A Prevailing Party May Now Recover Attorney’s Fees in a Vested Rights Dispute

June 15, 2017 | Insights

By Michael L. Knapek, Steven W. Dimitt, & William S. Dahlstrom

Chapter 245 of the Texas Local Government Code (the “Vested Rights Statute”), provides a regulatory scheme in which developers and the public may rely upon regulations of a regulatory agency in effect at the time an initial permit application for a project is filed. The Vested Rights Statute was created to prevent municipalities from changing land use regulations after a project has already started. Moreover, except as to some exceptions listed in Section 245.004 of the Vested Rights Statute, the regulations are essentially “frozen in their current state and the agency is prohibited from enforcing subsequent regulatory changes to further restrict the property’s use.” Harper Park Two, LP v. City of Austin, 359 S.W.3d 247, 249 (Tex. App.—Austin 2011, pet. denied).

The Vested Rights Statute applies to applications for a “permit,” which is defined as:

a license, certificate, approval, registration, consent, permit, contract or other agreement for construction related to, or provision of, service from a water or wastewater utility owned, operated, or controlled by a regulatory agency, or other form of authorization required by law, rule, regulation, order, or ordinance that a person must obtain to perform an action or initiate, continue, or complete a project for which the permit is sought.

See Tex. Loc. Gov’t Code § 245.001.

Some courts have also indicated that a site plan is a permit under the Vested Rights Statute. See City of Austin v. Savetownlake.Org, 2008 WL 3877683 *4, 6 (Tex. App.—Austin Aug. 22, 2008, no pet.) (referring to two site plan applications as permits under Chapter 245 of the Texas Local Government Code); see also Harper Park Two, 359 S.W.3d at 251-53 (including an application for a preliminary plan and subsequent site plan application as a series of permits for one project).

When municipalities and developers disagree whether certain rights are vested, the developer’s only recourse is to file a lawsuit against the municipality seeking declaratory or injunctive relief to establish that its rights are in fact vested. While developers can seek the court’s intervention, this process can be expensive, and even if the developer is ultimately successful, the cost of attorney’s fees may outweigh the benefit of prevailing.

Until recently, property owners and developers were unable to recover their attorney’s fees even if they prevailed on their vested rights suit against a municipality. However, in May 2017, the Texas Legislature enacted legislation to amend the Local Government Code to provide that a “court may award court costs and reasonable and necessary attorney’s fees to the prevailing party in an action” under the Vested Rights Statute. This amendment became effective on May 29, 2017. Now property owners and developers have a way to potentially recover their attorney’s fees if they successfully bring an action against a municipality under the Vested Rights Statue. However, the municipality may also recover its attorney’s fees if it is the prevailing party. As a result, all parties should thoroughly investigate their claims and defenses before a suit is filed.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice.