Massachusetts Agencies

Development is Difficult Enough with the Present State of the Economy

Articles from The Massachusetts Focus

Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Summer 2010, Volume 9, Number 1

Development is Difficult Enough with the Present State of the Economy
by Michael Agen, Esq., Manager and Counsel-Springfield and Rhode Island Agency Services Manager

It is no secret development is difficult enough in this economy. Add to that a municipal zoning scheme, sometimes antiquated, that prevents an economically viable use of a property coupled with the reluctance of a municipality to change zoning and you have a series of obstacles that cries for a creative solution. Municipalities are trying to find new ways of revitalizing dormant properties, thereby increasing their tax revenue, without negatively impacting the community as a whole. An examination of the evolution of the Doctrine of Contract Zoning may lead to a solution that is of economic benefit to the developer and municipality while withstanding judicial scrutiny.

Contract Zoning is the “process by which a local government enters into an agreement with a developer whereby the government extracts a performance or promise from the developer in exchange for its agreement to rezone the property.” 3 Rathkopf, Zoning & Planning § 44:11 (Ziegler rev. ed.2001). The process is of course subject to attack since it may involve the contracting away (selling) of the police power to regulate zoning to a private individual with their own priorities which may or may not be in the best interest of the inhabitants of the city or town. That said, not all agreements are on their face void as the Massachusetts Appeals Court has stated “[t]he existence of an agreement per se does not invalidate related zoning actions; it is the nature of the agreement and the character of the zoning action that determine the outcome”. McLean Hospital Corp. v. Town of Belmont, 56 Mass.App.Ct. 540, 778 N.E.2d 1016 (2002).

Since the decision in Sylvania Elec. Prod., Inc. v. Newton, 344 Mass. 428, 183 N.E.2d 118(1962) through Durand v. IDC Bellingham, LLC, 440 Mass. 45, 793 N.E.2d 359 (2003) the doctrine has evolved to allow for such agreements and to set a standard that would allow municipalities more latitude in dealing with developers without abrogating their duty and responsibility. Sylvania had raised the question whether a concession or consideration paid by a developer that was unrelated to the amelioration of the impact of the development may be extraneous consideration that would impeach the voting process and invalidate the zone change. This extraneous consideration test loomed over the approval of all zone changes that were conditioned upon concessions by a developer despite the fact that the zone change was on all other counts valid.

The test until Durand had three parts:

  1. Was the zone change in the best interest of the municipality and thus not offensive to public policy?
  2. Was extraneous consideration offered in a manner which would have impeached the voting process?
  3. Did the action constitutes spot zoning? Rando v. North Attleborough, 44 Mass.App.Ct. 603, 692 N.E.2d 544(1998) McLean Hospital Corp. v. Town of Belmont, 56 Mass.App.Ct. 540, 778 N.E.2d 1016 (2002).

If any of these questions were answered in the affirmative then the zone change was not valid.

In Durand the town had formed a task force to determine how to increase its property tax base. That task force recommended that a certain parcel have its zoning designation changed to industrial. The parcel was adjacent to other industrial parcels, which negated the claim of Spot Zoning. (G.L.c. 40A, §4, mandates that all zoning requirements be “uniform.” This mandate forecloses a municipality from engaging in spot zoning, which involves singling out an individual parcel for unique zoning treatment (Rando v. North Attleborough, 44 Mass.App.Ct. 603, 606, 692 N.E.2d 544 (1998).)

The zoning proposal went before the town meeting but did not receive the two-thirds majority necessary to pass. IDC, operator of a power plant, entered into negations with the town. The municipality was motivated to negotiate with IDC because it had an $8,000,000 shortfall in its construction budget for a new school. IDC publicly announced it would make an $8,000,000 gift to the town, to be used for any purpose, if 1) the zoning change was successful, 2) IDC decided to build a power plant on the parcel, 3) IDC built it and operated it successfully for one year. Town Departments and Boards recommended, and actively supported, the zone change which was passed. After the zone change there were continued negotiations that resulted in further restrictions imposed on the property by Special Permits.

The Court in describing Contract Zoning as Conditional Zoning set the tenor of its decision with the following quote:

The municipal power of zoning is, however, no longer a matter of delegated State legislative power. The practice of conditioning otherwise valid zoning enactments on agreements reached between municipalities and landowners that include limitations on the use of their land or other forms of mitigation for the adverse impacts of its development is a commonly accepted tool of modern land use planning, see 4 A.H. Rathkopf & D.A.Rathkopf, Zoning and Planning s 44.12 (2001)

Durand set a new standard by recognizing the reality of development and the evolution of the process of land use planning. The decision looks to the validity of the zoning enactment based upon a “court examining a zoning arrangement should not affix a formalistic label to it, but rather should engage in the substantive inquiry that we undertake here, namely ascertaining whether the zoning action is consistent with state law and constitutional requirements, and otherwise meets the criteria for a valid exercise of police power."

This test was further followed and restated by the Appeals Court as to the question whether the provisions of the development covenant constitute extraneous consideration given to induce the vote of the 2000 town meeting adopting the map amendment. Durand renders that discussion largely inapposite; instead, we consider whether the map amendment "violates State law or constitutional provisions, is arbitrary or unreasonable, or is substantially unrelated to the public health, safety, or general welfare." Hanna v. Town of Framingham, 60 Mass. App. Ct. 420 (2004).