Q:  Cities and counties are seeking to extract extra fees and extra work to complete horizontal development in revived subdivisions now that new builders are coming in and building houses again. These municipalities are holding building permits and C.O.’s hostage until the builder performs work on common areas, streets, sidewalks and the like.  Often, the reason the works are incomplete is that the city or county failed to hold the developer or surety responsible for said work. Can they hold me over a barrel and force me to perform work on property I don’t own and for tasks I never signed up for?

A:  NO. To understand what this question is about, we must first examine a common situation that arises in the course of real estate development. Developers will often begin work on subdivisions pursuant to written maintenance and performance agreement with the county. These agreements are typically supported by a surety bond posted by the developer that serves, in part, to ensure the developer’s completion of the project. This means that if a developer runs out of money or loses the property to the bank, the county has a right to collect on the surety bond to complete the development.

Unfortunately, counties sometimes drop the ball on pursuing the bond funds—either they try to collect outside the claims period or they forget about the bond altogether. Then, to compensate for their error, counties pass the completion costs on to individual homeowners, associations and builders seeking permits to build houses. The question here is whether the county can hold your permits hostage and force you to do work that was never your responsibility.

Unfortunately, most courts have found that property owners (new lot owners) do not have a right to access bond funds to complete a project because this right belongs only to the county or municipality that is named as an obligee in the bond.  However, all is not lost.  A homeowner or successor builder may have recourse through what is known as a writ of mandamus.  A writ of mandamus is a petition brought to compel a public official to act in accordance with how he or she is required by law. A court will grant a petition either where the official’s act was mandatory, or, if the act was discretionary, where the official’s failure to act was a gross abuse of discretion in that it was arbitrary, capricious, and unreasonable.  Although there is little law in Georgia involving writs of mandamus in the context of completion bonds, in other jurisdictions property owners have brought such claims with moderate success.

With the right set of facts, a lot owner would be entitled to a court order requiring the county to pursue the surety for the funds to complete the subdivision and issue our final plat, building permits, or C.O.  At a very minimum, the court should find that the county cannot hold permits or other entitlements hostage as leverage to force a builder to spend money or perform tasks never required by contract or operation of law.

Please send your “Ask Simon” questions to kmurphy@hbag.org.

The information contained in this column: (1) is not provided in the course of and does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. Readers of this newsletter should contact their attorney to obtain advice with respect to any particular or specific legal matter. No reader of this newsletter should act or refrain from acting on the basis of information contained herein without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney, with full and complete knowledge of the relevant facts, can provide assurances that the information contained herein – and your interpretation of it – is applicable to your particular situation.