Tuesday, August 9, 2022

Builder wins impact fees civil suit, Leland plans to appeal

D.R. Horton filed a class-action lawsuit against Brunswick County claiming impact fees, charged to fund future services, violated the company's constitutionally-protected property rights. (Port City Daily/File photo)
The Town of Leland lost a local ruling in March and was denied several motions this month in its lawsuit against local builder, Plantation Building of Wilmington Inc. (Port City Daily/File photo)

LELAND — Plantation Building of Wilmington Inc. won its lawsuit against the Town of Leland in district court in March, successfully arguing that the town unlawfully charged utility fees in excess of its statutory authority.

Leland plans to appeal the ruling. The town maintains it operated within its authority in charging the fees and admits to no wrongdoing, according to town attorney Brian Edes.

Related: Leland responds to builder’s Brunswick Forest lawsuit, denies it charged illegal fees

To help expedite the resolution of the case at the trial level, Leland Town Council approved paying the company $148,644 at its regular meeting Thursday. The payment should not be construed as an admission of liability, according to Edes.

According to Judge James Bell’s March ruling, the precise amount owed to Plantation Building of Wilmington Inc. is still undecided. The potential amount of total recovery among all classes is $4.1 million, according to Judge Jason Disbrow’s Aug. 20 ruling.

In separate rulings entered Aug. 19 and 20, Disbrow denied Leland’s motion to stay, motion for entry judgment, and motion to dismiss; Disbrow granted Plantation’s motion for class certification, authorizing the lawsuit’s class-action status. There are potentially 49 class members that were charged these fees over the time frame in the lawsuit, according to Disbrow’s ruling Thursday.

Funds paid to Plantation Building of Wilmington Inc. were derived from the Leland’s Utility Enterprise Fund, which earns revenues from utility fees the town collects. This fund’s budget was $6.7 million last fiscal year, making up about one-fourth of Leland’s total revenues.

Council also voted to beef up this fund Thursday in approving the transfer of $500,000 from its Public Utility Reserve Fund in order to fund “future lawsuit settlements.”

Representing Plantation Building of Wilmington Inc. in the lawsuit, Chris Theriault of Theriault Law, P.C. said he was pleased with the Court’s rulings.

The company filed similar suits against the City of Southport and Brunswick County in early April 2019, alleging similar wrongdoing. The initial suit against Leland involves 19 properties built in Brunswick Forest.

What are impact fees?

Most homeowners likely won’t encounter impact fees personally. These fees are typically picked up by developers, charged to cover the expense of accessing a utility system and folded into the final closing cost of a new home.

They are not “tap on fees,” which cover the exact cost to physically connect to a system. Instead, impact fees (now known as system development fees) cover the wear and tear on a system caused by the new user connecting to the system, including necessary system improvements.

These fees are charged to builders as a prerequisite to obtaining building permits.

First filed in Sept. 2018, Plantation claimed Leland arbitrarily charged the development company between 2015 and 2018. This time period is significant because in 2016, the N.C. Supreme Court ruled in a precedent-setting case that the Town of Carthage exceeded its legal authority in charging a developer for future, yet unplanned, infrastructure projects.

The following year, the legislature effectively legalized impact fees or so-called “system development fees,” requiring utility providers to charge these fees based on a professional analysis.

Preston Lennon contributed to reporting this article.

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