Permit application fee requirement is a land use decision

Imposition of a building permit application fee is a land use decision, says the Washington Supreme Court. It is therefore subject to the Land Use Petition Act (LUPA), chapter 36.70C RCW. Any challenge to the fee must be filed within LUPA's 21-day window for challenging a land use decision. Community Treasures v. San Juan County, No. 94463-6 (slip op., Oct. 11, 2018).

Background of the case

A local government may collect a reasonable fee from a permit applicant to cover the cost of processing the application. RCW 82.02.020. To that end, San Juan County requires an application fee be paid as part of a complete building permit application. San Juan County Code 18.80.020(C)(4). In 2012 and 2013, the petitioners applied for building permits, paying the required application fees. Almost three years later, the petitioners filed a class action against the County, seeking refunds of allegedly excessive fees. On the County's motion for judgment on the pleadings, the trial court held that LUPA applied to the petitioners' claims. Since they had not filed the lawsuit within LUPA's 21-day window, the trial court dismissed the lawsuit. The court of appeals affirmed. 

Divided Supreme Court holds that application fee requirement is land use decision

The issue before the Court was whether "the assessment of fees constituted 'land use decisions' under LUPA." Slip op., p. 5. In a 5-4 decision, the Court held that "the imposition of a permit application fee falls under [LUPA's] statutory definition of a land use decision ...." Therefore, it agreed with the lower courts that the petitioners' failure to file the lawsuit within 21 days barred the action, and it affirmed. Slip op., p. 2. The Court's opinion was authored by Justice Charles W. Johnson. The dissent was authored by Justice Barbara A. Madsen.

LUPA's definition of "land use decision"

LUPA is the exclusive means of judicial review of most local land use decisions in Washington State. RCW 36.70C.030(1). Therefore, the definition of the term "land use decision" is key to understanding the scope of the statute. Under LUPA, a land use decision is "a final determination by a local jurisdiction's body or officer with the highest level of authority to make the determination" on, among other things "[a]n application for a project permit or other governmental approval required by law before real property may be improved, developed, modified, sold, transferred, or used ...." RCW 36.70C.020(2)(a).

The Court holds that the imposition of the application fee was part of the final determination on the building permit application

In interpreting the statutory definition of "land use decision" the Court relied heavily on its earlier decision, James v. Kitsap County, 154 Wn.2d 574, 115 P.3d 286 (2005). In James, the Court held that "the imposition of impact fees as a condition on the issuance of a building permit is a land use decision ...." Id. at 586. In the present case, the Court saw no relevant distinction between impact fees and application fees, both of which it characterized as permit conditions.

The fees imposed ... are part and parcel of any application. There is nothing tangential about requiring a person or an entity seeking to build or enhance a structure to pay a required application fee - a nonpayment of the fee is directly related to the final determination of whether to grant or deny the permit. 

Slip op., p.7. The Court concluded that the fact that the County does not even process the application until the application fee is paid "is of no legal consequence: there are many other prerequisites that must be met before the final decision is issued, but those activities or conditions are all tied to the decision process nonetheless, occurring with the processing of the application." Id. As we are about to see, however, the four dissenters do not agree.

The dissent does not view a processing fee as linked to any substantive land use decision

In dissent, Justice Madsen argues that the Court's application of James to the facts of this case "will require that any county action that precedes the Count's ultimate land use decision is subject to review only via a LUPA petition, no matter how tangential the prior county action may be to the final land use deision." Dissent, p. 2.

As Justice Madsen notes, the application fee requirement was adopted by a County ordinance before the permit applications in question were filed. Thus, "the determination of the fee schedule amounts that were applied here, the propriety of which is the basis of petitioners' class action suit, occurred outside the County's consideration of petitioners' project permit applications." Dissent, p. 6.

Justice Madsen takes issue with the Court's understanding of the application fee as a permit condition. As she points out, in James the Court held that "the imposition of impact fees as a condition on the issuance of a building permit is a land use decision ...." Dissent, p. 8, quoting James v. Kitsap County, 154 Wn.2d at 586 (emphasis added by Justice Madsen). But in the present case, "[t]he application fee ... does not involve a determinative connection to the land use decision. It is merely a processing fee that must be paid regardless of the application's outcome." Dissent, p. 8.

The majority never addressed the dissent's essential point

The distinction drawn by Justice Madsen between impact fees and application processing fees is a reasonable one. Unfortunately, the majority did not address it. Given the potentially far-reaching effect of the Court's decision - for all practical purposes rendering most challenges to excessive application fees infeasible - it would have been helpful for the Court to have dealt with the issue more transparently. 

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