January 23rd, 2026

At some point, every developer and builder has felt trapped in “bureaucratic purgatory” during the development review process. As administrative regulations on land development increase, so does the permit review timeline. For the developer or builder, this means one thing: increased costs, or as some say, “time is money.”

On January 21, 2026, the North Carolina Court of Appeals filed a decision which held that when the government’s permitting delay is excessive and unjustifiable, a developer has grounds to state a claim for a “temporary regulatory taking.” In other words, the government may be held liable for the permitting delay, even when the permit is eventually issued. The case is LDI Shallotte 179 Holdings, LLC v. State of N. Carolina Dep’t of Env’t Quality, No. COA24-443, 2026 WL 156313 (N.C. Ct. App. Jan. 21, 2026).

In LDI Shallotte, the plaintiff-developer purchased property comprised of phases three, four, and five of an older residential subdivision. Phases one and two had been completed years earlier by another developer named “Owen.” However, when LDI Shallotte applied to NCDEQ for a stormwater permit through the “Express Review Program,” NCDEQ informed the developer that its application was not eligible for review. According to agency staff, this was because Owen was still the permittee on the existing stormwater permit and there were old, unresolved notices of violation against Owen for phases one and two. Having created a problem where one did not exist (NCDEQ had the authority to simply revoke Owen’s permit for the new phases being developed by LDI Shallotte), agency staff then proposed a series of “paths forward” which involved LDI Shallotte taking responsibility for Owen’s notices of violation and transferring the existing permit out of his name. NCDEQ based these demands not on a statute or regulation, but on a footnote in its “Express Application Review Fee Chart.”

Thus consigned to bureaucratic purgatory by a footnote, LDI Shallote filed a petition with the North Carolina Office of Administrative Hearings. After a hearing, the Administrative Law Judge (“ALJ”) found that NCDEQ did not have authority to exclude LDI Shallotte from the Express Review Program based on Owen’s stormwater violations in the unrelated phases. The ALJ also ordered NCDEQ to do what it should have done in the first place: revoke Owen’s permit for the undeveloped phases three, four and five, and review LDI Shallotte’s new application for those phases. Dissatisfied by the ALJ’s order, NCDEQ petitioned the superior court for review, but its petition was dismissed as untimely. Finally, six months after the trial court’s decision—and two years after LDI Shallotte first applied for “express review”—NCDEQ issued the stormwater permit for phases three, four and five.

Two days after receiving its much delayed permit, LDI Shallotte filed a lawsuit against NCDEQ for, among other things, inverse condemnation and unconstitutional taking based on the inability to develop the land for the two years that NCDEQ wrongfully withheld its permit. The trial court dismissed the lawsuit and LDI Shallotte appealed. The Court of Appeals held that the lawsuit could go forward on a claim for a “temporary regulatory taking”—that is, LDI Shallotte had sufficiently alleged that it was entitled to compensation for NCDEQ’s action, or rather inaction, in refusing to process the permit application, which deprived LDI Shallotte of all economically viable use of its land for two years. Answering the agency’s argument that a “takings” claim is only proper once a “final decision” denying a permit has been made, the Court of Appeals explained:

By Defendant’s logic, it could indefinitely hold applicants in bureaucratic purgatory by simply refusing to process their requests for stormwater permits. We decline to adopt a rule permanently foreclosing temporary takings claims after excessive administrative delays. There may be instances where grossly protracted inaction, if pleaded in detail, may well survive a motion to dismiss and warrant discovery.

It is too early to know if either party will petition the North Carolina Supreme Court for review. However, assuming the Court of Appeals’ decision remains intact, its holding vindicates developers, builders, and landowners damaged by excessive administrative delays, especially when those delays are created by administrators acting arbitrarily and outside the scope of their authority. State and local permitting authorities can no longer argue that a final decision of the permitting authority is required in all cases for the permit applicant to file a damages claim for the delay. State and local authorities must also recognize that “time is money” for their permit applicants.