Unlike conditional zoning (see separate post on this topic), contract zoning is illegal in North Carolina. While not technically “contract zoning,” it is also impermissible to place property into a conventional zoning district based on a promise that only a particular specified use or project will be carried out on the site.
[Adapted from Owens, Land Use Law in North Carolina (4th ed. 2023)]
Unlike conditional zoning (see separate post on this topic), contract zoning is illegal in North Carolina. While not technically “contract zoning,” it is also impermissible to place property into a conventional zoning district based on a promise that only a particular specified use or project will be carried out on the site.
Contract Zoning
In the classic contract-zoning situation, the local government and the landowner enter into a written agreement (sometimes recorded as a deed restriction) that if the government rezones the property to a specified new zoning district, the owner will carry out a particular use and accept specified limits or conditions on that use. While a North Carolina case has yet to involve this situation directly, in Chrismon v. Guilford County, the court held true contract zoning impermissible:
Illegal contract zoning properly connotes a transaction wherein both the landowner who is seeking a certain zoning action and the zoning authority itself undertake reciprocal obligations in the context of a bilateral contract. . . . [C]ontract zoning of this type is objectionable primarily because it represents an abandonment on the part of the zoning authority of its duty to exercise independent judgment in making zoning decisions.[1]
In Hall v. City of Durham, the court provided further elaboration on the contract-zoning definition:
A typical example of such reciprocal assurances occurs when the applicant assures the city council that the property will be used only for a specified purpose and no other, and the city council, in consideration of such assurance, agrees to rezone the property in question and not to alter the zoning for a specified period of time thereafter.[2]
This definition raises the question of whether a rezoning to a conventional district that is based on a specific proposal rather than all permitted uses is indeed contract zoning. In the cases discussed below, the Blades court termed such a decision contract zoning. However, the Chrismon court emphasized the necessity of a reciprocal agreement in order to have a contract. An element of reciprocity was not clearly present in the Allred and Blades cases.[3] The Hall decision resolved this question. The court there ruled that the practice was not contract zoning but was nonetheless illegal. When rezonings to conventional districts are involved, all potential uses in the new district must be fully considered for the rezoning to be valid.
Failure to Consider All Permissible Uses
A rezoning to a conventional zoning district that is based on a single project rather than on all permissible uses in the new zoning district is invalid.
Two cases from the early 1970s established this principle of North Carolina zoning law. Both cases arose in Raleigh, and both invalidated rezonings that allowed multifamily development in single-family residential neighborhoods. These early cases termed this practice contract zoning. The court has since dropped this characterization but has retained the result—the practice remains illegal in North Carolina.
In the first case, Allred v. City of Raleigh,[4] a 9.26-acre tract was rezoned from R-4 to R-10 to allow for the construction of twin high-rise apartment towers in what had been a single-family residential area. Two previous applications for similar rezonings of this site had been denied. Consideration of the rezoning petition that was approved included 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.[5] However, it recommended denial because of the proposal’s inconsistency with the comprehensive plan and because of opposition from the neighborhood. After a detailed discussion of the project, in which a prominent member of the General Assembly represented the developer, the city council voted to rezone the parcel in order to “afford the community the opportunity of this splendid development.”[6] The trial court and the court of appeals upheld the rezoning. However, the North Carolina 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. Writing for a unanimous court, Chief Justice Bobbitt held:
[N]otwithstanding the motivation of the City Council may be laudable, any action of the City Council that disregards the fundamental concepts of zoning as set forth in the enabling legislation may be arbitrary and capricious.
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.[7]
The second case, Blades v. City of Raleigh[8] presented a similar situation leading to the same result. In this instance, a five-acre tract was rezoned from R-4 to R-6 to allow the construction of twenty “ultra luxurious town- houses” (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 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.”[9] Thus, the court again unanimously invalidated the rezoning. This rule has subsequently been followed in North Carolina.[10]
In response to these cases, a number of zoning ordinances were amended in the 1970s and 1980s to explicitly forbid presentations on specific projects when petitions for rezoning to a conventional district are being considered. The Greensboro zoning ordinance formerly prohibited petitioners from offering any testimony concerning the specific intended use of the property. This resulted in frustrations for both the governing board and the applicant because they were participating in a hearing in which neither could directly discuss what they both felt to be the most relevant topic: precisely what was going to happen if the rezoning was adopted. Stephen Davenport and Philip Green recount the story of a rezoning hearing in which “the gentleman speaking in favor of a rezoning, when advised by the Chairman that the Commission could not ‘hear’ the testimony he was giving (about a specific use), moved closer to the microphone and continued in a louder voice (not recognizing the distinction between legal constraints and deafness).”[11]
A number of cities and counties, however, sought to retain the ability to evaluate rezoning proposals on the basis of the particular project motivating the rezoning petition, even when the rezoning proposed was to a conventional zoning district. Durham, for example, secured local legislation authorizing site plans to be submitted with rezoning petitions.[12] The court, however, continued to apply the Blades and Allred rule that a conventional rezoning must consider all of the potential uses allowed by the new zone. The court in Hall v. City of Durham[13] 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. Hall 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 lumberyard 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, a limit on the height to which lumber would be stacked, and a constraint on 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 but without considering all of the other possible uses in the new zoning district. The planning commission had recommended against the rezoning, noting that some of the twelve other uses permitted in the new district would not be compatible with the surrounding neighborhood. The court agreed and invalidated the rezoning.
The fact that specific plans are presented to the governing board, however, does not in and of itself invalidate a rezoning so long as the record is clear that all permissible uses are considered.
In Kerik v. Davidson County,[14] the petitioner for a 140-acre rezoning sent the governing board several memos while the petition was under review, outlining the proposed uses of the property if rezoned, describing various conditions to be placed on the property, describing proposed utility service, setting out an intent to donate park land to the county, and noting the alternative plans for the site if not rezoned. The court held that this provision of information did not invalidate the rezoning, as the record revealed that the board received a list of permitted uses in the proposed districts and discussed their potential impact (and the record reflected that the planning board had similar information and discussion).
Similarly, in Musi v. Town of Shallotte,[15] the court held that the fact that the town council was aware of a specific plan to build multifamily condominiums on the site of a proposed rezoning did not in and of itself indicate that the council was unaware of other uses that could be undertaken under the new zoning. The court noted that the range of uses allowed in the new town zoning district were similar to those allowed in the prior county zoning (albeit at a higher density), and each council member testified in depositions that the council had considered the full range of permitted uses at the time of the rezoning.
Morgan v. Nash County provides an additional illustration. The county was pursuing a specific company for economic development and rezoned a parcel that would accommodate construction of its plant. Before voting on the rezoning, each board member was provided a list of all permitted uses in the new zoning district, the list was read aloud at the hearing, and each board member signed an affidavit averring that the member considered all potential uses in the district before voting on the rezoning. The court found this adequately established that the board met its obligation to consider all permissible uses, not just the specific use being proposed.[16]
A mere allegation that a particular use and not all permissible uses were considered is inadequate to invalidate a rezoning. This is illustrated by Graham v. City of Raleigh,[17] where a rezoning from residential to office and institutional use was upheld over a contract-zoning challenge. The governing board and the planning board had met nine times to discuss the zoning of the site, and the record demonstrated “clearly that the circumstances and conditions concerning the questioned zone changes 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.”[18]
When a specific development proposal has motivated a rezoning request, many local governments explicitly note in the hearing record the full range of uses that would be allowed in a new zoning district. This is often done in a staff report that is presented to the governing board prior to a vote on the rezoning. It is not uncommon for the list to be read aloud at the hearing, along with a statement that any of the permitted uses (in addition to any specific project that has been mentioned) would be allowed if the property was rezoned. Such a recitation is sufficient to avoid invalidation of a rezoning on the basis that all potential permitted uses were not considered prior to action.
[1]. 322 N.C. 611, 635, 370 S.E.2d 579, 593 (1988). Most states traditionally held such bilateral agreements illegal.
[2]. 323 N.C. 293, 299, 372 S.E.2d 564, 568 (1988). In the example provided by the court, the attempt to limit the discretion of future boards with a binding agreement not to change the zoning is particularly troublesome. However, the owner and local government can accomplish much the same through use of either a development agreement or a vested right based on a site-specific development plan. Both are based on the ordinance in effect at the time of the agreement but vest the right to rely on that ordinance for an extended time into the future..
[3]. This fact produced a split on the court in Chrismon and Hall. The dissenters would have held that a rezoning based on a specific proposal was illegal contract zoning whether or not there was a reciprocal agreement.
[4]. 277 N.C. 530, 178 S.E.2d 432 (1971).
[5]. Id. at 536–37, 178 S.E.2d at 435 (quoting planning-commission report).
[6]. Id. at 539, 178 S.E.2d at 437 (quoting council-meeting minutes).
[7]. Id. at 545, 178 S.E.2d at 440–41. The owner of the site subject to the litigation in Allred was subsequently successful in having the site rezoned from R-4 to R-10. In this later, successful rezoning, the applicant presented a professional traffic analysis, a study of the compatibility of the rezoning with the thoroughfare, and a land use study. The applicant and the staff studiously avoided reference to a particular project and instead focused on all permitted uses. A protest petition was filed, but the rezoning was unanimously adopted. Single-story attached housing that was more compatible with the neighborhood than high-rise towers was eventually built on the site.
[8]. 280 N.C. 531, 187 S.E.2d 35 (1972).
[9]. Id. at 550, 187 S.E.2d at 46. Luxury single-family homes were eventually constructed on this site. See also Godfrey v. Union Cnty. 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).
[10]. In Alderman v. Chatham County, 89 N.C. App. 610, 366 S.E.2d 885, review 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 Cnty., 77 N.C. App. 407, 335 S.E.2d 76 (1985); Rose v. Guilford Cnty., 60 N.C. App. 170, 298 S.E.2d 200 (1982).
[11]. Stephen E. Davenport & Philip P. Green, Jr., Special Use and Conditional Use Districts: A Way to Impose More Specific Zoning Controls 13 (1980).
[12]. See S.L. 1975-671, § 92 (Durham city). S.L. 1989-950 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, N.C., Unified Development Ordinance § 3.3.3 (2022).
[13]. 323 N.C. 293, 372 S.E.2d 564 (1988).
[14]. 145 N.C. App. 222, 551 S.E.2d 186 (2001). See also Childress v. Yadkin Cnty., 186 N.C. App. 30, 650 S.E.2d 55, 64 (2007) (discussion at hearing by petitioner as to uses of the property if rezoned not per se violation).
[15]. 200 N.C. App. 379, 684 S.E.2d 892 (2009).
[16]. Morgan v. Nash Cnty., 224 N.C. App. 60, 735 S.E.2d 615 (2012), review denied, 366 N.C. 561, 738 S.E.2d 379 (2013). In fact, even though the rezoning was upheld on appeal, the developer withdrew and the poultry-processing plant was not constructed on the site.
[17]. 55 N.C. App. 107, 284 S.E.2d 742 (1981), review denied, 305 N.C. 299, 290 S.E.2d 702 (1982).
[18]. 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).
