Vesting: When a Property Development Plan is Grandfathered … or Not
(Not an article of clothing)
(Not assuming office)
(Not what Warren Buffet does)
Does the NFL change rules in the middle of a football game? The NCAA? Is it fair for a city to change the rules in the middle of developing a parcel of land? With the recent tower fires in London and Dubai, are safety issues frozen at the point of beginning construction?
The Texas Legislature attempted, in Chapter 245 of the Texas Local Government Code, to statutorily determine that a land development project is “vested” and is therefore “grandfathered” with the regulations in force at the time the first permit is applied for. One problem—a football game only lasts an hour on the game clock, a development project can go on for years.
Section 245.002(a) states that a city shall consider the approval, disapproval, or conditional approval of an application for a permit solely on the bases of any orders, regulation, ordinances, rules, expiration dates or other properly adopted requirements in effect at the time the original application for the permit it filed or a plan for development or plat application is filed. Stated another way, pulling a permit to remodel or build a building vests the project at the time the application is filed with the City or the application is mailed by certified mail.
But what about a subdivision that is built in phases and requires a series of permits? Regulations in effect at the time the original application for the first permit is filed is the trigger for vesting. Chapter 245.001 defines what a permit is but basically it is anything that a person must obtain to perform an action or initiate, continue, or complete a project for which the permit is sought. Preliminary plans and related subdivision plats, site plans and all other development permits for land covered by the preliminary plans or subdivision plats are usually considered collectively to be one series of permits for a “project”.
A Project is basically defined in just two words: “an endeavor”. The definition goes on to include over which a regulatory agency exerts its jurisdiction and for which one or more permits are required to initiate, continue or complete the endeavor. Put another way, if you “endeavor” to build a shed for your 14-foot-tall RV and you need a “permit” to build it, your “project” is vested when you visit the permit department and file your application.
There are of course more than 11 exemptions to vesting as found in section 245.004 of the Local Government Code, including uniform building, fire, electrical, plumbing or mechanical codes as recognized by a national code organization; municipal zoning regulations except (double negative here with an exception to an exemption) for landscaping, tree preservation, open space or park dedication, lot size meaning landscaping, trees, parks and lot size are vested; sexually oriented business; fees; annexation; utility connections; regulations to prevent imminent destruction of property from flooding and many more.
Are you vested if the project never got off the ground and went dormant? Chapter 245 lets a city put a 2-year expiration date on individual permits if no progress is made or 5 years for a project. Progress is defined as application for a final plat or a good faith attempt to file an application or cost incurred for development such as roadway, utility other infrastructure of more the 5% of the appraised market value or the payment of a utility connection or impact fee.
There are many traps for the unwary for both a developer as well as a city as cities continue to learn from past mistakes and refine their regulations.
Texas native J. Grady Randle concentrates his practice in the areas of real estate and municipal law in Houston and the surrounding counties. He represents government entities and local municipalities in litigation, regulation, land development, zoning, land use, and other matters. Mr. Randle also handles a wide variety of real estate transactional and litigation matters, including oil and gas contracts, large commercial land and building purchases, and commercial landlord-tenant issues. He received his Juris Doctorate as well as a Bachelor of Business Administration from Baylor University.