A City is not Contractually Bound by the Issuance of a Building Permit

From time to time, I have clients who suffer from cities that fail to fulfilled reasonable expectations owners and builders have with regard to the issuance of building permits.  But, as demonstrated by Cloud v. Washington City, 2012 UT App 348, owners and builders face uphill battles when seeking relief for those reasonable, but unfulfilled expectations.  
  
Washington City issued a building permit to Cloud for the construction of a warehouse.  Presumably, Washington City issued the permit based on plans and specifications proposed by Cloud, which did not provide for the installation of an automatic fire sprinkling system.  
 
Throughout the construction, Washington City building officials inspected the construction but did not mention that an automatic fire sprinkling system must be installed to comply with the fire code.  Accordingly, Cloud completed the building without installing a sprinkling system.

Upon completion of the construction, the Fire Chief inspected the building and found no sprinkling system.  Accordingly, he determined the warehouse did not comply with the fire code.  Based on the Fire Chief’s determination, Washington City refused to issue a certificate of occupancy to Cloud.

In a lawsuit against Washington City, Cloud brought  several claims for relief including breach of contract, breach of the implied covenant of good faith and fair dealing and federal civil rights claims.  The state district court was inclined to rule in favor of Cloud, but the U.S. District Court dismissed the federal claims and the Utah Court of Appeals granted leave for Washington City to appeal before trial.

Following prior appellate decisions, the Court of Appeals ruled that Cloud’s claims for breach of contract, including breach of the implied covenant of good faith and fair dealing were not viable claims.  The Court of Appeals explained that the issuance of a building permit does not contractually bind a city in any way.  The Court of Appeals further noted that recognizing building permits as contractual obligations would undermine the City’s ability to protect public  health and safety.

One would think that Cloud should have been more  disappointed by his architects and engineers and perhaps he was.  Architects and engineers, however, generally  do not warrant the accuracy and sufficiency of their plans and specifications.  Consequently, pursuing a relief from architects and engineers under these types of circumstances can be similarly challenging.  For this reason, owners should insist that their architects and engineers, as a minimum, warrant that their plans and specifications will satisfy all applicable building codes.

Copyright © Daniel L. Day 2013