TNCPA §208(g):Discontinuation

We have only two sections left for discussion: TNCPA §208 (g) and §208 (d) (2). This post will talk about §208 (g), the discontinuation clause. This subsection of the statute is complicated but certainly that is not unusual in the context of this statutory provision. Legislatively, there had been a debate about the discontinuation of non-conforming properties. Under the common law of most states, if the owner of a non-conforming property abandons the property with no intent to resume, the non-conforming aspect is lost and future activities on the property must conform to the zoning regulations. Many cities across the country, and in Tennessee, adopted discontinuation provisions which would limit the time that the property could be inactive, and once that time had elapsed, any renewed activity had to comply with local zoning. Notice the difference however: under the common law, the property owner had to abandon the use, implying a conscious and voluntary waiver of the right to use the non-conforming property; under the discontinuation provisions, even if the owner intended to resume the activity, if the inactivity lasted beyond the length of time specified in the ordinance, the non-conforming aspect was lost. Some cities had relatively reasonable discontinuation periods, including Metro Nashville which allowed inactivity for two years; others, were much shorter, like Chattanooga with its 60 day provision.

In order to bring some uniformity to this area, the Tennessee General Assembly once again amended the act, this time in 2004. I have posted a copy of the public act, Chapter 775 of the Public Accept 2004 on the Internet at this location. The reason to post the original public chapter is to highlight a key difference between the statutory codification in the original public chapter.

If you compare the two, specifically §208 (g) (4), you will note that the original Chapter 775 ends subsection (g) (4) with the period before the words “provided, however…” Those words then begin the next sentence and the formatting is such that it is clear that they apply to the entirety of subsection (g). In fact, I have included a copy of subsection (g) (4) here as originally adopted by the Tennessee General Assembly.

This is critically important. Because essentially, the final proviso of (g)(4) seems entirely to reverse the previous provisions of the paragraph. The early provisions of §208 (g) seem to indicate that the TNCPA “shall not apply if an industrial, commercial, or other business establishment ceases to operate for a period of thirty (30) continuous months…” The next sentence provides: “Anytime after the thirty-month cessation, any use proposed to be established on the site, including any existing or proposed on-site sign, must conform to the provisions of the existing zoning regulations.”

Based on this language at the beginning of §208 (g), it seems that the Tennessee General Assembly had chosen the objective approach: instead of requiring an intentional and voluntary waiver, if the non-conforming property remains inactive for 30 months or more, the non-conforming aspect of the property is forever lost. Then there are four subsections which explore situations in which the 30 month time frame may be tolled because of extenuating circumstances.

But then there’s the final proviso, which, in the original legislation appears as follows in relationship to subsection (4):

. . .

(4) The reactivation of the non-conforming use any time prior to the end of the thirty (30) month period.

Provided, however, that the restrictions of subsections (g) & (i) shall only apply if the property owner intentionally and voluntarily abandons the non-conforming use of the property. In any contested matter on the use of such property, the government has the burden of proving an overt act of abandonment in such matter.

I have spoken to a number of the legislators and lawyers involved in the amendment to this provision in 2004, and evidently this final proviso to (g) was added at the last minute. But the implication of this section is clear: the 30 month discontinuation provision is of little impact; first, before (g), or for that matter (i) applies, there must be some evidence that the property owner intentionally and voluntarily abandoned the non-conforming property and the government has the burden of proving an overt act of abandonment. If there is no demonstration of intentional and voluntary abandonment, then even if the property remains inactive for five years, the non-conforming aspect may be resumed regardless of the local zoning provisions.

By the way, I don’t know of any appellate court decisions interpreting this final proviso; I do know of one trial court decision here in Davidson County where the court seemed to give precedence to the requirement of intentional and voluntary abandonment, but also found that the 30 months have been tolled by litigation involving the property. If anyone knows of any other case law with regard to the apparent inconsistency between the final proviso and the remainder of subsection (g), I’d love to hear about it.

Let’s start from the top and review §208 (g) in its entirety. The subsection first indicates, as mentioned above, that the three principal sections of the act, (b)-(d) will not apply if the business “ceases to operate” for a period of 30 continuous months. After that, “any use proposed to be established… must conform to the provisions of the existing zoning regulations.”

Subsection (g) then lists four circumstances under which the discontinuation provision would be tolled. Those include (1)litigation; (2) construction, reconstruction, or renovation; (3) application for a building permit; and (4) reactivation of the non-conforming use prior to the end of 30 months.

There is, however, another provision which seems to undercut entirely the original restriction. The final lines of §208 (g) (4) read:

Provided, however, that the restrictions of this subsection (g) and subsection (i) shall only apply if the property owner intentionally and voluntarily abandons the non-conforming use of the property. In any contested matter on the use of such property, the government has the burden of proving an overt act of abandonment in such matter.”

This leaves us with something of a dilemma. The first sentence of subsection (g) requires nothing more than 30 months of inactivity in order for the protections of the statute to lapse. The last sentence requires voluntary abandonment by the owner and the government has the burden of proving “an overt act of abandonment” in order to prevail. Although this section has been on the books for almost 10 years, we still have no appellate court decisions. The lower court decisions in which I have been involved, have all deferred to the intent of the owner. The difficulty with that approach is that the four circumstances which toll the time of discontinuation are unnecessary if everything turns on the owner’s intent. In fact, the 30 months themselves are unnecessary. If the owner does not intentionally abandon the non-conforming property, it is merely inactive, and if the owner intends at some point to resume the activity, why couldn’t 10 or 15 years go by so long as there was an intention to resume those activities? Subsection (g) is notably difficult understand.

Perhaps we’ll get an answer this question one day. As it stands now, it’s difficult understand subsection (g). Obviously, there was a late amendment in the state capital when this provision was passed, tacking on the final proviso. Equally as evidently, no one really thought through how the final proviso would affect the preceding language. And, as it happens, the final proviso is almost contradictory to the foregoing provisions of the subsection.

Remember one other thing: as we have discussed previously, subsections (g), (h), and (i) do not apply to home rule municipalities unless the municipality has opted in by action of its legislative body. TNCPA §208 (j). That means that Memphis, Knoxville, and Chattanooga may all specify their own time of discontinuation as applied to commercial and industrial businesses, and related rules. This three cities are not bound (unless they choose to do so) by the final proviso or even by the length of time specified in subsection (g) for inactivity.

Airbnb

Airbnb made quite a bit of news yesterday when a New York City Judge ruled that transient occupation of an apartment or condominium is illegal under the city’s condominium laws. Several other charges were brought, including a zoning violation, but because ostensibly one of the uses permitted in the district included transient residency, those other charges were dismissed.

Airbnb is an Internet company that enables rental of various residential housing to guests who are traveling in the area. In essence, the traveler uses the Airbnb website to find temporary housing in the city that he or she will be visiting. There is a brief description of the unit, together with the price, and if it appeals to the traveler, s/he can arrange to rent the unit and pay Airbnb, who takes out its fee, and then pays the owner of the unit.

The difficulty with this arrangement is that most cities have zoning regulations which preclude short-term residential occupancy in most residential districts. So if the zoning district allows apartments, condominiums, single family residences and so forth, there is a pretty good chance that it precludes residential occupancy on a less than 30 day basis.

As a result, it may very well be that this arrangement for housing rentals is illegal in many cities across the country.

Here’s the court’s decision.

In Tennessee, we've already seen one example of this type of case.In Wade v Patterson, a homeowner in Hamilton County was doing just about the same thing. He advertised his home for short-term occupancy on the Internet and elsewhere, and would lease the home to visitors to the Chattanooga area for periods of less than 30 days. He was charged with violation of the local zoning regulations,and the trial court concluded that he was in fact in violation of the zoning provisions. However, on appeal to the Tennessee Court of Appeals, the trial court was reversed. Although the court found that there was a specific land use "tourist home," which provided for this use, the local legislative body had never zoned any property in the county for that particular use. As a result, applying the well-known zoning rule of construction, that any ambiguity is resolved in favor of the property owner, the court concluded that the local legislative body had intended to allow this type of activity, but having failed to specify exactly where that would be permitted, the property owner did not have to pick and choose and guess about it. As a result, the court concluded that the regulations were unconstitutionally vague and reversed the decision of the trial court.

The interesting question here is how many of the local governmental zoning regulations in middle Tennessee have the same failing? In a quick review of the Metro Zoning Ordinance, it wasn't entirely clear to me how this difficulty is handled. Under the terms of its predecessor, COMZO, adopted in 1974 and repealed in 1998, there were express provisions for transient occupancy prohibiting such uses in residential districts. Although Metro does have provisions for hotels and motels, I assume the same would've been true in Hamilton County; those uses are it would seem quite dissimilar. In any event, cases such as Wade v Patterson make it clear that local regulations should carefully be drawn to address and resolve this kind of issue.

TNCPA §208 (k) & (l): Used Car Lots and Industrial Sales to the Government

We last spoke about the after-acquired property provision of the Tennessee Non-Conforming Property Act, Tenn. Code Ann. §13-7-208 (e). Today we will shift focus once again, and take a look at two relatively unused sections of the act, the exemption for industrial establishments making government sales (§208 (k)) and the Metro used car sales provision (section 208 (l)). In my practice, I have never used the former, and only occasionally use the latter. Certainly because the Metro used car sales provision only applies to Metro Nashville, it doesn’t get a lot of use and other sections of the state. In any event, let’s take a look at these two unusual sections of the TNCPA.

We’ll begin with the industrial sales to governments provision, TNCPA §208 (k). This section limits the applicability of the discontinuation provision, the TNCPA §208 (g) to any industrial property which:
(1) makes 25% of its gross sales to local, state, or federal governments, their contractors, or subcontractors; or
(2) makes 75% of its gross sales to agricultural or construction businesses.

The real question here is what does this accomplish? It is certainly not very clear. In fact, it may be that the provisions of the TNCPA have gotten so complicated, that the General Assembly wound up making an exemption which makes little or no sense. As we will discuss shortly, the discontinuation provision under subsection 208 (g) is deceptive and probably will ultimately be interpreted to require an intentional and voluntary abandonment of a non-conforming use. Presumably, none of the industrial establishments which would be subject to §208 (k) would intentionally and voluntarily abandon the industrial use of the land unless they actually wanted to stop operations. What I think may have happened is that someone misread subsection (g), and believed that 30 months of discontinued activities worked an abandonment of the non-conforming property.

But, in fact, by exempting properties with industrial sales to governments from subsection (g), in fact that leaves it up to the local government as to how to address such non-conforming properties. As a result, the local government could require that the use of the property be deemed abandoned after inactivity of six, 12, 18 or 24 months, or any time in between. As a result, the industrial property has less protection by virtue of this subsection then it would have give the industrial sales to governments provision did not exist. This seems a very strange statutory amendment. I’m sure that there was a specific reason for this particular provision; I’m not privy to what was. If anyone reading this knows, I’d be interested to learn the circumstances which gave rise to this provision.

The second provision for review today, the Metro used car lot provision, gives the zoning board of a Metro Government, with more than 500,000 population in the 2000 federal census, (that means it only applies to Metro Nashville) the ability to terminate a non-conforming used car lot, after notice and hearing, if:

(1) it is within 1000 feet, on the same block as, or on the block across the street from another used car dealer;

(2) it has less than 250 feet of frontage; and

(3) greater than 10% of its inventory is composed of flood damaged, rebuilt, or salvage titled cars.

In order to determine whether a particular used car dealer is within the third requirement, the owner must make the titles for all of the vehicles located on the lot available within three days of a request by the local zoning official. A failure to comply results in a rebuttable presumption that at least 10% of the inventory consists of flood damaged, rebuilt or salvaged titles.

Several observations are worthwhile here. First, it seems to me that there is a significant question as to whether or not this results in a taking of the property if there is a zoning board order requiring the non-conforming property to terminate. To shut down an ongoing business which at one time complied with all the zoning regulations and which but for this unusual code section, singling out used car lots, seems to me confiscatory.

Second, there is a significant issue regarding proof before the board of zoning appeals. Let’s first assume that our used car dealer had 50% of his titles in the flood damaged, rebuilt, or salvaged category. He receives the notice from the zoning board, but by the time he appears for the hearing, he has sold or otherwise disposed of all but 10% of those used vehicles. If the used car dealer now complies, even if at some point, he did not, must the board terminate the activity? Again, it seems to me that this puts the board in a difficult situation, and certainly given the prospect that the decision might be confiscatory, the viral the board, I’d certainly vote in favor of the used car lot.

Third, it seems to me that under the circumstances, any appeal from the decision of the board of zoning appeals should be by virtue of the statutory writ of certiorari, with a trial de novo before the circuit or Chancery courts, rather than pursuant to the common law writ of certiorari, where the findings of fact by the zoning board are sacrosanct. In Judge Ben Cantrell’s landmark article in the University of Memphis Law Review, he indicates that where a species of property right is at stake, the appropriate appellate mechanism is the statutory writ and not the common law writ. The theory is that to the extent that an administrative body may be depriving a party of a property right, that’s a judicial decision, and reviewable by the statutory writ. That means ultimately that a real judge will make a final decision.

On a related point, you might not even have to sue under either version of the writ of certiorari; perhaps you simply sue in federal court for taking of your property without just compensation. That seems to me to be a very powerful compensatory mechanism for this unfortunate regulation.

Fourth, one other little tidbit. This requirement that the titles be produced within three days may well be a violation of the Fourth Amendment to the federal Constitution. To avoid this, the authors of the amendment created the rebuttable presumption in the papers were not produced. But from my perspective, to increase the probability that the owner might lose a property right based on a statute which requires a violation of his or her fourth amendment rights is inappropriate and unconstitutional. As a result, is not clear to me that this statutory provision is enforceable in the least.

There is another constitutional objection it seems to me. Singling out a single land use, right down to the external inventory kept on the lot, seems not to be a zoning regulation in the first place. There is at least a significant equal protection argument (if I have 251 feet of frontage I’m okay, but if I have 249 feet of frontage I’m not), as well as a substantive due process argument (don’t all used car lots have the same deleterious impact on surrounding land uses, and if so, why have these small ones been singled out for different treatment?). In any event, the enforceability of this Metro used car lot provision is significantly in doubt.

Finally, I’ve talked about this particular section many times with the Metro Nashville codes staff, and they all find it to be extremely irksome. It is not really codes enforcement. It basically winds up being an enforcement of used car lots. Enforcement is difficult and administratively challenging.

In our next installment, we’ll tackle the discontinuation provision, TNCPA §208 (g). In many ways this is an important part of the act, but it is unnecessarily complicated it would seem. We’ll see if we can shed some light next time.

TNCPA §208(e): No Expansion on After-Acquired Property

In our last post, we discussed two of the principal exceptions to the Tennessee Non-Conforming Property Act, Tenn. Code Ann. §13-7-208, specifically subsections (f) and (j). To summarize, the act simply doesn’t apply to a premier type resort city (Gatlinburg), nor do subsections (g), (h), and (i) apply to home rule municipalities. A list of those home roominess Pawleys is included with the last post.

In a similar vein, this post will briefly discuss a significant restriction on the generally favorable treatment given non-conforming properties by the act. That restriction is found at TNCPA §208(e), which reads as follows:

Subsections (b)-(d) apply only to land owned and in use by such affected business, and do not operate to permit expansion of existing industry or business through the acquisition of additional land.

Therefore, while a non-conforming property is permitted to continue, including replacement and repairs, as desired under subsection (b)(1); to expand, including the construction of additional facilities under subsection (c); and to destroy and rebuild under subsection (d)(1); the continuation, expansion, or reconstruction cannot take place on after a acquired property. Once the property becomes legally non-conforming, purchase of any additional property cannot be used in a manner which expands the non-conforming activities.

There is a case directly on point. 421 Corporation v Metro Nashville, 36 SW 3d 469 (Tenn. Ct. App. 2000), involves the proposed expansion of an adult entertainment establishment (“The Purple Onion”) located at 2807 Nolensville Road in Nashville. The owner had purchased some additional property adjacent to the Purple Onion and wanted to expand the operations of the establishment into the adjacent buildings. The city refused issue a permit, and on appeal to the Metro Board of Zoning Appeals, the denial was upheld. An appeal was taken to Davidson County Chancery Court where the zoning board decision was affirmed, and the same result was obtained before the Tennessee Court of Appeals.

The owner’s argument was that his application was made pursuant to the Metro Zoning Ordinance and its language was less restrictive than the state statute. Judge Koch, writing for the court, concluded that the territorial restriction was mandatory and that even if the local ordinance could be interpreted so as to permit such an expansion it conflicted with the state statute and was not permissible. As a result, the decision of the lower court and the zoning board were both upheld.

As a final footnote, this subsection (e) was part of the original 1973 Tennessee Non-Conforming Property Act. The original act was comprised, generally speaking, of what is now §208 (b)(1), (c), (d)(1), and (e). In addition, with regard to both subsections (b) and (d), additional language was later added which necessitated new numbered paragraphs. In each instance, the retained paragraph became (1), and the new language is included in the paragraph marked (2). In the case of subsection (b), the newly added language deals with off-premise signs and in the case of subsection (d), the newly added language deals with multifamily residential land use.

In our next post, we’ll take a look at a couple of provisions of the act which are not used all that often.

TNCPA §208 (f) and (j): Special Exemptions

We have now reviewed the three main sections of the Tennessee Non-Conforming Property Act, Tenn. Code Ann. §13-7-208 (b)-(d). There is one additional section of great importance subsection (g), but we will defer discussion of that subsection for a few posts.

Today we will talk about two subsections which provide exemptions from the applicability of the statute. Sections 208 (f) and (j) are special provisions limiting the local governments to which the statute applies. Section 208(f) makes clear that sections (b)-(e) do not apply to “premier type tourist resorts” as defined by Tenn. Code Ann. §67-6-103 (a) (3) (B). Mainly, this means that those sections do not apply to Gatlinburg.

Section 208 (j) limits the applicability of subsections (g), (h) & (i) so that they do not apply to home rule municipalities. We will discuss the substantive impact of those subsections soon, but for now they relate mainly to discontinuation of the non-conforming property. There are few home rule municipalities here in Tennessee and they include some of the biggest cities in the state such as Memphis, Knoxville, and Chattanooga. Metro Nashville is a consolidated form of government but not home rule so that the limit does not apply to Nashville.  Of course, a home rule city may opt in to those provisions by action of its local legislative body. The other home rule municipalities are as follows:

Clinton
East Ridge
Etowah
Johnson City
Lenoir City
Mt. Juliet
Oak Ridge
Red Bank
Sevierville
Sweetwater
Whitwell

This list is from the Municipal Technical Advisory Service (MTAS) website which can be found here.

Of course, these exemptions just make the application and enforcement of the statute that much more difficult.

There is another interesting question with regard to this subsection (j). Can a home rule municipality opt in to only one of these three subsections, or if it intends to opt in, must it opt in and accept all three? This is important because subsection (i) specifically requires that any structure rebuilt on the property must conform to the bulk regulations. It might be helpful for a home rule municipality to opt in regarding subsection (i) if you did not also have to accept the complexities of subsection (g). The same is true with regard to subsection (h) which limits the expansion of a billboard. But, if the home rule municipality must accept all three together, that makes the decision quite a bit harder. Generally speaking, both subsections (h) and (i) place restrictions on expansion and reconstruction. Subsection (g) seems to limit their applicability as we will describe in a future post. But if you could adopt subsection (h) and (i) without adopting subsection (g), that might be a favorable position for a home rule municipality. In that way, the municipality would get the limitations on expansion and reconstruction, but not have to deal with the complexities and confusion which seemed to surround subsection (g).

In our next entry, we will briefly discuss TNCPA §208 (e), which restricts expansion of any non-conforming  property  beyond the land at the time the property became non-conforming.