The Court of Appeal recently affirmed, in North Murrieta Community, LLC v. City of Murrieta, that developers can be held to pay additional impact fees, despite holding a vesting tentative tract map, if a subsequent development agreement allowed for such fees. In 1999, the City of Murrieta approved a vesting tentative map for a development project known as the Golden City Project, developed by North Murrieta Community, LLC.  Four months before the map would expire in 2001, the developer and the City entered into a development agreement covering the project. The development agreement extended the term of the map for 15 additional years. The parties later extended the term of the map until 2019 and the development agreement until 2021.

Development projects can take many years to be completed and over those years regulations and fees imposed by local governments may change as time goes by. Typically, tentative maps and development agreements lock into place regulations and fees that a city may impose on a development project, thereby giving developers some financial certainty about how much the development will cost to create and cities some certainty that the project will develop as planned.

The 2001 Murrieta development agreement, however, specified that the City could, after its effective date, impose new fees on the development if these new fees were part of a generally applicable fee schedule applicable to the entire city, and not just the Golden City development. Acting on that authority years later, the City and the Western Riverside Council of Governments later passed a new fee to help fund local transportation projects, applicable to any development in the City. Under the new ordinance, the City in 2017 charged the developer and their successors in interest a new transportation impact mitigation fee of $541,497. The developer paid the fee under protest and filed suit arguing that the City could not impose the new mitigation fees until the tentative map expired in 2019 and the development agreement expires in 2021. At trial, the court ruled that the City had the right to impose the fees under the terms of the 2001 development agreement.

On appeal, the Second Division of the Fourth District Court of Appeal considered whether a subsequent development agreement can modify rights under a vesting tentative map. Generally, the approval of a vesting tentative map precludes a city from imposing additional conditions or fees that were not in effect at the time the map was approved. However, the 2001 development agreement specifically allowed Murrieta to impose future mitigation fees if the fees are applied throughout the City. The court of appeal ruled that such an agreement can modify the developer’s rights under a vesting tentative map. The court noted that had the City and developer not entered into the development agreement, the developer’s vesting tentative map would have expired. In return for agreeing to extend the term of the map for 15 more years, the City could lawfully secure a development agreement that allowed for future generally applicable fees and fee increases. The court was unsympathetic to the developer’s arguments that the vesting tentative map alone should control, emphasizing the developer negotiated and agreed to the 2001 development agreement. If the developer had not wanted to be subject to future generally applicable new fees, the developer should not have agreed to the language allowing such fees. Therefore, the traffic mitigation fees were applicable to the development. The decision adds to the litany of cases affirming that development agreements can vary general restrictions on a city’s land use power. As the economic cycle shifts to respond to the current uncertain climate, cities may be advised to evaluate development agreements as a tool to preserve future opportunities to fund services for their residents and communities as developers seek vesting tentative tract map extensions and land use entitlement amendments.