How Zoning Requirements Can Affect Your Business

Zoning laws are a regulatory framework that will affect your decisions to develop, build and/ or renovate, sell and/ or lease your existing or newly acquired properties.

Various federal, state, and local zoning laws regulate the real estate industry. Case law can also significantly affect your plans, because neighbors and political coalitions can sway your development proposals one way or another through legal actions and other political pressure.

Valuable insight can be gained by looking at how the courts have decided some landmark and other recent cases of zoning and land use.

For example, in one Supreme Court case, a landowner was affected by zoning changes, subsequent to his purchase, that interfered with his plans to build residential homes on two properties. Two years after he purchased the properties, the municipality passed ordinances prohibiting any residential construction in the vicinity of the land.

The taxpayer went to court to claim that the ordinance resulted in a taking of the property because he could not use it for the intended purpose. At issue was whether the no-build regulation resulted in a compensable taking.

The top court held that it is unreasonable for a state to prohibit the owner from using the land as he originally intended, unless it can be shown that this use results in a nuisance of that general property law prohibits such as use. (Lucas v. South Carolina Coastal Council (91-453), 505 U.S. 1003, 1992)

In another landmark case heard by the Supreme Court, a landowner was using a building for a small drug rehabilitation facility in a neighborhood zoned for residential use. The city sued the landowner trying to force the facility to move on the grounds it violated the residential zoning laws.

The facility leased and operated a group home for 10-12 adults. The city issued citations against the facility for violating the zoning code rule because the facility housed more than five unrelated persons, therefore it didn't conform to the code.

At issue before the Supreme Court was whether the city's definition of "family" qualifies as a "restriction regarding the maximum number of occupants permitted to occupy a dwelling" within the meaning of an exemption that is allowed by the Federal Housing Authority (FHA).

The top court ruled that the city's definition of "family" did not qualify for the exemption. The reasoning was that the city's zoning code provision describing who may compose a "family" is not a maximum occupancy restriction exempt from the FHA because it does not answer the question, "What is the maximum number of occupants permitted to occupy a house?" It is not a uniform rule. Instead, it is a use restriction. It does not apply to all residents of all dwelling units. (City of Edmonds v. Oxford House, Inc. (94-23), 514 U.S. 725 (1995)

In a third case before the top court, a developer sued a city that kept rejecting its proposed plans. The developer alleged violations of the Due Process and Equal Protection clauses of the Fourteenth Amendment.

At issue before the Supreme Court was whether plaintiffs have a right to a jury trial over land-use regulations when they allege constitutional violations under 42 USC Section 1983. The court ruled yes, stating that property owners who file a Section 1983 civil rights suit seeking compensation for an alleged taking of their property can have a jury trial in some circumstances. (Monterey V. Del Monte Dunes At Monterey, Ltd., 97-1235) 526 U.S. 687, 1999, 95 F.3d 1422)

In another case before the top court, a developer in Lake Tahoe was prohibited from acquiring building permits for a period spanning over two years, while the regional lawmakers took their time deciding upon new zoning requirements.

At issue before the Supreme Court was whether a moratorium on development imposed during the process of devising a comprehensive land-use plan constitutes a per se taking of property requiring compensation under the Fifth Amendment's Takings Clause.

The court held that the mere enactment of the regulations implementing the moratoria did not constitute a per se taking of the landowners' property. The Court reasoned that whether a taking occurred depended upon the considerations of landowners' expectations, actual impact, public interest, and reasons for the moratoria.

Moreover, the Court concluded that the adoption of a categorical rule that any deprivation of all economic use, no matter how brief, constituted a compensable taking would impose unreasonable financial obligations upon governments for the normal delays involved in processing land use applications. (Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 00-1167, 535 U. S. 302, 2002, 216 F.3d 764)

Zoning laws can have a great impact on your business. By becoming informed on how zoning legislation affects your business, you are better prepared to assert your development plans without undue restrictions or unforeseen financial losses.

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