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January 24, 2013

How Local Governments and Developers Can Establish Strong Agreements

SSLGL Book ImageTo turn a grassy field into a shopping mall, a host of issues can emerge during the long and arduous process of development. Do you need the city council’s permission? Should there be a public hearing? Do the plans impact the environment? Do you need more roads or access to water? Before breaking ground and cutting ribbons, behind-the-scenes negotiations often occur between developers and local agencies to review the project and to ensure expectations are understood.

To give an overview of the various agreements that can be reached for development, annexation, conservation and other land use, a panel of experts conducted a legal education course on how developers and local governments can reach consensus and avoid problems during the development process.

“Government has to be really thoughtful and think, ‘Well, do we really want to sign up for this?’” posed Cecily Talbert Barclay, a land use and entitlements lawyer. “From the developers’ perspective, there is a similar risk of nonperformance, so it is important for them to write-in not only do we have a right to develop, we have a right not to develop.”

According to the ABA Section of State and Local Government Law publication, Development by Agreement: A Tool Kit for Land Developers and Local Governments, land developments of any size and substance require an assortment of public services and facilities to support them. In order to adequately finance these public facilities, local government and land developers have turned to development agreements to help negotiate auxiliary costs for public services such as streets, water and sewer facilities, affordable housing, parks and recreation, and schools.

Development agreements come in many shapes and sizes, and they can avoid the potentially costly and time-consuming litigation that occurs when consensus is not established beforehand. However, experts stressed that development agreements must be in accordance with any existing state or local law and that land developers and local governments understand those laws before they meet and craft any contract.

“The first question that is often asked is: ‘What is the statutory authority?’” said Barclay. “It’s important to look at what local ordinances have been adopted as well as state statutes that apply.”

Barclay said the number one issue she faces in public meetings has to do with affordable housing. According to her experience, “the developer doesn’t know a lot about how to do affordable housing, so these agreements force parties to think about how they will enforce this requirement.”

The recent economic downturn radically altered the enforcement of existing development agreements. Julie A. Tappendorf, a lawyer who works with local governments, said she encountered several new issues with existing development agreements around 2007 and 2008, when money for development dried up and many projects were hindered.

“If you have an existing agreement, and development has stalled because the property is in foreclosure or bankruptcy, how can you best protect the municipality when that development is stalled?” Tappendorf proposed to the audience. She recommended flexibility when faced with tough economic situations, and advised that government agencies work with the potential new owner to renegotiate the agreement.

“It’s better to have some development than no development,” Tappendorf said.

This continuing legal education course was sponsored by the Section of State and Local Government Law; Forum on Affordable Housing and Community Development Law; Section of Real Property, Trust and Estate Law; Section of Dispute Resolution; and Center for Professional Development.

Development by Agreement: A Tool Kit for Land Developers and Local Governments is available through the ABA store online.