What is grandfathered property?
Grandfathered property is a term commonly used in land use and municipal zoning contexts. Open to interpretation, the term itself means a property is not required to comply with a current ordinance, policy, or rule because it was already in compliance before the policy or rule was enacted. It can also mean that the specific activity the property engages is permitted without obtaining a permit or permit waiver. Typically, the term applies to zoning ordinances. For example, if a property was compliant with the zoning ordinance when it was enacted, it is ‘grandfathered.’ If a new ordinance forbids a use, then the property does not have to stop its operation. A typical example would be an apartment building that is compliant with the zoning ordinance at the time the ordinance is adopted, but the ordinance subsequently changes to prohibit multiple-family housing units in that zone. The apartment building, however, would remain grandfathered since it existed prior to the adoption of the ordinance . The term ‘grandfathering’ in the land use context was created in the mid-20th Century along with modern zoning ordinances; however, it was also used in other legal contexts, including labor relations and environmental regulations. It was not until the late 20th Century that a difference in terms was adopted based on the context. This change in language codified the notion that the origins of the rules were different. If a property was exempt from a regulation, it was called ‘grandfathered.’ If a business was exempt or exempted from the rules, it was ‘grandmothered.’ More recently, the distinction is something of the past and the terms are often used interchangeably. Grandfathered property is a vestige of the modern land use system. It has provided certainty to property owners that their rights will not be taken away by subsequent changes in zoning ordinances. It also provides robust opportunities for property owners, particularly for those who obtain variances.
The beginnings of zoning laws
In the early 19th century, uncontrolled land use led to problems of light, air and congestion which created the first espousals of community zoning laws and police power. In the second half of the 19th century, widespread industrialization caused real estate speculation and the growth of modern cities. By the 1890’s and 1900’s, many state legislatures were granting municipal corporations more extensive powers in the exercise of their zoning powers. The exercise of the municipality’s police power permitted land use and development requirements. Moreover, the due process and equal protection clauses of the Fourteenth Amendment to the U.S. Constitution gave rise to judicial review of legislative enactments dealing with the regulation of property usage.
Early case law regarding municipal police power emphasized that:
"…[I]t is well settled that the regulation of the kind and character of uses or construction of property so as to advance public health, morals or the safety of the public generally, such as public parks, places of resort for the public attendance or recreation is an exercise of police power…."
"[E]xercise of police power for purposes outside of the protection of the public health, morals, safety and public order is an arbitrary interference [with constitutional rights]."
"In the enactment of legislation affecting property rights legislation is presumed to be enacted in all particulars and in every respect within the constitutional powers of the legislative department."
"Inconvenience and injury, in the use of property, are condition inseparable from the growth of cities which can only be alleviated by economic factors beyond human control."
It was not until the early 20th century that zoning became a practice of American city government. The standard of land use planning was land use planning on a city-wide basis. The concept of zoning a community by separating land into districts according to particular proposed type of use did not become a comprehensive practice until the late 1910’s and early 1920’s. The rise of the insurance industry and the nation’s love affair with the automobile and the U.S. interstate highway system created the property and land use phenomena of suburban sprawl. As a result, people leave the inner city for the outskirts of town creating a need for governing bodies to establish boundaries to the outer areas of the city. In its wake, zoning laws to separate various types of uses was born.
The turning point came in the case of Euclid v. City of Ambler, 272 US 365 (1926). After two years of Supreme Court deliberation, the landmark case upheld the constitutionality of municipal zoning. The overturning of these district requirements created problems of urban sprawl. Consequently, additional zoning regulations were enacted. It controlled the use of property by:
(a) separation of agricultural structures surrounding residential communities;
(b) separation of commercial uses in a defined area;
(c) separation of industrial structures in a defined area;
(d) restricting residential buildings to homogenous neighborhoods; and
(e) prohibiting certain expensive or high-rise structures.
Land planning and zoning are now the backbone of smart growth, urban revitalization and sustainable communities.
How grandfather clauses work
Grandfather clauses under zoning laws and ordinances operate by providing existing properties with immunity from compliance with more stringent zoning regulation. They act to protect preexisting, nonconforming uses of property when a municipality adopts a new zoning ordinance or whereby an existing use of property is affected by a new zoning ordinance. More specifically, a use that is not in compliance with the current zoning law but was lawful prior to the adoption of the amendment is considered a legal, non-conforming use. An example of a non-conforming use would be a restaurant in an area that has recently developed into a commercial and shopping complex. This restaurant was a lawful use of property until the new zoning ordinance was enacted.
The language of the grandfather clause typically requires that a use be "lawful" at the time the municipal ordinance was enacted. A use of property is generally lawful if it conformed to the law and was did not violate any applicable ordinances, zoning regulations or building requirements at the time it was established. Laws that make a given use unlawful retroactively do not violate the requirement that a use be "lawful" for purposes of grandfathering. Further, a use may be lawful even though it lacks a required permit or other authorization.
Once the requisite number of years passes, the non-conforming use becomes a conforming use. Under this scenario, the property will become a non-conforming use unless the property owner obtains approval of the non-conforming use from the governing body.
Advantages and disadvantages of grandfathered property
While grandfathered property may have some disadvantages, they can be outweighed by the benefits. Therefore, we have divided this section of our guide into two opposing sub-sections: advantages and disadvantages.
Advantages
Grandfathering can limit liability by ensuring that future land use denials will not fall on an existing owner of a property, provided the land use being pursued is the same as what was there prior. This protection can last until there are changes to the law in the state about the use.
Land use laws can also be changed over time. A land use that was once prohibited under law may then be permissibly pursued by an owner under grandfathering. A good example of this is when a homeowner converts their ordinary garage into a home office. Changes in law may now allow a home business that prior to the change would not have been permissible. Even if the home occupation still has to follow certain rules for safety and impacts on neighbors, being grandfathered means that the land owner can pursue this use without restriction.
Failing to have your property labeled as grandfathered may mean that development you have been looking to do may be subsequently curtailed by the new application of a land use law that has changed since you bought the property. Think of a land baron who buys up a large patch of land in hopes of putting high-density housing there . If the land is not grandfathered, then when zoning changes occur no greater density than the rest of the neighborhood would be allowed through usage of the newly applied law. If the property were a commercial space, then still no density would be allowed.
Disadvantages
One of the biggest disadvantages often associated with grandfathering is that it doesn’t remain in place for the life of the landowner. To continue this example of the land baron, if he passed the property on to his son and the son continued the efforts to put condos on the land, but then passed the land to his son, then grandfathering may be broken. Sometimes a landowner only has a limited time to utilize grandfathering before it is broken, so when that time period runs out the landowner will have to abide by new land use laws.
Grandfathering can also disadvantage a landowner by preventing the landowner from changing the current land use of the property. Again to refer to the example of our land baron, once passed down two generations, if there is no longer a need for high-density housing in the area and someone wanted to make low-density (single family housing), the grandfathered status could actually be a disadvantage. The lower density housing could not go in if the land use remains grandfathered into high-density housing permitted by state law.
Legal issues with grandfathered properties
Courts have declared some grandfathered uses to be invalid in the context of new or revised zoning ordinances adopted after the use’s establishment. In those cases, "nonconforming rights" have been denied. The question of whether a nonconforming use has continued without interruption is a question of fact. In a recent New Jersey case involving bulk storage tanks containing industrial chemicals, the question was whether the removal of these tanks to comply with fire code regulations invalidated the nonconforming use status. The Appellate Division sided with the trial court that there was an interruption in the use when the tanks were removed, leading to the conclusion that its status as a nonconforming use was lost.
Regulations may also incorporate time limits prohibiting continuation of nonconforming uses. The city may enforce a statute of limitations, set under the Zoning Ordinance, against continuing a prohibited use when the use began long before the limitation period. In the California case, a property owner formed a limited liability company years after creating a nonconforming use and then became the manager of the LLC that owned the property. A neighboring property owner had acquired the property, which was subject to a 15 year statute of limitations. The new owner could not prohibit the use under the statute of limitations, notwithstanding the property owner’s alleged failure to disclose the nonconforming use in certain disclosures in the purchase contract.
Municipalities may also enforce property rights preserved by a zone change on a tract of land, even where the prior action declaring the land as nonconforming was invalid. The municipal government may introduce a new ordinance to resuscitate a prior invalid ordinance and apply it in such a way as to accept the original nonconforming use. The developer’s rights have been reinstated despite the running of the statute of limitations in a New Jersey case where property was sold as a nonconforming use. The newly enacted ordinance operated as a "legal embodiment" of the provisions in the original ordinance and its accompanying determinations of the Planning Board. The community’s governing document established all the elements of affinity required to reinstate the developer’s prior rights.
Managing grandfathered properties
When managing a grandfathered property, there are several best practices owners can follow to ensure that their property remains in compliance with zoning laws while maximizing its value and avoiding potential legal issues.
First, it is essential to maintain proper records. Having documentation that proves a structure’s existence prior to the applicability of a specific zoning law will help to establish its grandfathered status. Documents like site plans, photographs, tax assessment records or utility bills can help prove the structure’s age to zoning administrators. Failure to maintain adequate records can make it difficult or impossible to prove the property’s exempt status.
Second, an owner should be aware of what development activities will change that property’s use. Some zoning districts may allow for some development, but not others, for a grandfathered property. A business looking to expand its operations must avoid putting itself in a situation that would require further actions by municipal zoning administration that could affect its grandfathered status.
Third, an owner should be aware of what types of changes to a grandfathered property need to be reviewed by a municipal administrator . Some municipal jurisdictions may require a building permit for any change to a grandfathered property, including minor renovations. Others may require the property owner to submit a request for evaluation to the zoning authority. Knowing the specific process in place is vital to avoiding any issues that could impact the grandfathered status.
Fourth, maintaining compliance with local zoning laws may not only enhance your property’s value; but, will also help you avoid legal issues that could jeopardize your property’s grandfathered status. While most zoning authorities will allow for a change in ownership for a grandfathered property, this is not always the case. A property owner can take steps to avoid situations where a change in ownership might result in a loss of a property’s grandfathered status.
While navigating local land use requirements can be time-consuming, knowing how to best manage a grandfathered property can offer the owner significant advantages in the event of a zoning conflict. Knowing how to properly maintain a grandfathered property, including understanding the legal requirements associated with that designation, will help owners avoid losing the property’s valued zoning exemption.