Vested Rights Extended For Developers
Colorado Real Estate Journal, June 21, 2000
In Colorado, the doctrine of vested rights in real property originates in the common law, with additional legislative modifications in 1987 and again in 1999. The statute was intended to establish a time earlier in the development process that the right to build a planned project becomes certain. The statute was also intended to address ambiguities, inequities and inconsistencies in the way that local governments interpreted the common law. An overhaul of the statute was passed last year, as a response to continued problems in this area.
Briefly stated, "vested rights" refers to a landowner's common law right to complete improvements to his or her real property, notwithstanding subsequent changes in laws or regulations, if substantial steps towards making such improvements have been taken in reliance on a valid building permit. However, developers usually invest substantial resources (time, money, effort) for months or years before applying for a building permit. This led to the enactment of CRS § 24-68-101 et seq., which establishes and protects a vested right to develop land for three years after a local government land use body approves a "site specific development plan."
There were a number of practical difficulties with the original statute. As a result, House Bill 1280 was introduced. By the time it went through the legislative process, it was quite different from the way it started out, but is nevertheless generally thought to be an improvement on the 1987 law. The bill makes three major changes to the statute. It requires local governments to identify by ordinance or resolution the type or types of site specific development plan approvals that will cause property rights to vest. It also provides that, in the absence of such an ordinance or resolution by January 1, 2000, then the rights automatically vest on the approval of any plan, plat, drawing, or sketch that is substantially in compliance with the definition of "site specific development plan" in the statute. This corrected a gap in the prior version of the statute, which superficially appeared to be self-executing, but was not. If a local government had no definition of site specific development plan, then there was no "safe harbor" for a landowner who had not yet pulled a building permit.
The bill provides that the rules applicable to a particular development are those in effect at the time an application is submitted, and those rules will remain in effect throughout the development process. "Application" is defined as the original application at the first stage in any process that may culminate in approval of a site specific development plan. Unless local governments are careful to define the first step in a site specific development plan process, or to provide for expiration of preliminary development plans if not acted upon within a certain amount of time, they could find their building codes and rules frozen in time with respect to a particular parcel of property, and potentially for much longer than the three year "vested rights" period, in the case of multi-phase, large developments. In other words, under the statute, the development right "vests" when the site specific development plan is approved, but the law governing that development is the law in effect at the time of the application, which could have occurred long before the site specific development plan is finally approved.
The third major change is a narrowing of the definition of site specific development plan. As of last year, a site specific development plan is not a sketch plan, final architectural plan, public utility filings, or final construction documents and related documents specifying materials and methods for construction of improvements. What's left? The statute says it's a plan that has been submitted to a local government by a landowner or its representative describing with reasonable certainty the type and intensity of use for a particular parcel or parcels of real property. What constitutes a site specific development plan that would trigger a vested property right is to be finally determined by ordinance or regulation, or by agreement with the developer.
Developers should be aware of the potential for great variations among jurisdictions in implementing H.B. 1280, not to mention traps for the unwary. For example, in Dacono, the ordinance requires the landowner to make a specific written request to City Council to have its approval of a site specific development plan result in vested rights. The request must be made at least 30 days prior to the date the City Council is scheduled to approve the plan. Failure to make the request "renders the PUD final development plan not a site specific development plan and no vested rights shall be deemed to be created." Similarly, the Boulder ordinance provides a procedure for "getting vested" and says "an applicant's failure to meet all of the above requirements renders the site specific development plan approval void, and results in a waiver of the applicant's right to create a vested property right pursuant to Section 24-68-103(1), C.R.S." Whatever the jurisdiction, developers and their advisors should be careful to ask for their vested rights at the appropriate stage of the development process. Although it's an interesting academic exercise to speculate about whether cities, counties, and towns have the power to change state law in this fashion, it is doubtful that an individual developer would be interested in taking the test case to court, especially not if the developer still wanted to develop in the community in question.
