Relating to Real Estate
Federal Court Dismisses Developer’s Claim against Montgomery County for Reducing Development Rights
A federal judge recently dismissed a lawsuit against Montgomery County that claimed the county unfairly reduced a developer’s ability to build a large residential project on 541 acres of undeveloped land near Clarksburg, MD.
In Pulte Home Corp. v. Montgomery County, Maryland, 2017 WL 3701848 (D. Md. Aug. 25, 2017), the U.S. District Court for the District of Maryland rejected developer Pulte Home Corporation’s claims that the county’s downzoning of property, imposition of new restrictions, and denial of water and sewer service amounted to a taking or violated Pulte’s rights. The county’s actions will allow Pulte to develop only 93 of its 541 acres.
From 2004 to 2006, Pulte and Shiloh Farm Investments invested nearly $50 million in purchasing undeveloped property near Clarksburg and another $12 million buying additional development rights for what was intended to be a 1,000-home residential project.
From 2009 to 2012, Pulte requested changes to the County Water and Sewer Plan to move the project forward and submitted a “Pre-Application Concept Plan” for the project to the county; however, the county refused to act on the submissions. In 2014, the county amended its Master Plan for the area, which included an increased limit on impervious surface, additional open space requirements and a downzoning of the property from residential to agricultural classifications. The cumulative effect of these changes was that Pulte could now develop only 17 percent of its property.
Pulte and Shiloh Farm sued the county for $86 million in damages, alleging various constitutional infirmities, including violation of procedural and substantive due process, violation of equal protection, and that the county’s actions amounted to a taking without just compensation. Ruling on the defendants’ motion for judgment on the pleadings, Judge George Hazel rejected all of the plaintiffs’ claims and granted judgment for the defendants.
The court held that the plaintiffs had no constitutionally protected entitlement to develop the property according to the county’s original zoning and that the county had a rational basis for rezoning the property to protect sensitive watersheds in the area. The judge held that the plaintiffs were not deprived of “all economically beneficial use” of their property because 93 acres were still developable and the deprivation was not sufficient to amount to a taking. The court further stated that Pulte’s investment was “highly speculative”; it knew that development was dependent on receiving approval for water and sewer, and the county had significant discretion in land use decisions.
Pulte and Shiloh Farm have filed an appeal of the District Court’s decision to the U.S. Court of Appeals for the Fourth Circuit.
Commentary: The reasoning behind the court’s decision makes it very difficult for developers to plan projects of any significant size and leaves developers open to the risk that local jurisdictions will change the rules that are in effect at the time they are planning a project. Although it appears that Pulte attempted to work with local officials and participated in County Council meetings and hearings, those efforts did not help with respect to this project.
For questions, contact Edward J. Levin.
410-576-1900 • firstname.lastname@example.org