City of Venice to pay Neal Communities $1.6M over permit fee dispute

The city of Venice will pay a developer and homebuilder $1.6 million after the City Council unanimously approved a settlement agreement June 25.

Neal Communities of SWF and Neal Signature Homes LLC proposed the agreement to the city of Venice following a yearslong dispute over its building permit fees.

"After years of expensive litigation, we thought the best course of action was to settle and move forward," Pat Neal, CEO and co-founder of Neal Communities, says in a June 26 emailed statement to the Business Observer.

In August 2022, Neal Communities filed a lawsuit against the city over what it claimed was the improper assessment of fees for building permits.

The company alleged it paid $3.7 million in building permit fees from September 2014 to July 2021, according to the lawsuit. During this time, it received 825 building permits from the city of Venice. The building fees were based on a percentage of the cost of the projects, rather than costs incurred by the city’s building department, as outlined by state law, the lawsuit contended.

"The City of Venice Building Permit Ordinance was incompatible with the powers granted the City under state law," Neal says.

By the company's estimation, it was billed at least $1.45 million over what it should have been through June 2021 and was overcharged when compared with other builders in the city, according to allegations in the lawsuit.

Photo by Stacey Hines

A trial was set to begin June 11. But on June 10 Neal Communities and Neal Signature Homes proposed a settlement to resolve all claims for $1.6 million. The prolific homebuilder, based in Lakewood Ranch, also stipulated that it will not pay builder fees going forward.

City officials are not likely to be concerned other builders will take issue with the fees.

"Through the settlement, Neal Communities acknowledges that the City’s current building permit fee complies with the law," city of Venice spokesperson Lorraine Anderson says in a June 26 emailed statement to the Business Observer. The settlement agreement states that Neal Communities recognizes that the resolution establishing building fees in Venice "results in valuation-based fees which are compliant with State and City law."

Without discussion, the Venice City Council unanimously approved the settlement agreement at its June 25 meeting. It also passed an ordinance adjusting the city’s budget by $1.6 million to cover the cost of the litigation settlement. (The $1.6 million payment to Neal will come out of the city’s building fund.)

"After considerable litigation, including the City prevailing on a significant claim of Neal Communities earlier this year, the City Council determined under the totality of the circumstances it would be in the best interests of the City to accept a complete settlement of this matter that would not impact the City’s general revenue fund and would avoid the risk and expense of further litigation," Anderson says.

In its lawsuit, Neal made two claims: One was that it was owed declaratory relief, and the other was inverse condemnation with "excess illegal fees contrary to constitution and statute." Circuit Court Judge Danielle Brewer granted the city's motion for summary judgment on Jan. 25 and ruled in the city's favor on one claim, that Venice did not unlawfully take the company's money. The judge let stand the developer's claim it was owed declaratory relief. 

There is $4.4 million in the city’s building fund currently, according to Derek Schroth, special counsel to the city of Venice in the case, who says the city also paid more than $4.3 million in building fee refunds in fiscal year 2023.

Contributing to the building fee refunds last year was a change by the state legislature that capped the amount of building fees governments could carry over from one fiscal year to the next, according to Anderson, who says the city used the excess funds to reduce future building fees and issue refunds.

In December 2020 and October 2023, Neal was issued refunds, according to the settlement agreement, which says those combined with the $1.6 million payment will "constitute full payment and complete satisfaction of all past, present and reasonably foreseeable future claims by Neal and/or Neal entities related to the issue of the City of Venice's building permit fees and/or the use of revenues from those fees."

Neal Communities has 311 employees and posted $905 million in revenue in 2023, up 47.6% from $613 million in 2022. The company has built 23,000 homes since Pat Neal and his father founded it in 1970. So far in 2024, Anderson says Neal has applied for 90 building permits in the city of Venice.