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Ray and Lindsay – 11, LLC v. Town of Gilbert - 9/7/2021

Arizona Court of Appeals Division One holds that mutual agreements between a city and landowner, in which the landowner agrees to reimburse the city for improvements, are development agreements authorized and governed by A.R.S. § 9-500.05, and are not circumscribed as assessments under A.R.S. § 9-243.

In 2016, a landowner acquired vacant land.  In 2005, the prior owner of that land had entered into an agreement with the City under A.R.S. § 9-500.05.  Pursuant to that agreement, the City agreed to construct public improvements, such as streets and sidewalks, required for the proposed development of the land.  In return, the owner agreed to reimburse the City for certain improvements.  The owner guaranteed repayment with a lien on the land.  The agreement explicitly bound all successors to the land and was recorded to notify prospective purchasers. 

In 2018, the landowner argued it was not bound by the agreement to reimburse the City and demanded that the City release the lien.  The landowner sued for declaratory judgment finding that the development reimbursement agreement was an assessment that had abated, because the land had not been developed within ten years under A.R.S. § 9-243(C).  The superior court granted the City’s motion for judgment on the pleadings, holding that the agreement was not an assessment, and dismissed the suit. 

The Court of Appeals affirmed.  The Court held that the agreement was not an assessment governed by § 9-243, but rather a development agreement governed by § 9-500.05.  The Court explained that assessments do not require the assent of the obliged business or landowners.  Rather, a city orders assessments on those businesses and landowners benefitting from improvements.  However, assessment obligations abate if the relevant property is not developed within ten years.  In contrast, to enter or amend a development agreement, the landowner and the local government must mutually assent to the terms.  Such agreements do not expire in the absence of development after ten years. 

The Court explained that, because the legislature expressly limited assessment’s abatement restriction to any assessment under § 9-243, and the prior landowner and the City had voluntarily negotiated and mutually agreed to the reimbursement requirement and lien under § 9-500.05, which explicitly remained binding on successors, the landowner’s reimbursement obligations did not stem from an assessment, but rather a development agreement, and therefore had not abated. 

Judge Weinzweig authored the opinion; Judges Gass and Brown joined.

Posted by: BriAnne Illich Meeds

Posted On: 1/19/2022