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When Does a Municipality "Approve" a Contract or an Application? by Andrew J. Bellwoar
6/9/2010
The Court of Common Pleas of Chester County recently decided an issue of significance for every municipality in Pennsylvania. At what point during a public meeting does a municipality "approve" a contract or plan of development? In this case, a developer and a municipality resolved a land use appeal by entering into a written agreement, whereby the municipality approved a concept plan attached to the agreement. Once the developer went through the land development process, he received approval to develop a large commercial property, including the construction of a hotel. Thereafter, the developer wanted to change the approved use from a hotel to apartments. After numerous discussions and presentations to the municipality, the developer claimed that at a public meeting the elected officials approved the use, density and layout for apartments, with a written document to follow, and all open issues to be addressed in land development. According to the municipality, it accepted the use, density and layout subject to the developer resolving remaining issues -- such as grading and preservation of historic trees -- before the municipality would approve the requested change to the concept plan.
The developer claimed that the municipality thereafter failed to follow through on its approval and sued for breach of contract, declaratory judgment and specific performance. The developer presented an expert report that concluded that the developer had suffered $5 million in damages because the township refused to allow the developer to move ahead with the "approved" plan for apartments.
The issues in this case joined at the intersection of contract law and land use law. Andrew Bellwoar and Susan DiGiacomo, as counsel for the municipality, presented a dual defense: No contract was formed at the open meeting as there was no meeting of the minds, and a municipality cannot enter into a contract and/or approve a land development plan unless there is a formal motion and vote by the elected officials.
The import of this case for municipalities lies in the manner in which a municipality takes action. If the Court had agreed with the developer, then any words of approval by board members concerning a proposal -- or even nods of the head -- could be argued as constituting the municipality's agreement to the proposal. Instead, the Court agreed with the municipality that Pennsylvania law (including the Sunshine Act) requires a motion and a vote for any "official action" to take place. Of note, the minutes of the municipality revealed that all actions taken by the governing body on other matters were the subject of a motion, a second, and an affirmative vote of a majority of elected officials. The minutes of the meeting for this matter showed consensus by the Board members, but no motion or vote.
Practice pointer: When discussing a project or proposal with a developer (in a staff meeting or in a Board meeting), clearly state (both verbally and in the minutes or in a follow-up letter) that any approval or agreement is subject to a formal decision by the elected body, and that until such a decision is rendered through formal action by the Board, no approval has been granted and no agreement has been made.
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