To Avoid Contract Zoning, Define Your Standards Well

Last Updated: November 3, 2022

Contract zoning is just a concept, and only courts can make a determination of when it occurs.

When a particular zoning classification, such as Downtown Commercial, is assigned to a land parcel, some courts have ruled that it is unconstitutional for the municipal government to provide that rezoning in return for a promise not to do something that otherwise would be permitted under the local land use law.

The term "contract," in this case, implies that the municipality has granted the zoning as a favor. In return, the developer or property owner promises not to do something that is permissible by law, but that the public, or simply the elected governing body, finds objectionable.

In common language, contract zoning occurs when a local government says in effect, "OK, we'll give you this zoning that you want, but you have to promise not to do Actions X and Y that you otherwise could do under our ordinances."

The idea that historically has made judges cringe is that if there is contract zoning, the zoning amendment is granted as a private benefit to a developer or builder in a particular situation, rather than as the best possible decision guiding land use in the abstract.

Sound theory holds that the applicant should be able to build as he or she sees fit, as long as the construction fits within the regulations that have been enacted for a particular district. Unless local zoning or other land use regulation is explicit about when promises that a developer or property owners must be upheld, property owners have an implicit right to change oral promises, representations, renderings (architectural drawings), and sketches as they move further toward actually implementing a development.

How to Avoid a Contract Zoning Charge

In some instances, local governments have tried to make contract zoning into a virtue and even discussed enacting contract zoning ordinances to permit the practice. This is a variation on the theme of flexible zoning, which certainly is gaining in popularity among decision makers who have tired of seeing awkward results from traditional zoning theory.

However, it remains very sound advice to avoid contract zoning, or the appearance of it. The criteria are rather simple:

• Rezonings that appear to be the result of deal-making that favors a particular applicant should be avoided.

• A rezoning based on a promise not to do something that would be permitted may be considered suspect on the face of it.

• A rezoning that benefits a private party, but appears to be contrary to the public interest, may be considered contract zoning if it is based simply on the basis of promised good behavior. The rezoning could be nullified by a court.

How to Accomplish Public Goals While Leaving Flexibility for the Private Sector

If you read very much of this website, you might be surprised to see us expressing caution about contract zoning, which to some just appears to offer flexibility to negotiate with a developer before granting a request for rezoning.

However, in our experience, municipalities have a fairly substantial toolbox already for providing a developer some flexibility. What follows is a discussion of methods that we prefer.

• A city or town can require special use permits, or even better, conditional use permits, when a particular type of land use seems likely to be problematic. The two procedures are similar, in that both generally require the at least one public hearing opportunity, just as a rezoning does. We notice that in larger cities it is becoming common for an administrative hearing officer, a city employee, to conduct the hearing and make a decision. A conditional use allows special "conditions" to be listed for a particular applicant, business, and location. Generally any change to the conditions would require the applicant to repeat the original conditional use process.

While we support the conditional use technique, we would argue that it should be confined to fairly minor and routine situations, and that when a certain size threshold is surpassed, a full-blown public hearing in front of a planning commission and then a city council should be required.

A special use permit is similar to a conditional use permit in many jurisdictions, but the special use permit often does not require a list of conditions that a property owner must meet both initially and continuously for the land use to remain legal.

The terms are becoming blurry though, so don't be surprised if your municipality varies this distinction.

• Zoning variances provide relief when strict application of the zoning ordinance would present a unique hardship. If you read our page on the subject, you will find that we cling to the opinion that a variance should be granted only when the physical characteristics of a property are distinctive. We are not in favor of "use variances" under any circumstance.

• Planned unit developments (PUD), now often simply called PD (planned development), and all types of site plan review and approval requirements are appropriate measures to protect the public interest within the context of a set of site specifics.

PUD and PD are typically zoning district classifications, just like R-1, R-2, and so forth. Site plan review might be required in certain circumstances, or even in all situations, under the zoning ordinance, or it could be described in a standalone ordinance.

• Development agreements also are considered legal in most situations, providing the zoning and other development codes spell out in advance of the particular zoning application when developer agreements will be required and the ways that the public interest will be protected. Community benefit agreements, as a type of development agreement, are included in our generalization. However, the local government should be very careful in maintaining the appearance and the reality that a particular development agreement is not a condition of rezoning.

I know it's a fine line. And one that probably will eventually fall away in the courts. But it's a line that exists now, and it's not worth subjecting yourself to a lawsuit when other methods outlined above are readily available.

If local elected officials would like to grant a rezoning, but only as a favor to the particular applicant, that's a sure sign that the rezoning is inappropriate. Local governments become especially susceptible to this legal pitfall when a respected and well-known citizen applies for a rezoning with a particular development aim in mind. We observe that prominent citizens often bend over backwards to promise good behavior, and local elected officials faced with this situation are likely to trust promises. While this may be a good way to live, where zoning is concerned, proceed cautiously.

Local governments need to remember that they are not obligated to grant a rezoning just because they like an applicant, or because an applicant has purchased land or an option on it. A development that would be slightly positive isn't enough justification for the appearance of favoritism.

If governments protect the public interest through clear standards written into ordinances or ordinance-backed guidelines and abundant transparency in zoning, all will be well. An allegation of contract zoning shouldn't stick.