Two Recent Maryland Rulings on Development Rights and Responsibility Agreements

In my previous blog post, “Development Rights and Responsibility Agreements: The Give and Take of Development,” I discussed the purpose and requirements for a Development Rights and Responsibility Agreement (“DRRA”) between a land developer and the local government having jurisdiction over the property. Now that developers are using DRRAs, and as issues inevitably arise regarding the interpretation and enforcement of a DRRA, those agreements are being put to judicial scrutiny.

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 and involve actual construction. 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, a DRRA contains both rights as well as responsibilities. The Court of Special Appeals of Maryland recently 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 demonstrate 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,” claimed that the DRRA 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 between the developer and the County. The Court found that to decide otherwise could impede a developer’s rights by a last minute change of laws, which would discourage developers from undertaking development projects, which in turn would frustrate the government’s interest in obtaining public benefits provided under the terms of the DRRA. So, score one for the developer and the enforcement of rights under the DRRA.

Less than two months later; however, the score was somewhat evened, with a decision in favor of the local government. In the second case, Cleanwater Linganore, Inc. v. Frederick County, ___ Md. App. ___, ___ A.3d ___ (2017) (Md. Ct. Spec. App., Feb. 3, 2017), the Court found that the DRRA between the developer and County did not include sufficient consideration or value to the County and, therefore, was void. In this 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 reversed the decision of the Circuit Court and ordered that the DRRA be vacated. So, score one for the government and enforcement of responsibilities under the DRRA.

These two recent opinions, arising out of the same property and same DRRA, demonstrate the two sides of a DRRA: the enforceable rights and the concurrent responsibilities. You cannot have one without the other, and that goes for both sides. As new challenges and cases present themselves, it will be interesting to see how Maryland courts interpret the respective rights and responsibilities in enforcing DRRAs.

This blog was written by Anne-Herbert Rollins at Miles & Stockbridge.

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.