each stage of a defined process." Id. It added that in cases, such as the one at hand, that involve large expenditures on a lengthy pre-permit process, "it would be inequitable to leave an applicant to the vagaries of the unanticipated actions of other governmental entities during the extended process required by local authorities." Id.

Finally, the court determined that the Village's "extensive efforts to secure all necessary approval from local governmental authorities not only establishes good faith reliance but also precludes its project being classified as a new subdivision." Id. It added that

Section 910(a) [of the Act] extends its setback restrictions to "any new subdivision development . . . ." Given the extensive efforts pursued by the Village and the substantial sum expended by it, prior to the State's proposal of the preservation district, its project can hardly be characterized as a "new subdivision." Accordingly, we hold that the Village's right to proceed with its subdivision plan became vested by that date and is not subject to the restriction.

Id.

The case was decided on October 18, 2002; this summary was posted June, 2003