The Maryland Court of Appeals recently heard and decided a case involving Development Rights and Responsibility Agreements. In my first blog post on this topic, “Development Rights and Responsibility Agreements: The Give and Take of Development.” I discussed the purposes of and requirements for a Development Rights and Responsibility Agreement (“DRRA”) between a land developer and the local government having jurisdiction over the property. In my subsequent blog post, “Two Recent Maryland Rulings on Development Rights and Responsibility Agreements.” I discussed two decisions by the Maryland Court of Special Appeals regarding the interpretation and enforcement of a DRRA. One of those cases was subsequently appealed to Maryland’s highest court, the Court of Appeals, and a decision was recently issued which reversed and remanded the lower appellate court’s ruling.
As a bit of a refresher, under Maryland case law, the rights of a land developer do not “vest” until there is some evidence of visible, lawful construction on the property. So until some visible construction exists, changes could be enacted to the local laws which may affect the property, even if the developer has already expended considerable amounts of time and money on the development in ways that may not be visible but involve actual construction, such as architectural design or title review. The Maryland legislature adopted the use of DRRAs to provide greater certainty to both the land developer and the local government for the development of a property by way of the contractual rights and responsibilities set forth in the DRRA.
As the name implies however, a DRRA contains both rights as well as responsibilities. The Maryland Court of Special Appeals previously issued two decisions interpreting the impacts of a DRRA. Both cases related to the same property, located in Frederick County, and the same DRRA. The opinions were issued just weeks apart, and demonstrated the two sides of a DRRA, with a focus both on the rights under such agreements as well as the related responsibilities.
In the first case, Cleanwater Linganore, Inc. v. Frederick County, 231 Md. App. 373, 151 A.3d 44 (2016), a local environmental group, Cleanwater Linganore, Inc., claimed that the DRRA in question between Frederick County and the land developer consisting of a joint venture between of Lillian C. Blentlinger, LLC and William L. Blentlinger was too broad and that the land developer should be subject to laws, ordinances and rules enacted subsequent to the execution of the DRRA. Cleanwater Linganore claimed the DRRA was too broad in scope because it attempted to freeze future County ordinances regarding various development rights, which it claimed went beyond the use, density and intensity provisions set forth in the DRRA statute (see, Annotated Code of Maryland, Land Use Article, Section 7-303 (the “Statute”)). The Court of Special Appeals (the “Court”) disagreed and affirmed the decision of the Circuit Court, finding that the provisions of the Statute were broad enough to include all types of laws referred to in the DRRA. The Court found that to decide otherwise could impede a developer’s rights by any last minute change of laws, which could discourage developers from undertaking future development projects, and in turn frustrate the government’s interest in obtaining public benefits provided under the terms of the DRRA. So, score round one for the developer and the enforcement of rights under the DRRA.
Less than two months later, the score was somewhat evened, with a decision in favor of the local government. In the second case, Cleanwater Linganore, Inc. v. Frederick County, 231 Md. App. 620, 153 A.3d 874 (2017) (Md. Ct. Spec. App., Feb. 3, 2017), the Court found that the DRRA between the developer and County did not contain sufficient consideration or value to the County and, therefore, was void. In that case, the same environmental group argued that the DRRA was void for lack of consideration because it failed to provide any enhanced public benefits to the County. The Court agreed, finding that a DRRA is a bargained-for agreement and, therefore, must contain benefits for both parties. Although the developer had offered to convey a portion of the property to the County for use as a school site, the Court found that the developer would have been required to grant property for a school site in any event under the County’s adequate public facilities ordinance and, therefore, the offer of a school site provided no additional benefit to the County. Accordingly, the Court of Special Appeals reversed the decision of the Circuit Court and ordered that the DRRA be vacated. So, score round two for the government and enforcement of responsibilities under the DRRA.
Ah, but the fight did not end there, as the developer decided to go another round by appealing the Court of Special Appeals’ decision to the Court of Appeals. “Cleanwater Linganore” and the developer proceeded to battle it out for another round, and when the bell rang, the Court of Appeals scored round three in favor of the developer.
Specifically, the Court held in Lillian C. Blentlinger, LLC, William L. Blentlinger, LLC v. Cleanwater Linganore, Inc. et. al, 456 Md. 272, 173 A. 3d 549 (2017) (In the Court of Appeals of Maryland, No. 13, September Term 2017) that based on the language and legislative history of the State enabling legislation, the Annotated Code of Maryland, Land Use Article, Sections 7-301 through 7-306 (the “DRRA Statute”), as well as the relevant case law, in order to be a valid DRRA, a developer is not required to confer any “enhanced” public benefit to the local governing body. In other words, the Court of Appeals held that there is no evidence in the DRRA Statute, its legislative history or case law demonstrating the intent to require an enhanced public benefit as part of a DRRA and, therefore, the DRRA at issue in the case was found to be valid and supported by sufficient consideration. Based upon its findings and holding, the Court of Appeals reversed the lower appellate courts’ judgment and remanded the case back to the Circuit Court for Frederick County.
This recent opinion further demonstrates the two sides of a DRRA: the enforceable rights and the concurrent responsibilities, and sets the stage for continuing battles likely to ensue in future cases. As new challenges and new cases continue to present themselves, which they inevitably will in the high stakes world of land development, it will be interesting to see how Maryland courts interpret the respective rights and responsibilities of developers and government bodies in enforcing DRRAs.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Accessing this blog and reading its content does not create an attorney-client relationship with the author or with Miles & Stockbridge. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.