Vesting Measure 37 claims under Measure 49

Measure 49 has passed. It's the law of Oregon. Measure 37 has been fixed – not perfectly, but well. So what happens now with Measure 37 claims?

In many cases the legal concept of "vesting" will come into play. With the passage of Measure 49, Measure 37 claimants are going to take one of three paths:

(1) The "express lane" if a claimant wants 1 to 3 home sites. Straightforward. Easy. Hardly any questions asked by the state Department of Land Conservation and Development (DLCD). Claims on high value farmland, forest land, or groundwater limited land will have to take this path.

(2) The "conditional path" if a claim isn't on farm, forest, or groundwater limited land and wants 4 to 10 home sites. The claimant will have to demonstrate a loss of value from a land use regulation that justifies the number of new home sites requested.

(3) The "vested path" if a claimant has made sufficient progress on developing the claim to have vested their right to complete and continue development.

Under the third "vested path" option a claimant would continue on under the provisions of Measure 37.

Since Measure 49 offers substantial benefits to claimants – the ability to transfer development rights to a buyer, and for a spouse to inherit a claim that wouldn't pass on to him or her under Measure 37 – likely only those who want a subdivision with more than 10 home sites will try to go down this path.

This chart shows that there are less than a hundred Measure 37 claims, out of 7,500 statewide, that have filed an application to build a subdivision with more than ten home sites.

But these large subdivisions obviously would have a large impact on the surrounding area. In most cases concerned neighbors will be as interested in stopping a claim from becoming vested as the Measure 37 claimant will be in establishing a vested right.

Common law is the foundation for vesting decisions. There isn't any state statute that lays out the criteria for determining whether a landowner is vested or not-vested. Rather, court cases in this area have established precedents that now form a body of legalities called "vesting common law."

The state of Oregon's land use agency, DLCD, has put up questions and answers about Measure 37 and Measure 49 that are based on legal advice from the Department of Justice. Here's the Q & A about vesting (#20):

It's been said that if Measure 49 is approved by the voters, development that has vested under common law would not be affected. What is vesting, and when does a development vest under common law?

In general, the right to complete a use of real property when the law changes so that the use would otherwise be unlawful, is known as a "vested right." Under decisions of the Oregon courts, whether a person has a vested right to complete a use (despite a change in law) is determined on a case-by-case basis by considering the following factors:

• The amount of money spent on developing the use in relation to the total cost of establishing the use;
• The good faith of the property owner;
• Whether the property owner had notice of the proposed change in law before beginning the development;
• Whether the improvements could be used for other uses that are allowed under the new law;
• The kind of use, location and cost of the development; and
• Whether the owner's acts rise beyond preparation (land clearing, planning, etc.).

These factors set a high bar for a Measure 37 claimant to jump over in order to be vested. A really high bar.

As discussed in a memorandum by attorney Ralph Bloemers of the Crag Law Center, the good faith requirement for vesting means that once Measure 49 was referred to the voters in June, claimants couldn't rush ahead with construction in an attempt to get vested before a change in the law took effect.

In Oregon, the law on nonconforming uses and vesting provides that a landowner may not take steps to "vest" when the owner has notice that the land use laws may change. Vesting of a non-conforming use is dependent on, among other things, "the good faith of the landowner, whether or not he had notice of any proposed zoning or amendatory zoning before starting his improvements." Holmes at 198.

Pursuant to Holmes, a Measure 37 claimant who has received a waiver and applied for and received a permit to develop property may not take steps to "vest" these rights by developing the property in the interim period.

The other factors listed by DLCD are other significant hurdles to vesting. And naturally any construction work, made in good faith or not, has to be legal. If necessary permits haven't been obtained before starting work, a Measure 37 claimant can kiss that hoped-for vesting expenditure goodbye.

Here's what some "headnotes" from the Oregon Land Use Board of Appeals has to say about vesting expenditures:

37. Vested Rights. Distinguishing those expenditures properly considered in a determination of the "ratio of expenditures" under Holmes factor (7) requires (1) identification of the time at which the expenditures were made, (2) an analysis of whether the expenditures were made in good faith and lawful when made, and (3) a determination regarding whether the expenditures are directly related to the proposed use of the property. DLCD v. Curry County, 19 Or LUBA 237 (1990).

There's a lot more to say about vesting under Measures 37 and 49, and I'll be putting up more information on this subject as the post-Measure 49 policies in this area become clearer.

My main goal here is to provide some basic facts about vesting for both neighbors of large Measure 37 subdivisions and the claimants themselves.

Your interests, really, aren't as divergent as it might seem. Neighbors don't want construction to continue beyond what Measure 49 allows. And Measure 37 claimants shouldn't want this either – unless their goal is to waste money on fruitless construction activities.

Hopefully the state of Oregon and individual counties soon will issue crisp, clear, coherent guidance on how to handle Measure 37 vesting cases under Measure 49.

An initial important step is to require that construction work stop on claims that haven't been successfully built out with a building permit before Measure 49 became a pending law (June 15, 2007).

I don't believe there are any Measure 37 claims in this category. Most fall into another category: those that have a Measure 37 waiver and/or a building permit and haven't done any construction or building prior to November 7, the day it was known Measure 49 had passed.

These claims clearly aren't vested.

The final category is made up of claimants who had gotten little or nothing started before June 15, yet made a "rush to construction" between June 15 and November 6 (with the necessary permits).

It will be almost impossible for this last category to prove that they're vested, since they'd have to show that they had no knowledge of Measure 49's impending land use law changes. You'd have to be in a coma, or hermetically sealed in a cave, for this to be believable.

So that's why the presumption needs to be that Measure 37 claims aren't vested. Construction has to stop while a prompt and definitive decision about vesting takes place.

[Update: Check out my new "Hardly any Measure 37 claimants will have vested rights" post that discusses an excellent memo on vesting by Ralph Bloemers of the Crag Law Center.]

Comments

Thanks Brian for your blog. It's very informative. I'm very interested on the vesting issue. On Pete's Mountain, near West Linn there is a 41 home subdivision that is trying to become vested. The developer is building a development and will be selling the lots for homes to be built. He believes his costs as a percentage of the the lots available has been over 50 percent so he will be vested.
Clackamas County is not stepping up to the plate and is acting more like advocates to the developer.

[Brian]

Yes, Pete's Mountain is one of the few Measure 37 claims that might be able to prove it's vested. However, the bad faith criterion could very well trip it up, unless most of the work occurred before June 15.

See my more recent post about vesting:
http://hinessight.blogs.com/hinessight/2007/11/hardly-any-meas.html

I didn't know that the Pete's Mountain plan was to sell lots for homes to be built on them. Under Measure 37, development rights don't go to a lot buyer; they stay with the Measure 37 claimant.

My wife and I always have been told that a Measure 37 subdivision couldn't sell lots to a would-be home builder. The claimant would have to build homes himself/herself and then sell them along with the lot.

Even then, the new owner still wouldn't have development rights. So that owner couldn't construct an out-building, an extra room, or maybe even rebuild the house if it burnt down.

I'm not surprised that Clackamas County is acting that way. Sounds a lot like Marion County.

[Elaine]

Do we know who will be responsible for bring the vesting lawsuit against the developer of subdivisions? the state? the county? the homeowner groups?

[Brian]

Elaine, as Bloemers' memo says, it's unclear what the respective roles of the land use system (DLCD, counties, LUBA) will be versus the role of the court system.

I'd always thought that since vesting is a common law question, disputes would be fought out in the courts. However, indications are that vesting will be considered a land use decision, at least in part.

We'll know more soon, probably. Guidance will have to come from DLCD, AOC, and others about how vesting questions are handled. It could be that both tracks (land use and courts) are taken by different parties, with different motivations (i.e., Measure 37 claimants and neighbors wanting to stop development).

It's confusing at the moment. But it will get less confusing in the next few weeks, I'm confident.