Beware Transfers of Title Without Inclusion of Development Rights!
The 1st District Court of Appeals recently took a look at whether development rights in a development of regional impact automatically transfer when title is conveyed. This case begins with a long, complicated history of sales, foreclosures, option agreements, asset sales and bankruptcy. There are federal and state claims of inverse condemnation, fraudulent misrepresentation and civil theft, among others. But at the heart of the case is whether development rights, never mentioned in a deed or contract, automatically transfer with title. The court held that they do not, and based on the court’s analysis, it is likely the court could reach a similar decision about development rights in other large scale projects such as PUDs and PDs.
Walton County approved a development order creating the Sandestin Development of Regional Impact (DRI) in the 1970s. Development rights were allocated to large development pods within the DRI. Ownership of the property subject to the DRI was very fragmented, but the DRI did not allocate entitlements to specific deeded parcels. In 1999, Murray was assigned a small parcel, Tract 3, but when it applied for a development order in 2008, Walton County advised that Howard owned all the development rights for Parcel 208, in which Tract 3 lies. Murray sued for declaratory relief and to “quiet title” to development rights for the Tract 3. Unfortunately for Murray, the Court could find no documents or agreement reflecting any intent to convey development rights at any point in time. It acknowledged that Murray’s claim to development rights rested solely “on naked title to the real estate” and “obtaining title to real estate subject to a DRI order does not, however, in and of itself, confer development rights.”
The Court recognized that entitlements need not be deployed uniformly over the entire parcel. For instance, certain features of, or plans for, a parcel, including wetlands, conservation areas, roads, and parks might render the parcel undevelopable.
DRIs are designed to allow flexibility in the distribution of development rights within the development area. Rather than immediately creating small lots and assigning a certain amount of square footage for development to each, the property is divided into larger tracts with the intent that they later be subdivided by deeds into such smaller pieces as the market dictates.
This creates a contractual issue between parties “to determine which development rights, if any, are transferred, unless the development order provides otherwise.” The Court found that “there is no automatic transfer of a specific proportion (or even some reasonable portion) of the development rights allotted to a large parcel on a DRI master plan when a conveyance is made of title to only a portion of the large parcel.”
Would this apply to a planned unit development approval that approved zoning entitlements in a similar way? Some large planned development approvals are similarly designed “bubble plans” that approve development rights for a larger project but leave the details of the individual parcel development for later review. The Court held there that “development rights do not pass automatically with the conveyance of the fee interest in a DRI subparcel.” Given its similar purpose, “to allow flexibility in the distribution of the development rights within the development area,” we will assume that the development rights in a PD are distinct from title and will not transfer without a specific conveyance.
Howard v. Murray, Case Nos. 1D14–1841, 1D14–1984, and 1D14–1996 (1st DCA. Nov. 9, 2015) (J. Benton)
Anne Pollack practices in the areas of land use, real estate, environmental and governmental relations, and represents both private and governmental clients in connection with the sale, acquisition and development of real estate. She has resided in the Tampa Bay area since moving from the San Francisco area in 2003.