N.H. Supreme Court Delivers Good News to Developers and Property Owners

By Philip M. Hastings, David W. Rayment, and John H. Sokul

[This article originally appeared in the New England Real Estate Journal,March 7, 2003 and April 4, 2003.]

The New Hampshire Supreme Court recently delivered good news to developers and property owners. Two decisions are of particular importance.

In AWL Power, Inc. v. City of Rochester, the Court struck down an attempt by the City to revoke a 1987 site plan approval for 18 single family homes and 59 condominium units because the developer had stopped construction in 1990 and the zoning ordinance had been subsequently changed in a manner precluding the project. At the time construction stopped, the developer had built six of the single family homes, spent over $200,000 on required public improvements and paid the City a $50,000 impact fee. The issue presented was whether the project had been "substantially constructed," in which case the developer would have had a vested right to complete it. The City argued that because the amount spent by the developer was only a small fraction of the total cost of the project (over $6,000,000), substantial construction had not occurred.

The Court disagreed, finding that completion of a certain percentage of construction was not the exclusive method of determining whether a developer has a vested right to complete a project and stating that the vesting standard should be liberally applied if the developer acts in good faith. The Court held that the correct standard for determining substantial construction turns not only on actual construction measured against the entire plan, but also on whether the amount of completed construction is by itself substantial. The Court found that the developer's investment in the project in this case was large enough to constitute substantial construction, regardless of the overall cost of the project, and the developer therefore had a vested right to complete the project. This case is particularly valuable to developers of larger or phased projects, which the Court noted would be unfairly burdened by the straight costs incurred to overall project cost test used by the City.

Rancourt v. City of Manchester, in which the Court revisited the standard for zoning variances set forth in its 2001 Simplex decision, also provides good news. In Simplex, the Court, in its words, "adopted an approach that was more considerate of a property owner's constitutional right to use his or her property". Before Simplex, in demonstrating that an "unnecessary hardship" existed, an applicant for a variance had to show that, because of the uniqueness of the land, the deprivation resulting from applying the ordinance was so great as to effectively prevent the owner from making any reasonable use of the land. Simplex relaxed this standard so that applicants need show only that the restriction interferes with the reasonable use of the property, considering the unique setting of the property in its environment.

In Rancourt, a use variance was appealed on the grounds that there were no special conditions which rendered the land uniquely unsuitable for the use for which it was zoned and therefore a variance was not appropriate. The Court, however, relying on Simplex, found that the applicants' proposed use was reasonable in light of the special conditions of the property and upheld the issuance of the variance. The Court also expressly rejected the rule that to be reasonable the use must be established, or customarily associated or consistent with established uses, in the neighborhood. Rancourt therefore confirms that getting a variance after Simplex will be less difficult than before.

These and other recent decisions by the Court continue to signal a strong concern for the constitutional and statutory rights of developers and property owners and underscore municipalities' limits with respect to regulating development.