Sellers Have Rights to Development Work After Buyer Default

Sellers of undeveloped land selling to buyers who plan on developing the land often want the buyer’s development work if the buyer does not follow through with the deal.  In Mangat v. Snohomish County, No. 67712-8, (Div. 1, Aug. 26, 2013), a Washington Court of Appeals recently decided that sellers in this situation may proceed with the development application originally filed by the buyer in the event of a buyer default. The court reasoned that there is no vested right to process an application independent of an ownership interest in the property. Thus, a seller does not “take” a buyer’s personal property when the seller continues the permit application after a buyer bails from a deal.

The details of the case are simple. Buyers signed two purchase and sale agreements for contiguous properties. These agreements allowed the buyer to commence development of the land by seeking a plat application to subdivide the properties.  Under these agreements, if the buyers defaulted they would be required to turn over to the sellers all materials related to the plat applications. The buyers in this case defaulted while the plat application was still in progress and the sellers chose to continue with the plat application commenced by the buyers.  The buyers brought a lawsuit against the sellers, arguing that the sellers’ continuation of the buyers’ plat application was an unconstitutional taking of property violating the buyers’ right to substantive due process. The court ruled against the buyers. According to the court, a permit application is not personal property. Permits run with the land and the buyers had no right to the underlying real property (or its permit applications) after their default.

As such, sellers of undeveloped land should include a provision where the buyer must turn over all materials related to the development of the property upon default, including pending permit applications. Buyers should be aware that there is no right to development right applications after buyer defaults under a purchase agreement.  For questions and help related to the sale or acquisition of commercial property, please contact Bill Humphries or another attorney at MPBA.

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