Relating to Real Estate
DRRAs Protect Developers from New Laws
In Cleanwater Linganore, Inc. v. Frederick County, Maryland, No. 1917 Sept. Term, 2015 (Md. Ct. Spec. App. Dec. 28, 2016), the Court of Special Appeals endorsed a Development Rights and Responsibilities Agreement (“DRRA”) between the County Commissioners of Frederick County and a local property owner over the objections of an environmental group that claimed that the property should be subject to subsequently enacted laws, ordinances, and rules.
Under Maryland case law, the rights of a developer in the development of a property do not vest until visible, lawful construction begins. Under this holding, local governments could change the permissible land use and rights and obligations of the property owner very late in the process, including after the developer had expended considerable time and money. In fact, such a change can occur even after a building permit is issued. Because of this doctrine, a developer would not know the full parameters of the costs and rights of a project until construction was under way.
The Legislative Fix
In order to provide more certainty to developers and to balance their rights with the rights of local government, in 1995 the Maryland General Assembly enacted what is now §7-304 of the Land Use Article of the Maryland Code (“LU”), which permits developers and local governments to enter into DRRAs and provides “the local laws, rules, regulations, and policies governing the use, density, or intensity of the real property subject to [such] an agreement shall be the local laws, rules, regulations, and policies in force at the time the parties execute the agreement.” This has the effect of “freezing” certain local laws so that the applicable rules and costs are locked in and are not subject to change unless necessary to “ensure the public health, safety, or welfare.”
How Broadly Should “Use, Density, or Intensity of the Real Property” Be Read?
The Eugene B. Casey Foundation owns 634 acres in the New Market Planning Region of Frederick County. In 2014, as part of the rezoning of the property, Casey and Frederick County entered into a DRRA. Cleanwater Linganore, Inc. and others (the “Challengers”) opposed in the Circuit Court for Frederick County the County’s entering into the DRRA. The circuit court dismissed the challenge. The Challengers appealed to the Court of Special Appeals.
Among its charges, the Challengers claimed that the DRRA was too broadly written because it purported to freeze Frederick County ordinances regarding “development, subdivision, zoning, comprehensive planning, moderately priced dwelling units, growth management, impact fees, water, sewer, stormwater management, environmental protection, land planning and design, adequate public facilities laws, and architecture.” The Challengers alleged that this was far more inclusive than “use, density, or intensity of the real property” as specifically permitted by LU §7 304.
The Court of Special Appeals, in an opinion written by retired Judge Glenn Harrell of the Court of Appeals, disagreed with the Challengers and affirmed the decision of the circuit court. Judge Harrell looked at the legislative history of House Bill 700 of the 1995 legislative session, which became LU §7-304, and found that its fiscal note addressed a number of costs and expenses that a developer could freeze under a DRRA. From that Judge Harrell concluded that the General Assembly intended that the freeze provisions of the statute were broad enough to include all of the types of laws referred to in the DRRA between Casey and Frederick County.
Further, the court found that its conclusion effected sound policy and encouraged developers to proceed with their plans. Judge Harrell wrote:
If the DRRA Act only allowed DRRAs to freeze the application of local zoning ordinance provisions, a local government could undermine still the legal and financial stability of an on-going development project by changing the laws related to, for example, development or site plans, subdivision, or planning compliance. Where a developer assumed that its project could be thwarted by a last-minute or mid-stream change to any of these non-zoning laws, it would be less likely to undertake a substantial development at all in a jurisdiction. This, in turn, would frustrate the local government’s interest in obtaining greater public benefits through negotiation of a DRRA’s terms.
For questions, please contact Ed Levin (410) 576-1900.