In Levine v. Town of Sterling, No. 18470 (Apr. 12, 2011), the Connecticut Supreme Court held that a property owner need not show that his property was rendered worthless or that he made "capital investment" to prove that he relied on a resolution by the town's board of selectmen that he could build more than one house on his land.
Levine involved zoning estoppel (aka equitable estoppel, permit estoppel, or, as in Connecticut, "municipal estoppel"), the claim that the government cannot apply existing land use regulations to a parcel because the owner has relied on some kind of official assurance that she could do something else. In that case, Mr. Levine owned a parcel with an existing house and wanted to build two others and convert it to a planned unit development. The board "noted that [the plaintiff] was within his rights to do so but stressed that none of the homes on this lot could ever be sold individually." Slip op. at 1. The owner then obtained approvals from the towns wetland and watercourses and health commissions.
The town then amended its land use ordinance to prohibit more than one dwelling per lot. The ordinance did not specify whether it applied to projects already in progress so the owner sought the board's clarification. In response, the board adopted a motion that the development was not "affected by the new land use regulations." The property owner then "engaged and paid a number of professionals to assist in the development of the parcel and invested approximately 400 hours of his own personal time in furtherance of the development." Slip op. at 1.
At the next board meeting, however, it did an about-face and rescinded the motion and "reserved the right to seek enforcement of the land use ordinance as it related to the plaintiff's project." Slip op. at 2. The board asserted it did not have the authority to "waive" the land use ordinance. The property owner then applied for building permits, which predictably were denied.
The owner sued, asserting that the town had no power to adopt the new ordinance, and that the town was estopped from applying the no-more-than-one-dwelling ordinance. Under Connecticut law, in order to establish estoppel, a plaintiff must show four elements:
[I]n order for a court to invoke municipal estoppel, the aggrieved party must establish that: (1) an authorized agent of the municipality had done or said something calculated or intended to induce theparty to believe that certain facts existed and to act onthat belief; (2) the party had exercised due diligence to ascertain the truth and not only lacked knowledge of the true state of things, but also had no convenient means of acquiring that knowledge; (3) the party had changed its position in reliance on those facts; and (4) the party would be subjected to a substantial loss if the municipality were permitted to negate the acts of its agents. . . .
Slip op. at 8. The first three elements were not in dispute, but the trial court concluded that the property owner failed to show substantial loss. "The trial court determined that, although the plaintiff had demonstrated that he had invested time and money in preparing his property for the construction of two additional dwellings, 'he has not established the extent to which his investment would be lost if the [town] was not estopped ... [because] he has not demonstrated that the improvements made would be rendered useless ... [c]onstruction of the proposed additional dwellings has not even begun.'" Slip op. at 8-9.
The supreme court rejected that analysis, concluding that if proven, the owner's expenditures (hiring of "professionals to assist in the development of the parcel and ... approximately 400 hours of his own personal time") qualify as "substantial losses." The court rejected the trial court's conclusion that an owner must demonstrate a "capital investment" to show substantial loss. It also rejected the conclusion that a property owner must show that his "entire investment would be lost." Slip op. at 10. The court relied on a line of Illinois cases to conclude that a "strict showing" of such losses is not required, and that a property owner need only show "significant expenditures in reliance upon the representation of a municipal official." Id. (citing Drury Displays, Inc. v. Brown, 715 N.E.2d 1230 (Ill. 1999)).
What this means is that in order to show reliance, a property owner need not show "hard" costs such as money spent on actual building, or even that he spent money on services for actual building. He need only show that he invested time and money in preparing his property for development and that he "paid for the assistance of professionals" (aka "soft costs"). It also means that property owners do not need to show that their land would be rendered useless or without value if the government was not estopped. That standard seemed to wrongly conflate takings with estoppel, and as the Connecticut Supreme Court put it, "[n]othing in our case law interpreting the substantial loss element of municipal estoppel claims requires such a strict showing." Slip op. at 10.
The approach adopted by the court is similar to other courts (such as Hawaii's) which treat the expenditure of soft costs as "reliance" for estoppel purposes. As we wrote in a 2004 law review article:
The type of obligations incurred following such approvals are soft costs and obligations such as architect’s fees, financing points, legal fees, advertising fees, fees for engineering work, costs for "design and planning," costs of archeological research, planning and development consultant fees, and appraisal fees. These examples, of course, are not exclusive, and it is clear that a wide range of project-specific costs count.
Arrow of Time: Vested Rights, Zoning Estoppel, and Development Agreements in Hawaii, 27 U. Haw. L. Rev. 17, 52-53 (2004) (footnotes omitted). After all, "[a]nyone familiar with the land development process knows that neither land, nor planners and designers, are free," Id. at 34-35 n.103, so why shouldn't these costs count towards reliance when the government has assured a property owner that it has the green light? The Levine court's acknowlegement of soft cost reliance "recognizes the realities of the development process because one or more other actions will generally be required following official assurances
before actual site work can commence." Id. at 53.
The court also rejected the town's arguments that the plaintiff needed to exhaust administrative remedies by appealing to the zoning board of appeals (because the issues were either not appealable to the ZBA, or the ZBA did not exist at the time), and rejected the plaintiff's argument that the town lacked authority to enact the second ordinance limiting the number of dwellings on a parcel.
All in all, a case worthy of reviewing.
Levine v Town of Sterling, No. 18470 (Apr 12, 2011)
