A 2023 ruling by the Arizona Court of Appeals means developers may now be able to receive monetary damages from municipalities that provide incorrect information during the land development process.
In Hammer Homes vs. City of Phoenix, the Court ruled the relationship between developers and municipal planners resembles that of an expert and a client, since clients pay experts for their knowledge and guidance. The foundation for this “special relationship,” which is similar to the relationship clients have with doctors or lawyers, stems from the municipality’s financial interest in the outcome of actions the developer takes based on that professional guidance, realized in the form of application and development fees.
Under the ruling, the municipality has a duty to the developer to provide accurate information and not engage in “negligent misrepresentation.”
Before the ruling, if a municipality provided wrong information that led to financial loss, the municipality could merely be prevented from blocking construction after issuing a project’s permits and variances. There was no provision for monetary damages. The Hammer Homes ruling now allows the developer to recoup money for losses as well.
Experts warn this could lead to more caution on the part of municipalities and restricted collaboration between governmental bodies and their staff members and development representatives. Some municipalities have begun including waivers in materials that state there is no special relationship between them and the parties requesting information and that no legal duty exists.
The long-term impact on development timelines and processes remains to be seen. (Source)