Development Agreements with Local Governments – An Overview
 
December 17, 2002
 

Agreements between property owners and local governments regarding the use and development of land are an increasingly popular way to provide each party to the agreement certain guarantees about the development of a particular parcel of land.  The property owner generally wishes to ensure that the local government’s zoning and land use regulations, conditions and exactions remain fixed during the development of his property.  The local government typically seeks as many land development conditions as possible beyond what it could reasonably require through subdivision exactions, impact fees and other conditions under the normal exercise of its regulatory authority or police power. 

Whether a development agreement will provide the security and control that both parties seek will depend, in part, on how well the approved draft of the agreement expresses the interests, intentions and expectations of both parties.  The following overview describes the basic issues that a development agreement should address. Read and use it in conjunction with relevant state and local government enabling laws.

Definitions. Precisely define all technical terms that will be used in the development agreement in a "table" of definitions.  Define terms the same way in the agreement that have been defined in any applicable statute or ordinance.

Parties. Name and clearly state the capacities of all parties to the agreement. In the case of developers/owners, state their equitable or legal interests in the property. In the case of government entities, recite their authority to enter into development agreements.

Relationship of the Parties. Clearly state the relationship between the parties to the agreement. Typically, the statement will specify that the relationship is contractual and that the owner/developer is an independent contractor, and not an agent of the local government.

Property. Clearly and thoroughly identify the property that is the subject of the agreement. Incorporate by reference a map that specifically describes the property.

Authorization. Cite the state and local government legislation under which the parties are enabled and authorized to enter into the agreement.  This is particularly important in the event a state agency is a party.  Also cite the ordinance or resolution by which the agreement has been approved by the local government legislative body.

Intent of the Parties. The intent of the parties to be bound by the terms of the agreement should be clearly stated.

Recitation of Benefits and Burdens. Recite the benefits each party expects to gain from entering into the agreement, as well as the burdens each agrees to bear.  Because the agreement will be treated as a contract, state the consideration each party is to receive from the other in order to ensure enforceability.  It is especially crucial that the benefits to the local government and community be expressed in terms that exhibit the agreement as consistent with (or as an exercise of) the police power.  Stressing such benefits may help protect the agreement against a bargaining-away-the-police-power challenge.

Notice and Hearings. Note the date upon which the public hearing (if required) was held, as well as all relevant findings resulting from such hearing.  Recite all other pertinent notice and hearing requirements.

Consistency with Plans. State the the local legislative body's findings that the agreement is consistent with the local government's plans (if applicable).

Administrative Act/Legislative Act. The agreement should state that it is deemed to be an administrative act or legislative act, whichever is applicable, of the government body made party to the agreement.  Cite the relevant section of the enabling statute.  While this does not guarantee a court will so treat it, it raises the inference that it will.

Applicable Land Use Regulations. Include a precise statement of all land use regulations to which the development project will be subject.  Precisely specify which regulations will apply to the project or otherwise could be affected by the agreement, regardless of future changes.  Make it clear that regulations not specifically identified will not be affected by the terms of the agreement, and will be subject to enforcement and change under the same criteria that would apply if no agreement were in effect.

Status of Applicable Land Use Regulations and Plans. The agreement should contain a statement that no applicable land use regulations or plans are currently under review or reconsideration, and that there are no legal challenges to the validity of such regulations or plans pending.

Approval and Permit Requirements. The parties should specify all discretionary approvals and permits that must be obtained before the development can proceed beyond its various stages.  Specify the permits and approvals obtained prior to execution of the agreement. List any and all conditions precedent to the obtaining of permits and approvals.

Permitted Uses Under the Agreement. Specifically identify elements of development required by state or local laws.  For example, this provision might include the permitted uses of the property, the density of use and the bulk, yard and height regulations for the property.

Uses Prohibited by the Agreement. The parties to the agreement are free to set limits to permissible uses beyond those specified by the applicable zoning classification.  Clearly state all additional limits and requirements.

Dedications and Reservations. Provide, where appropriate, a statement of all reservations or dedications of land for public purposes as are required pursuant to laws, ordinances, resolutions, rules or policies in effect at the time of entering into the agreement.  Also state all reservations or dedications that are permitted under existing laws at the time the agreement is entered, and to which the parties have agreed.

Utility Connections. Describe in detail, together with schedules of construction completion (if not existing), cost allocation (between or among developers and government and later developers), and hookup or connection schedules for all water and sewer service, either to be provided by the developer or by the local government.

Duration of the Agreement.  State a termination date, and project commencement and completion dates, either for the project on the whole, or for its various phases.  Specify that the termination date can be extended by mutual agreement, and that commencement and completion dates also may be extended.

Amendments, Cancellation or Termination. Recite the statutory conditions under which the agreement can be amended, canceled or otherwise terminated.

Periodic Review. Provide for periodic reviews of the project in order to determine compliance with the terms of the agreement, as required by statute and ordinance, if appropriate.  The agency responsible for performing such reviews should be identified and specific times for such reviews should be stated.  Procedure should be developed and specified for dealing with situations in which minor and major noncompliance is discovered.

Progress Reports.  If the parties agree, the agreement should specify that the developer must make available progress reports to the local government agency involved at specified intervals, or upon completion of specified phases of the project, or at whatever time periods the parties choose.

Remedies. Provide remedies for breach on the part of either party.  State specific remedies for specific breaches, if possible. Include a statement clarifying whether the remedies stated in the agreement are to be exclusive, or whether other statutory or common law remedies also will be available.

Enforcement. Specify that the agreement shall be enforceable, unless lawfully terminated or canceled, by any party to the agreement or any party's successor in interest, notwithstanding any subsequent changes in any applicable law adopted by the county entering into the agreement that alters or amends the laws, ordinances, resolutions, rules or policies frozen by the agreement.

Hold Harmless Clause.  If the parties so agree, include a provision that the developer/property owner holds the local government and its agents harmless from liability for damages, injury or death that may arise from the direct or indirect operations of the owner, developer, contractors and subcontractors, who are related to the project.

Insurance, Bonds. Specify any insurance coverage required and/or secured by either party to the agreement, and affecting any aspect of the development project.  List existing performance bonds or other security, as well as bonds or other security not yet obtained but required as conditions precedent for final approval of the subdivision plan.  Cite applicable ordinances relating to bond or other security requirements.

Severability Clause. Include a clause specifying that the provisions of the agreement are severable, if the parties so agree.  State any limitations upon the severability of any particular clause or clauses.

Merger Clause. Specify via a merger clause or other statement that the terms of the agreement as stated in the written document are both a final and complete expression of the parties' intentions.

Statements of Incorporation by Reference.  State that all documents related to the agreement or otherwise attached or appended thereto are expressly incorporated into the agreement by reference.  These might include lists of conditions, schedules of completion for public facilities, imposition of dedications, impact fees, and development plans and specifications.

Cooperation. Include a statement of the extent to which the local government will cooperate with the owner to secure required permits from nonparty government agencies.

Subsidiary or Collateral Agreements. If the owner has obtained additional agreements relating to the development project from any nonparty agencies or persons, specify such agreements and the parties thereto.

Conflict of Laws. Specify procedures for dealing with situations in which changes in laws promulgated by nonparty government bodies (state or federal) might preempt or otherwise affect municipal laws frozen by the agreement.

Any development agreement with a local governmental entity should be drafted by an attorney after a thorough discussion of the  project and expectations of the parties. It should address not only the basic issues listed above but also the other issues that are unique to each project.

For further information, contact Julie Tappendorf, toll-free, at 888-688-8500.