Q: A Builder is looking into purchasing several lots from a Developer. The lots were zoned R-1 when purchased by the Developer, but during the time the Developer owned the lots, the County added an overlay district which affects the size of houses that can be built on the lots. The Developer says he is grandfathered into the ‘old’ zoning. If the Builder purchases the lots from the Developer, will the Builder be grandfathered into the original R-1 zoning for these lots, or will the Builder be subject to the County’s new overlay district?

A: The zoning change will affect the Developer and Builder in different ways.

The Developer will be found to have a vested right to develop the lots in accordance with the previous zoning scheme. The law recognizes such vested rights to develop in compliance with an “old” zoning scheme in situations where a land owner (here, the Developer) experiences a substantial change of position in relation to the land, has made considerable expenditures, or has incurred significant obligations.

However, the Builder, should he or she purchase the lots, will not enjoy the Developer’s vested rights to develop in accordance with the previous zoning scheme. In other words, the Builder will not be “grandfathered in” because the Developer’s vested rights to develop property in accordance with prior zoning are personal to him or her as owner of the lots at the time of the zoning change. Such vested rights are not transferable and do not “run with the land.” The Developer may build under the old zoning scheme, but subsequent purchasers may not without further action such as rezoning or a variance.

Q: Same facts as previous question except the Developer represents to the Builder that the Builder can build under the previous zoning scheme. The Builder buys lots from the Developer based on that representation, only to find that the Builder must either comply with the new zoning scheme or apply for rezoning or a variance. Does the Builder have a claim against the Developer? Can the Builder rescind the contract to purchase the lots?

A: The Builder will have a claim against the Developer.

However, Builder will have a choice to make. Under Georgia law, fraud makes a contract voidable at the election of the injured party. The contract is not automatically void because of the fraud—the injured party must affirmatively choose to void the contract. Therefore, the Builder may (1) choose to rescind (or void) the contract and sue the Developer for fraud and deceit or (2) choose to affirm the contract and sue Developer for breach of contract. The Builder’s decision between options (1) and (2) may affect the available legal remedies and will certainly be influenced by the terms of the contract to buy the lots from the Developer.

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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.