[This article originally appeared in the New England Real Estate Journal, September 1, 2006.]
It’s a common scenario: when faced with a question or issue in the process of developing your property, you seek the advice of a building inspector or other municipal official. Often, that guidance is helpful and accurate. However, what happens if the advice that you receive is inaccurate? A recent case decided by the New Hampshire Supreme Court underscores the risks inherent in following the recommendations of a town official without double-checking the applicable law.
In the recently-decided Thomas v. Town of Hooksett, the court held that a developer who received inaccurate advice from two town officials remained bound by the applicable statutory requirements, even though the developer had relied and acted upon the town’s recommendation to his detriment.
In understanding this issue, it is helpful to review the facts in the Thomas case. The developer had been granted site plan approval, but had not yet commenced construction. He wanted to be sure that his project was protected from a critical recent zoning amendment. The developer sought guidance from the local code enforcement officer and town planner, each of whom stated that if he obtained a building permit within one year, and commenced construction within six months after that, his project would be immune from zoning changes.
In fact, the advice that the developer received misstated the applicable legal requirements. RSA 674:39 provides, in part, that zoning protection extends only to projects for which “active and substantial development” has commenced within “12 months” of the relevant approval. The town subsequently determined that, by not commencing development within one year and therefore having failed to satisfy the statutory requirements, the developer was subject to the adverse zoning changes.
The developer, invoking the legal doctrine of “municipal estoppel,” asked the Supreme Court to find that the town should be bound by the statements made by its two municipal officials. The court held that municipal estoppel can only apply if the party claiming such estoppel “reasonably” relied on the advice of a municipal official; the developer’s reliance in this case was not reasonable because he should have known that the advice he received was contrary to the applicable statute. Therefore, the court held that the developer’s project had lost its zoning protection.
This case presents a humbling lesson for developers. Certainly, as a developer, it is important to foster and maintain a good rapport with town officials who can provide critical guidance for your project. At the same time, we should recognize that those officials, like all of us, are capable of making mistakes, and a developer will need to comply with all applicable legal requirements irrespective of any advice he has been given.
In short, the moral of this story (admittedly self-serving for the authors) is that any advice you receive from a municipal official with legal implications should always be confirmed by your lawyer. Doing so could help you avoid an unpleasant surprise down the road.