Indiana Court of Appeals Clarifies Indiana Developers’ Vested Rights

In Indiana zoning law, the doctrine of “vested rights” protects developers who have made large investments in a construction project from having those investments thwarted by changes in zoning requirements while the development project is underway.  City of New Haven v. Flying J. Inc., No. 02A03-0902-CV-74, Ind. Ct. App. (August 31, 2009), recently addressed the question of what steps a developer must take in reliance on a set of existing zoning standards before that developer enjoys the protection of such “vested rights.”

Flying J involved a tortuous litigation path including two appeals (and even a diversionary foray by the developer into federal court).  Flying J proposed to build a travel plaza (including a gas station, convenience store, 24-hour restaurant and other amenities) on a 17-acre site.  The initial BZA decision rejected the development, but that decision was overturned in the first appeal because the Indiana Court of Appeals concluded the travel plaza involved permitted uses under the New Haven zoning ordinance.  After that decision, however, New Haven amended its zoning ordinance to impose new restrictions on the size (by acerage) of service stations.  The size and scale of Flying J’s planned travel plaza exceeded the limitations of the amended ordinance.  The issue addressed by the Indiana Court of Appeals in the second appeal was whether Flying J had a “vested right” to proceed with its development plans under the earlier version of New Haven’s ordinance.

The Indiana Court of Appeals affirmed the trial court’s decision finding that Flying J’s vested right in its planned development precluded application of the amended ordinance.  The Court rejected the BZA’s argument that Flying J had no vested right because it had not yet begun construction on the travel plaza.  Quoting an earlier decision in Pinnacle Media LLC v. Metropolitan Dev. Comm’n, 868 N.E.2d 894, 900 (Ind. Ct. App. 2007), the Court stated that “there is no bright-line rule that construction must have commenced in order to show a vested right.”  The Court elaborated:

We read the Pinnacle cases to mean that, while construction definitely does establish a vested right, mere preliminary work, including filing of a building permit, does not.  In situations falling between these two extremes, courts must engage in a fact-sensitive analysis to determine whether vested rights have accrued prior to application for a building permit or construction.

The Court of Appeals concluded that the $4 million-plus spent by Flying J gave rise to a vested right (or at least the trial court did not err in so concluding).  By far the largest portion of the $4 million was the purchase price of the property — a point pressed vigorously by the BZA.  (The BZA no doubt pointed out that if the cost of acquiring a property alone created vested rights under the zoning regulations in existence at the time the property was acquired, then zoning changes would be enforceable only against those property owners who happen to acquire their properties after the zoning ordinance is changed.  Such a rule would make it virtually impossible to update zoning regulations.)  Without directly addressing that argument, the Court of Appeals held that Flying J’s other expenses, “including tens of thousands of dollars on engineering and surveying, constitute more than mere ‘preliminary’ work or expenses,” and were sufficient to give Flying J a vested right under the original ordinance.

About Bose McKinney & Evans LLP

Bose McKinney & Evans LLP is a business law firm, headquartered in Indianapolis, Indiana, serving both publicly held and privately held businesses, governmental entities and high-growth industries. Our clients include Fortune 100 companies, international manufacturers, national and regional financial institutions, agribusinesses, sports teams, university-incubated start-ups, media, utilities, cities and schools, to name a few. We strive to build strong relationships with our clients as key business advisors, to exceed expectations in the quality of our work, to be knowledgeable about our clients’ businesses and sectors, to be responsive to service needs and to continually seek to improve the delivery of client services. Our ultimate focus is on our clients.
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