Conditional Zoning: Is it Really Contract Zoning in Disguise?

December 8, 2008

Historically, Michigan has been one of the many states to consider contract zoning illegal and unenforceable. Contract zoning has been defined as a local unit of government’s promise to rezone property in exchange for the property owner’s use or development of the property in a particular manner. As part of this process, the property owner may even agree to provide other consideration to the local unit of government. Opponents of contract zoning have criticized the concept by arguing that the act of zoning is a legislative action. By participating in contract zoning, the local legislative body would be giving up this authority, which is against public policy. Nevertheless, the Michigan legislature appears to have responded to this criticism as part of its adoption of the Zoning Enabling Act. Specifically, the legislature adopted a statutory provision, which permits conditional zoning. However, the distinction between contract zoning and conditional zoning, if there is one, remains largely unclear.

In an effort to distinguish between the two concepts, proponents have defined conditional zoning as a property owner’s unilateral offer to a local unit of government to place certain conditions on the use and development of property. This unilateral offer is then accepted by the local unit of government’s act of rezoning the property. As you can imagine, the line between contract zoning and conditional zoning is often a blurry one. What is clear, however, is that a property owner interested in conditional zoning must be careful to follow the requirements of the statute. The property owner should also request a copy of any implementing ordinance, which may have been adopted by the local unit of government. If an implementing ordinance exists, it is likely to contain more specific procedures that the property owner will need to follow. It may also identify for the property owner the required contents of any offer, which will need to be submitted.

The property owner should make certain that any offer is in writing and is voluntary. The written offer should also outline the conditions that will be imposed on the use and development of the property. The conditions should bear some reasonable relationship to the rezoning which is being requested. For instance, if the property owner is requesting that residential property be rezoned to commercial property, it may make sense for the property owner to build a landscape screen to block noise from the new commercial development. An offer to make a simple cash payment to a local unit of government is not likely to meet the criteria of being a valid condition on the use and development of the property.

A property owner should also recognize that the local unit of government may place a time limitation on the property owner’s obligation to satisfy these conditions. If the conditions are not satisfied within this time limitation, the property will revert back to its former zoning classification. The property owner is allowed to seek an extension of time from the local unit of government to satisfy the conditions. However, whether the local unit of government grants such an extension of time is discretionary. As a final matter, a property owner should also include the procedures to be followed in order to return the property back to its former zoning classification if the conditions are not timely satisfied. This is not dictated by the statute, and if not contained within an implementing ordinance, should be specifically addressed.

If you have any questions about this article, please contact the author or a member of Miller Johnson’s real estate practice group.