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Text of Document: March 17, 1994
You have asked a question regarding the downzoning of residential property and whether the "loss of property value" that property owners allege takes place as a result of donwzoning is quantifiable. I am not the right person to answer that question. I imagine it is like most factual issues, a question of deciding which of the experts is the more believable. However, regardless of the "provability" of economic loss, unless the "loss" sustained is very substantial, so that no "viable economic use" may be made of the property, or unless there is no legitimate basis for the amendment, economic loss is not a sufficient reason to overturn an zoning amendment.
The Fifth Amendment to the U.S. Constitution, made applicable to states by the Fourteenth Amendment guarantees that no person "shall be deprived of life, liberty or property without due process of law...". Many property owners challenging a particular zoning action will allege that the resulting loss in value amounts to a "taking" of property without due process. In analyzing whether a Fifth or Fourteenth Amendment violation has occurred, the courts first look to whether there was a constitutionally protected "property" interest that has been revoked. In the context of downzoning, the argument would be that the property owner has some protected property interest in the existing zoning classification and any change in that classification results in a deprivation of property without due process.
While the courts are more inclined, these days, to find a taking to have occurred where governments act to restrict development rights, the simple downzoning that you describe does not affect any legally recognized property rights. The rule in Tennessee is that a zoning ordinance will be upheld unless:
1. it does not advance legitimate state interests; or
2. denies an owner economically viable use of his land
Hamilton Bank v. Williamson County Regional Planning Commission, 729 F.2d 402 (6th Cir. 1984).
The first parameter simply requires that the zoning restriction bear a reasonable relationship to the health, welfare and safety of the public. This is because the line-drawing inherent in zoning is a legislative exercise of the police power and judicial review is restricted to whether there was arbitrary or capricious conduct in adopting the ordinance. Brooks v. City of Memphis, 192 Tenn. 371, 241 S.W.2d 432 (1951). To prove that a particular zoning amendment is arbitrary, capricious or confiscatory:
...the property owner has the burden of showing that the amendment was not adopted in the public interest, but was directed at him or her, to his or her disadvantage and prejudice. Id., at 435.
Where the downzoning results from a change in the comprehensive zoning plan or map the Court consistently uphold the legislative action. In Keeton v. City of Gatlinburg, 684 S.W. 2d 97 (Tenn.App. 1984), the plaintiff's property went through several reclassifications, from low density residential to high density residential and back to low density residential. When the plaintiff asked that the zoning be high density residential again the city denied the request for a number of reasons, including inadequate roads and the fact that much of the neighborhood was single family residential. The property owner argued that because her property was at some point rezoned to a higher classification, the city could not now argue that it was properly zoned low density. The Court held:
A municipality, under its police powers, may correct an unwise or erroneous zoning which has been previously established by a comprehensive plan of zoning. See Barret v. County of Shelby, 619 S.W. 2d 390 (Tenn.App. 1981). Also see 101A C.J.S., Zoning and Land Planning, §72.
Brooks involved a challenge to a zoning amendment that rezoned the plaintiff's property from a commercial to a residential classification. The plaintiff argued that the downzoning reduced the value of her property from $1,500.00 to $500.00. The Tennessee Supreme Court upheld the "downzoning" and discussed at length the authority of municipalities to zone:
Since the decision of Spencer-Sturla Co. v. City of Memphis, 155 Tenn. 70, 290 S.W. 608, the authority of municipalities to "zone", i.e., to define and restrict the permissive use of property, has been established in Tennessee. Obviously, this implies the authority to draw a line and provide that on one side of the line the property may be, and on the other side of the line may not be used for certain purposes. It must follow that property owners nearest the limit of the restricted area are most affected...Every property owner...is charged with notice of the Zoning Ordinances, and of the authority of the municipality to amend the Ordinances...as, in the discretion of the municipal authority, the need arises.
...Than the late, great Oliver Wendell Holmes, there was never a Judge who viewed with a more sardonic eye, any modern contrivance that curtailed the old common law principle that ownership of land in fee, meant owning it from hell to heaven (ab inferis ad coelum), yet he said: 'Looked at by itself without regard to the necessity behind it the line or point seems arbitrary. It might as well or nearly as well be a little more to one side or the other. but when it is seen that a line or point there must be, and the there is no mathematical or logical way of fixing it precisely, the decision of the Legislature must be accepted unless we can say that it is very wide of any reasonable mark.' Louisville Gas and E. Co. v. Coleman, 277 U.S. 32.
The Court went on to conclude that the case was controlled by Howe Realty Co. V. Nashville, 176 Tenn. 405, 141 S.W.2d 904 (1940):
In that case, after a permit had been granted a property owner for a commercial use, which use was permissible under the existing ordinances, the permit was revoked and this Court upheld the authority of the municipality to revoke the permit, and so to make the amendment of the Zoning Ordinances necessary to justify the revocation of the permit, saying: 'In many instances residential property owners could derive much larger incomes if they were permitted to devote same to commercial purposes. The right, however, to restrict such areas has become the law in this and practically every jurisdiction in the United States While such regulations frequently result in financial loss to property owners, they are based upon the idea that the interests of the individual are subordinate to the public good"...[citations omitted].
Since the decision in Howe, there has been an increasing willingness by the Courts (both Federal and State) to find the a municipality does not have unfettered discretion in amending the zoning ordinances and, especially in revoking permits granted that were valid at the time. An alleged decline in value, in and of itself, is not considered to amount to a "taking" of property. Draper v. Haynes, 567 S.W.2d 462 (Tenn. 1978). But, where there is reliance by the property owner on a particular zoning classification, and substantial economic investment is made to develop the property at its current zoning, the city may not come along and rezone/downzone the property unless it compensates the property owner for this economic loss. What amounts to a substantial economic investment? There really is no hard and fast rule. What is clear is that:
rights under an existing ordinance do not vest until substantial construction occurs or substantial liabilities are incurred relating directly to construction. State ex rel. SCA Chemical Waste Services, Inc. V. Konigsberg, 636 S.W. 2d 193 (Tenn. 1982)
Simply put, one does not have a protected property right to a particular zoning classification and unless the property owner can show that the challenged action doesn't promote the public interest or unless the owner can prove the rezoning deprives the property owner of any viable economic use the legislative action will be upheld. However, there may be circumstances that require the government to compensate the property owner for his or her economic loss.
Sincerely,
Leslie Shechter
Legal Consultant |