The trouble with nonconforming property

Editor’s note: Guest columnist Michael J. Belaen serves as the Saint Paul Area Chamber of Commerce’s director of public affairs and legal counsel. Any viewpoints expressed in this column are those of the author. 

Cities across the country are changing. I’m talking about the look and feel of cities — building design, quality of infrastructure, and access to great parks. Change occurs at city hall, in planning commission and city council meetings, and cities are using municipal-planning tools to effect change.

But when cities adopt new comprehensive plans and rules on land use, change can be difficult, particularly for landowners whose property becomes nonconforming.

Take a recent case from St. Paul. In 2008, the city rezoned an industrial area hoping to facilitate redevelopment. These changes produced a number of nonconforming properties, including an underutilized warehouse. The warehouse was put up for sale. At the same time, the warehouse was used intermittently by various short-term industrial users.

Recently, a developer sought to convert the warehouse into a self-storage facility, a use that that was previously allowed. The city said no. The Saint Paul Area Chamber of Commerce opposed this decision (more on this later).

A refresher on the municipal planning process in Minnesota is in order.

First zoning law in the state

Minnesota adopted its first zoning law in the early part of the 20th century. The law was quite limited, only allowing certain cities to use eminent domain to establish residential districts. Municipal-planning powers have since been drastically expanded. The Municipal Planning Act now provides cities with basic land use tools, including the power to engage in comprehensive planning, to zone and to regulate subdivisions.

Often described as the community’s vision for the future, comprehensive planning allows municipalities to guide future development and land use. A comprehensive plan is a long-range, forward-thinking, policy-oriented document. The process of developing a comprehensive plan generally consists of a lengthy community-based effort initiated by the city’s lead planning body, typically the planning commission. For many cities, this is usually the first step in adopting official zoning and subdivision controls.

The use of zoning to effect change

To assist in achieving the vision laid out in a comprehensive plan, municipalities will often adopt new zoning rules. Zoning allows municipalities to promote the public health, safety and general welfare of its citizens through controls placed on the use of land.

But when zoning changes restrict the use of private property, implementing new rules can be quite controversial. For example, a city might adopt new height restrictions on new buildings in a certain neighborhood, restrict the hours of operation for a particular type of business, or even ban a certain type of activity altogether. This might generate public outcry and may even result in litigation.

It is important to keep in mind that municipal zoning powers are subject to both constitutional and statutory limitations. Cities may only exercise their zoning authority in a manner that is reasonable, not arbitrary, and without discrimination. If a zoning regulation becomes too restrictive, the city may have a constitutional obligation to compensate the affected property owner.

When municipalities implement zoning changes, the new rules often create what is referred to as “nonconforming property.”A nonconforming property is simply any land use, structure or lot that does not comply with the current zoning ordinance of a city. The law makes a distinction between nonconformities that were permitted when a zoning ordinance was adopted and those that were not. The former are called legal nonconformities. The latter are illegal nonconformities.

Grandfather rights

Legal nonconformities are entitled to important protections under the law while illegal nonconformities are not. Specifically, the Municipal Planning Act provides:

Except as otherwise provided by law, any nonconformity, including the lawful use or occupation of land or premises existing at the time of the adoption of an additional control under this chapter, may be continued.

These are extremely important property rights often referred to as “grandfather rights.” While a municipality may prohibit the expansion of nonconforming property, it must allow for their continuance, including through repair, replacement, restoration, maintenance or improvement.

Both municipalities and property owners should be aware that grandfather rights can easily be lost. There are five circumstances under which nonconforming property rights may terminate: discontinued use, destruction, eminent domain, the property becomes a nuisance, and by mutual agreement.

If use of a nonconforming property is discontinued for more than one year, it will be presumed abandoned. However, this presumption can be rebutted with evidence showing there was no intention to abandon the nonconforming rights. The Minnesota Court of Appeals has said that actively trying to sell a nonconforming property provides such evidence.

The St. Paul case

Let’s revisit the nonconforming warehouse in St. Paul. Following the 2008 zoning change, the warehouse remained underused or vacant. When the warehouse was not occupied, it was for sale. A developer tried to buy the warehouse and convert it into a self-storage facility, a use that was previously permitted. The city rejected the developer’s proposal. The chamber of commerce opposed the city’s decision.

For the chamber, this was not an issue of “highest and best use.” Instead, it was about protecting important property rights. Because the property had been actively marketed when not being used, the self-storage use should have been permitted, as the property owner had not abandoned its nonconforming rights.

So what does this all mean?

Minnesota cities have been given important powers by the Legislature to shape the look and feel of future development. But when municipalities implement new zoning policies in hopes of achieving their long-term development vision, nonconforming property is often created as a result.

Nonconforming property is generally viewed as inconsistent with a municipality’s long-term plans. While legally nonconforming property can be continued, it cannot be expanded absent express approval from the municipality. It is difficult to re-establish nonconforming property rights once they are lost.

Because of these limitations, landowners may find it difficult to sell nonconforming property.

In addition, the value of property tends to be less after it becomes nonconforming. This will negatively affect the local tax base. And it can be particularly hard to find redevelopment opportunities for nonconforming property.

It is critically important to understand how owners of property can be negatively affected by new land use and zoning policies that cause their property to become nonconforming. Factoring these considerations into the planning process will help protect important property rights, encourage community investment, and strengthen the local tax base.

Michael J. Belaen can be reached at [email protected] or 651-265-2795.