An example of a dispute over the interpretation of the terms of a development agreement can be found at Building Industry Ass`n of Central California v. Patterson, 171 Cal. App. 4th 886, 90 Cal. Rptr.3d 63 (2009). The agreement required the developer of a subdivision to pay replacement fees for affordable housing. The fee at the time the agreement was approved in 2003 was $US 734 per housing unit, due to the granting of each building permit for an una affordable unit. However, the City was in the process of preparing an updated analysis of its affordable housing costs and the parties established in the agreement that the developer would be bound by the revised fee schedule “provided that the same is reasonably justified.” Following a new study on affordable housing needs, which used a different cost allocation model, the City adopted a new scale in 2006 that increased affordable housing costs per unit to $20,946. The Tribunal held that the interpretation of the provision of the development contract that the fees were “reasonably justified” was a question of law subject to the general rules of interpretation of the contract.
The Tribunal concluded that an objectively reasonable person would read the term in such a way that any increase in the fee would be consistent with existing legislation. The court then found that the rate increase did not meet the standards of California law for such costs. See also Sprenger, Grubb &Assocs., Inc.