Downzoning is the rezoning of land--normally
over the objection of the landowner--to a less intensive use.
For example, commercial land may be rezoned for residential
use, or residential land may be rezoned to a less dense residential
category. The usual result is that the land is worth a lot
less after downzoning than it was before.
Many of those in the real estate industry seem to believe
that the government does not have the power to downzone property.
"They can't do this--it's unconstitutional," is
the reaction often heard by the real estate lawyer when his
client first learns of a pending downzoning. Unfortunately,
however, downzoning is perfectly legal, within certain limits.
As cities and towns continue to revise and update their general
and specific plans, and as local and neighborhood groups become
more powerful, the amount of downzoning undoubtedly will continue
to increase. It is therefore important for all landowners
to know the basic rules governing downzoning and what avenues
they have available to protect existing zoning.
As mentioned above, there are certain limitations on downzoning.
The first limitation is the constitutional prohibition against
taking private property without just compensation, stated
in the Fifth Amendment of the Constitution. This has been
interpreted as meaning that property cannot be rezoned to
a category that leaves it with no reasonable economic use.
Such a rezoning amounts to a condemnation or "taking"
by the jurisdiction, and must either be set aside or the jurisdiction
must purchase the property for its fair market value. For
example, residentially zoned land could not be rezoned exclusively
for parks or open space without compensating the landowner
for the value of this land. This limitation, however, rarely
applies, and if the land is left with almost any practical
use, the courts will hold that it is not a condemnation.
The second limitation is that rezoning cannot be used to terminate
an existing use; that is, a use which commenced prior to the
rezoning of the property and which continued to the date of
rezoning. Under such circumstances, the zoning is said to
be "vested." Most counties and municipalities have
embodied this concept into a "nonconforming use"
ordinance that allows existing uses to continue despite a
change in zoning. For example, a city cannot terminate an
existing retail nursery business by rezoning the land on which
it is located for strictly residential uses. It is critical,
however, that the use be an established existing use. It normally
is not sufficient if the property merely has been purchased
with the intention of using it for a particular purpose.
How to Protect Yourself
How does a landowner protect his zoning in the face of a threatened
downzoning? The first step is to keep informed of any pending
revisions to the general plan or the formulation of specific
plans covering the property. The landowner should appear at
any hearings for such plans and explain why the zoning on
his property should not be changed. This is very important,
because if the landowner fails to appear, he will likely be
told in later rezoning hearings that the city is merely carrying
out the provisions of the plan, and that the landowner should
have made his objections known when the plan was being adopted.
After the plan has been adopted, it is generally more difficult
to successfully oppose the rezoning. However, it is usually
worth a try, both by appearing at any planning commission
and council hearings and by lobbying elected representatives.
The landowner might also try to protect his zoning by taking
action to "vest" the zoning, which is another way
of saying that he must commence the use of the property pursuant
to the higher zoning category. The question then becomes,
what is sufficient to vest zoning as an existing use?
Some courts have held that it is possible to vest the zoning,
and thus avoid the downzoning, by making substantial expenditures
toward the development of the property in accordance with
its with its existing zoning, even if the actual use of the
property has not begun. For example, starting construction
of an apartment building is likely to vest apartment zoning,
even though no apartments have yet been rented. Spending money
for the purchase of the property itself, however, is not a
qualified expenditure, even if the price paid by the landowner
reflects the higher zoning category. There have been cases
where commercial property was downzoned to residential within
months of its purchase at commercial prices. The loss to the
landowner can be enormous in such cases.
It has been held that a city may not refuse to issue a building
permit because of the pending downzoning proceedings. Therefore,
a landowner faced with threatened downzoning should, if he
is financially able to do so, consider protecting his zoning
by immediately obtaining a building permit and commencing
construction of his intended development. While the law is
not clear enough for one to know whether such actions, particularly
in the face of a pending downzoning, will furnish absolute
protection, in most cases the potential loss from the downzoning
is large enough to make the attempt worthwhile.
Although downzoning is not automatically unconstitutional,
there are a number of steps a landowner can take to protect
existing zoning. The chances of success are highest if the
landowner keeps himself informed of the city's plans for his
property and takes action at the earliest possible time.
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