Permitting Fiasco, Maui Style

What happens when the County gives a landowner the go ahead for a proposed project, a neighbor complains, and then the County decides to revoke issued land use approvals after the landowner invests money in the property? The County buys it at up to 30 times the purchase price of course. That's what happened recently concerning two separate Maui properties: one in Lahaina and one at Montana Beach. See Harry Eagar, Condemnation of Maui beach lot given a go, Honolulu Adveriser, July 6, 2007; Harry Eagar, County steeles, pays $1.5 million for shoreline lot, Maui News, July 5, 2007.

Both cases involve special management area (SMA) exemptions granted by the Director of the Maui County Planning Department. The SMA is an area designated by the County as a special management area under the coastal zone management act; therefore, development requires additional permits approved after scrutiny by the Maui Planning Commission. However, in both cases, the Planning Department granted SMA exemptions. Exemptions by the Director are allowed under the statute for certain enumerated projects that do not have a cumulative impact, or a significant environmental or ecological effect on a special management area.

In both cases, after the SMA exemptions were issued and the landowners started building, area residents complained. In answer, the Director decided to revoke the permits. The landowners appealed to the Maui Planning Commission. After years of haggling between the land owners and the County, the County has agreed to pay $1.5 million for the Lahaina property (originally bought for $40,000), and $6 million for 5.6 acres Montana Beach shoreline property. These monies include attorney's fees and costs.

The facts of these cases provided a strong argument for the landowner under the doctrine of equitable estoppel. Equitable estoppel prevents the government from taking away land use entitlements where: (1) the land owner has relied in 'good faith'; (2) the land owner has expended substantial sums; (3) assurances where made by officials; and (4) the landowner relied on such assurances. In both cases, the county granted permits based on county information that its zoning and community plan allowed for the proposed uses, monies were spent on developing the properties, permits were issued, and the landowner's relied on those permits by starting construction.

Having satisfied the elements of equitable estoppel, the landowner's remedy usually is monetary damages. Here, the landowner wins with a settlement, but he never got the home he intended to build, and he suffered a year or more of contested case hearings before the Planning Commission. And the residents lose, because the County's poor decision to revoke permits leads inevitably to a drain on its coffers.