Protecting Your Developments From Moratorium Statutes
By: JOSEPH G. SPRINGER
November 2004
The Minnesota Court of Appeals clarified how moratorium statutes may be applied to projects that have received preliminary plat approval. In Semler Construction, Inc. vs. City of Hanover, Semler Construction wanted to develop more than 400 homes in Hanover. The City was concerned whether its infrastructure could accommodate such a large increase in the number of houses within a short period of time. Semler agreed to phase the development over a seven-year period and the City granted preliminary plat approval for the entire development. Semler and the City entered into a “Master Subdivision Agreement” which provided that the preliminary plat approval would be valid for eight years. The agreement also provided that the City reserved all rights to accept, reject, or modify any plat presented to them.
Six months later, a new mayor and new council member, who had opposed the project before her election, were elected. At its first meeting, the new City Council adopted a moratorium on residential development within the City for twelve months, which the City later extended for an additional eighteen months.
After the moratorium was adopted, Semler applied to the City for final plat approval of the second phase of its project. The City denied final plat approval based on the moratorium. Semler sued, and the trial court decided in the City’s favor, finding that the moratorium applied to the project. Semler appealed.
The Minnesota Court of Appeals reversed the trial court and found that the moratorium did not apply to a development that had already received preliminary plat approval. It held that the term “preliminary”plat approval is a misnomer; it is “intended to be comprehensive and, in fact, is the most important step in obtaining approval of the subdivision.”
The Court discussed statutory protections afforded to developments that have received preliminary approval. Under the Minnesota Statute that governs subdivisions, § 462.358, municipal actions may not affect certain aspects of the development, including use, development density, lot size, or lot layout, for one year following preliminary plat approval or two years following final plat approval.
Under the statute, a municipality may by resolution or agreement extend these protections. The Court of Appeals found that the City of Hanover had extended these protections for eight years in the Master Subdivision Agreement. The Court also found that the City may not stop issuing permits for the later stages of development because the City itself sought the staged development. Finally, the Court found that the moratorium statute, Minn. Stat. § 462.355, prohibited application of the moratorium to Semler’s development because it had received preliminary plat approval prior to the effective date of the moratorium ordinance.
This case highlights the importance of careful drafting of subdivision and development agreements. To avoid any ambiguities, specific references to the statutes establishing the protections being sought should be included.
Editor’s note: Joseph Springer represented the Builders Association of the Twin Cities in the appeal of the Semler case to the Minnesota Court of Appeals. David Sellergren of Fredrikson & Byron was instrumental in the original drafting of the statutory protections accorded to developments under Minn. Stat. § 462.358.