County Says Lot Perks, Then Doesn’t, Then Gets Sued

A buyer entered into an offer to purchase lake front property from a seller with a condition that the lot perk for a three bedroom house. Buyer purchased the lot after receiving and relying upon an improvement permit issued by the Montgomery County Health Department after the lot passed a perk test. The buyer also built a boat dock. All good so far.

But wait - a few years later before building the house, buyer decided to change the location of the driveway and applied for a new permit. The Health Department retested the lot, found it failed the perk test, acknowledged a mistake was made and revoked the permit – for the new plan and the old plan.

In Watts v. N.C. Department of Environmental and Natural Resources (Lawyers Weekly 07-07-0385), the Health Department argued that it could not be sued due to the public duty doctrine barring suits against government agencies. In a split decision, the North Carolina Court of Appeals majority ruled that the buyer fits into a “special duty” exception, whereby the government agency breached a duty owed to the buyer individually, rather than to the public at large.

Previously, North Carolina courts limited the “special duty” exception to situations where a government entity makes a promise of protection, fails to protect, and causes injury to an individual as a result. Considering the direct reliance the buyer had in the Health Department’s perk test and improvement permit, and the resulting detriment to the buyer as an individual, it appears the North Carolina Court of Appeals averted an injustice. So all is good again, right? Well, the Court excised a large chunk of the buyer’s damage award as speculative interest damages. And no attorney’s fees or costs. But the moral victory the buyer may keep – as a perk. (Today’s entry posted by Ken Michael of Womble Carlyle’s construction and real estate development practice group).