I successfully appeared on behalf of the property owners opposing a City-initiated rezoning of their property, presenting arguments establishing that such a rezoning would have constituted a taking.
On Monday, April 15, 2019, the City of Ann Arbor’s City Council was asked to review a proposed rezoning of a portion of S. Ashley Street from a commercial zoning district to a multi-family zoning district. The City of Ann Arbor’s professional staff had recommended against such a rezoning.
My clients had purchased one of the lots subject to potential rezoning, paying commercial values, to allow future incorporation of the property into their existing business. A rezoning would have rendered the existing use legally non-conforming and required a minimum lot size for development larger than the parcel itself.
In Pennsylvania Coal Co v Mahon, 260 US 393, 415 (1922), the U.S. Supreme Court recognized that “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” Traditionally, both the U.S. and Michigan Supreme Courts held that a regulatory taking could occur when the land use regulation imposed by the government failed to substantially advance a legitimate governmental or public interest or the regulation deprived the owner of all economically beneficial or productive use of the property. K&K Constr v Department of Natural Res, 456 Mich 570, 577, 575 NW2d 531 (1998), rev’g, 217 Mich App 56 551 NW2d 413 (1996), cert denied, 525 US 819 (1998), on remand, 267 Mich App 523, 705 NW2d 365 (2005).
A taking can be established when, after analysis of (1) the degree to which a regulation disrupts the “reasonable investment-backed expectations,” (2) the “economic effect” of the regulation on the landowner, and (3) the “character of the government action,” it is demonstrated that the government is “forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Palazzolo v Rhode Island, 533 US 606, 607 (2001); K&K, 217 Mich App 56. The offending regulation of property may take the form of a local ordinance like a zoning change that unconstitutionally impacts the use of property.
With respect to regulations that preclude all economically beneficial use of land, the regulation will be found not to be a taking only if the state’s property or nuisance law would have prohibited the proposed use to begin with, and no newly adopted legislation or decree may be enforced without compensation. Lucas, 505 US at 1028–1029.
This test clearly applied to this rezoning. The property would have been rendered too small to be used as multi-family housing under the proposed new zoning, it did not generate any cashflow as it existed, and a zoning change would have prevented incorporation into the existing business. My clients would have had no choice but to sue, claiming a taking.
Fortunately, the City Council agreed with its staff and avoided the unintended consequence of implementing the taking that would have resulted.
Understanding the potential impact of the zoning action and presenting those impacts to the deliberative body can avoid substantial problems prospectively. It is far better to advise a municipal body of unintended consequences that could lead to takings litigation before they act as opposed to being forced to litigate a claim.
I regularly represent property owners in zoning disputes. In many instances, such representation ties directly into my expertise in takings law. If you are having any zoning issues with a municipality, please feel free to contact me.