Iowa C.A. assumes validity of pre-annexation agreement

by Allison Arends and Gary Taylor

NT Home Builders v. City of Buffalo
(Iowa Court of Appeals, April 8, 2009)

Provisions of pre-annexation agreement did not bind city council to rezone property to particular district classification. 

NT Home Builders and the City of Buffalo entered into a pre-annexation agreement when NT purchased real estate in the City with the intent of developing approximately 80 family units. The pre-annexation agreement, which was approved by the Buffalo City Council, required NT to, “request that the property be zoned for single family residences” and that NT “shall be subject to and comply with all other ordinances of the Buffalo Municipal Code.”  Buffalo’s zoning code states that newly annexed land shall come into the city zoned  “A- Country Home.”  This designation would allow NT to develop only about 60 units.    NT requested that Buffalo re-zone the property to B-1 Residential which would allow development of 82 units. The city denied NT’s request. NT filed suit against the City of Buffalo arguing that the pre-annexation agreement required Buffalo to zone the property B-1. The district court affirmed the City of Buffalo’s refusal to re-zone. NT appealed. 

As a preliminary matter the court addressed the question of the validity of pre-annexation agreements, stating:

“In recent years, there has been considerable controversy over whether a municipality may enter into an agreement with a private party binding the municipality to specific zoning in the future. We will assume, without deciding, that Buffalo’s city council could enter into an agreement obligating it to take certain zoning actions.  After all, the city council is Buffalo’s final zoning authority.”

NT first contended that the reference in the pre-annexation agreement to “single family residence” zoning required the city to rezone to B-1 Residential.  The Court of Appeals disagreed, determining that the reference did not require rezoning to B-1 because single family residential development could be accomplished either with A- Country Home or B-1 Residential.

The court also found that both parties were acting in “good faith” and both were oblivious to the inability of NT to construct 80 homes on A- Country Home land until after the pre-annexation agreement was signed. 

NT also argued that it had the legal right to whatever zoning was needed to erect 80 homes on the property. In light of the previous two findings, the court found that this would put an unfair burden on the municipality, because it would require them to assess the developer’s plans in detail and see to it that the developer’s interests were adequately protected under the contract. The court recognizes that this burden should lie with the developer, and that it is the developer who should be obligated to contract expressly for the zoning it needs. Therefore the court did not grant NT damages, “the district court’s finding of good faith on the part of both parties would appear to foreclose liability on this basis.”

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