Construction During Litigation Forfeits Challenge to Development Permit Conditions

It is well established that a developer that builds a permitted project before it obtains a final judicial determination on a lawsuit challenging conditions of approval risks forfeiting its claims. In Lynch v. California Coastal Commission, the state Supreme Court has clarified that – except in limited circumstances under the Mitigation Fee Act – there is no exception to this rule.

After storms caused a seaside bluff to collapse, the Coastal Commission approved an amendment to the Lynch plaintiffs’ existing permit, to allow reconstruction of a stairway and seawall. Conditions of approval prohibited reconstruction of the lower portion of the stairway and also required the permit to be renewed in 20 years. The plaintiffs objected to those conditions and filed litigation to invalidate them. While the litigation was pending, the plaintiffs constructed the seawall. The Supreme Court held that the plaintiffs had forfeited their challenge to the conditions by constructing the seawall, under the general rule that developers “must take the burdens along with the benefits” of a permit.

The plaintiffs argued that, by rebuilding only the seawall and not the stairway, their construction had not affected the conditions they challenged. The court observed that the plaintiffs were essentially asking for “us to create a new exception to the forfeiture rule, allowing landowners to accept the benefits of a permit under protest if the challenged restrictions can be severed from the project’s construction.” The court declined to create a new exception. The court noted that, although the Mitigation Fee Act allows developers to construct their projects and still protest development fees, the Legislature had not extended that exception to any other type of condition. The court held that a judicially created exception allowing construction to proceed “under protest” could potentially swallow the entire forfeiture rule. The court further held that, in practice, courts would find it difficult to determine which conditions were “severable” from construction, and that invalidation of purportedly severable conditions after construction could foreclose alternative measures to mitigate impacts.

Lynch is an important reminder that, when considering whether to challenge permit conditions in court, developers should weigh the potential for litigation to delay construction of their projects.