NC Planning

Key Legal Issues

Contract Zoning

David W. Owens, Professor, Institute of Government, The University of North Carolina at Chapel Hill, CB# 3330, Knapp Building, UNC-CH, Chapel Hill, N.C. 27599-3330
May 1998

Such negotiation is permissible in North Carolina, but only if carefully defined procedures are observed. If a rezoning to a new general zoning district is premised on a particular development being built as a result, the rezoning will be invalidated on the grounds that all permissible uses in the new district were not considered in the decision. On the other hand, it is permissible carefully to blend a legislative rezoning decision with a concurrent quasi-judicial decision on a special or conditional use permit for a particular development.

Caution on the terminology used in these analyses is warranted. Planners, commentators, and the courts sometimes use very similar terms to describe different concepts; on the other hand, sometimes the same term is used by different parties to mean different things. Therefore, labels-for example, contract zoning, contingent zoning, conditional zoning, and conditional-use-district zoning-should be used advisedly.

Failure to Consider All Permissible Uses

In a 1971 case, Allred v. City of Raleigh,[1] a 9.26-acre tract was rezoned from R-4 to R-10 to allow construction of twin high-rise apartment towers in a previously single-family residential area. Two previous applications for similar rezonings of this site had been denied. In the consideration of the rezoning petition that was approved, there was extensive discussion of the particular project proposed. The planning commission report on the project noted that the particular proposal was for “very attractive” buildings of “outstanding architectural” quality.[2] However, it recommended denial because of inconsistency with the comprehensive plan and the opposition of the neighborhood. After a detailed discussion of the project, in which the developer was represented by a prominent member of the General Assembly, the city council voted to rezone the parcel in order to “afford the community the opportunity of this splendid development.”[3] The trial court and the court of appeals upheld the rezoning. However, the supreme court concluded that the rezoning was based on the specific plans of the applicant, had not considered all possible uses to which the property could be devoted under the new zoning, and was thus invalid. The court held:

In our view, and we so hold, the zoning of the property may be changed from R-4 to R-10 only if and when its location and the surrounding circumstances are such that the property should be made available for all uses permitted in an R-10 district. Rezoning on consideration of assurances that a particular tract or parcel will be developed in accordance with restricted approved plans is not a permissible ground for placing the property in a zone where restrictions of the nature prescribed are not otherwise required or contemplated. Rezoning must be effected by the exercise of legislative power rather than by special arrangements with the owner of a particular tract or parcel of land. [4]

A second case decided the following year, Blades v. City of Raleigh, [5] presented a similar situation and the same result. In this instance a 5-acre tract was rezoned from R-4 to R-6 to allow construction of twenty “ultra luxurious townhouses” (the existing R-4 zoning allowed only single-family residences). A site plan of the proposed development was presented at the rezoning hearing, and a representative of the owner explicitly noted that other permitted uses in the proposed R-6 district (e.g., a sanatorium, a hospital, or a rest home) would not be “proper development.” Even though the Raleigh City Council had previously adopted a resolution providing that rezonings were not to be based on a specific use or plan, the court concluded, “[I]t is quite apparent that the amending ordinance was adopted solely because the applicant convinced the Council that it would use the property for the construction of town houses as specifically described. Nevertheless, the adoption of the ordinance, if it be valid, would permit use of this property for any other purpose permitted in an R-6 district.”[6] Thus the court again unanimously invalidated the rezoning. This rule has subsequently been followed in North Carolina.[7]

In response to these cases, many zoning ordinances explicitly forbid presentations on specific projects when petitions for rezoning to a new, general-use district are being considered. For example, the Charlotte zoning ordinance provides:

Other local governments sought to address their interest in reviewing individual project proposals when considering a rezoning by securing local legislation authorizing site plans to be submitted with rezoning petitions.[9] However, in 1988 the court in Hall v. City of Durham[10] ruled that although a site plan may be submitted, its submission does not remove the requirement that all potential uses in a new general zoning district be fully considered. The Hall case involved the rezoning of a 12.9-acre tract from a single-family residential district to a commercial district to accommodate construction of a four-building commercial complex with an outdoor lumber yard and a parking area. A detailed site plan submitted with the rezoning petition included the physical layout of the development, a proposed donation of adjacent property to a conservation group, and detailed restrictions on development, including a landscaped buffer, the height to which lumber would be stacked, and the color of the buildings. Most of these detailed conditions had resulted from extensive negotiations with neighboring property owners. The city council based the rezoning on this carefully negotiated project, not considering all of the other possible uses in the new zoning district. The planning commission staff had recommended against the rezoning, noting that some of the thirteen uses permitted in the new district in addition to the one proposed would not be compatible with the surrounding neighborhood. The court agreed and invalidated the rezoning.

A mere allegation that a particular use rather than all permissible uses was considered is inadequate to invalidate a rezoning. This is illustrated by Graham v. City of Raleigh,[11] in which a rezoning from residential to office and institutional use was upheld over a contract zoning challenge. There had been nine meetings of the governing board and the planning board to discuss the zoning of the site, and the record demonstrated “clearly that the circumstances and conditions concerning the questioned zone change were peculiarly within the knowledge of the city council and that they considered all permissible uses available in the Office and Institution I and III districts in enacting the questioned ordinance.”[12]

Contract Zoning

In Chrismon the court distinguished between conditional-use-district zoning, which is permissible, and contract zoning, which is impermissible:

The court concluded that conditional-use-district zoning was not contract zoning per se because the promise was unilateral (the owner offered to use the property according to a subsequently issued conditional use permit; the local government made no reciprocal promise), and the governing board retained its independent judgment because it had not made a reciprocal promise.[14]

The question this raises is whether a rezoning to a general use district that is based on a specific proposal rather than all permitted uses is contract zoning. The Blades court termed such a decision contract zoning, but the Chrismon court emphasized the necessity of a reciprocal agreement in order to have a contract. Such an element of reciprocity was not clearly present in the Allred and Blades cases. The Hall decision resolved this question. The court ruled that the practice was not contract zoning, but was nonetheless illegal. When rezonings to general use districts are involved, all potential uses in the new district must be fully considered for the rezoning to be valid.

2. Id. at 536-537, 178 S.E.2d at 435.

3. Id. at 539, 178 S.E.2d at 437.

4. Id. at 545, 178 S.E.2d at 440-441.

5. 280 N.C. 531, 187 S.E.2d 35 (1972).

6. Id. at 550, 187 S.E.2d at 46. Luxury single-family homes were eventually constructed on this site. See also Godfrey v. Union County Bd. of Comm’rs, 61 N.C. App. 100, 300 S.E.2d 273 (1983) (invalidating rezoning of 17.45 acres from single-family residential to heavy-industrial use to allow owner to relocate his grain-bin operation).

7. In Alderman v. Chatham County, 89 N.C. App. 610, 366 S.E.2d 885, rev. denied, 323 N.C. 171, 373 S.E.2d 103 (1988), a 14.2-acre rezoning from a residential-agricultural district to a mobile home district was invalidated because only the density of the development according to a restricted plan submitted by the owner, rather than all the uses permitted in the new district, was considered by the governing board. The court of appeals noted that a rezoning was invalid if it was “accomplished as a direct consequence of the conditions agreed to by the applicant rather than as a valid exercise of the county’s legislative discretion.” Id. at 619, 366 S.E.2d at 891. In several cases the courts have also held that it is improper to grant summary judgment when an allegation has been made that a rezoning decision was based on a single proposed project. Nelson v. City of Burlington, 80 N.C. App. 285, 341 S.E.2d 739 (1986); Willis v. Union County, 77 N.C. App. 407, 335 S.E.2d 76 (1985); Rose v. Guilford County, 60 N.C. App. 170, 298 S.E.2d 200 (1982).

8. CHARLOTTE CODE § 1301.3, app. A. Similarly the Greensboro zoning ordinance provides that in rezonings to a general use district, the petitioner “shall be prohibited from offering any testimony or evidence concerning the specific manner in which he intends to use or develop the property.” GREENSBORO CODE § 30-178.

9. See, e.g., 1975 N.C. Sess. Laws ch. 671, § 92 (Durham city). 1989 N.C. Sess. Laws (1990 Sess.) ch. 950 extended this authority to Durham County. The submission of a development plan when a petition for a rezoning is made is at the option of the landowner. The Durham ordinance also requires submission of a traffic impact analysis when a development plan is submitted in certain zoning districts. DURHAM CITY CODE § 24-22(4)(a). Other similar local legislation includes 1989 N.C. Sess. Laws ch. 430 (Knightdale) and ch. 611 (Zebulon). Other local governments have also adopted ordinance provisions that allow site plans to be submitted with rezoning proposals. For example, the Gastonia zoning ordinance requires plans to be submitted for certain zoning-district petitions, such as rezoning to a condominium district, a multifamily district, or a shopping center district (which also includes a requirement for submittal of a market analysis and a statement regarding readiness to proceed with construction within a year of the rezoning). GASTONIA CODE § 25-16.1, -17. In these instances the applicant may submit a “simple sketch plan,” analogous to the sketch plan used in many subdivision ordinances, for staff review and comment before making a formal petition for rezoning. The Morehead City zoning ordinance requires a comprehensive site plan to be submitted with all petitions for rezoning to commercial, industrial, or multifamily development, and a drainage impact study to be submitted with all petitions. MOREHEAD CITY CODE § 14-3.

10. 323 N.C. 293, 372 S.E.2d 564 (1988).

11. 55 N.C. App. 107, 284 S.E.2d 742 (1981), rev. denied, 305 N.C. 299, 290 S.E.2d 702 (1982).

12. Id. at 111, 284 S.E.2d at 745. See also Dale v. Town of Columbus, 101 N.C. App. 335, 399 S.E.2d 350 (1991).

13. 322 N.C. 611, 635, 370 S.E.2d 579, 593 (1988).

14. In Hall, decided just two months after Chrismon, the court provided further elaboration on the contract zoning definition:

323 N.C. 293, 299, 372 S.E.2d 564, 568 (1988).