- Aren't Property Rights Sacrosanct?
- Can the City Down-Zone Land After the Fact?
I am no lawyer, and understanding property rights law is difficult even for the most qualified legal eagles. But I have uncovered two similar cases that have seen interesting, and maybe even surprising, rulings against property owners who want to convert golf course properties to residential housing tracts.
Here is a brief summary I have compiled from some legal websites.
Heatherwood Holdings, LLC vs. Homeowners
A federal court of appeals held that a golf course was encumbered by an implied restrictive covenant, preventing the foreclosing lender from selling the golf course for residential development.
The U.S. Court of Appeals for the 11th Circuit found that the original marketing of a subdivision where the golf course was located played a significant role in establishing an implied restrictive covenant.
Although the court found that there were no recorded covenants restricting the property's use to a golf course, it held that the property was limited to golf course use by an implied restrictive covenant, evidenced in large part by the testimony of homeowners who stated that the presence of the golf course was integral to their decisions to purchase in the subdivision.
Liberty Building Corporation vs. Skyline Woods Homeowners
In 2004, Skyline Woods Country Club LLC filed a voluntary petition for relief under chapter 11 bankruptcy. The court entered a sale order authorizing the sale of substantially all of the debtor’s assets, including a golf course, to an affiliate of Liberty Building Corp. The sale order provided that the sale was “free and clear of claims, liens and encumbrances.”
Months later, Liberty announced that it would not reopen the golf course, but rather would redevelop the property for other purposes (a housing tract).
Shortly thereafter, homeowners in the residential development located around the golf course brought suit against Liberty in Nebraska state court seeking to prohibit Liberty from using the property as anything other than a golf course.
The homeowners contended that:
- the golf course and their homes were part of a planned community,
- they had purchased their respective homes in large part because of the proximity and existence of the golf course,
- an implied restrictive covenant existed that required the property to be used only as a golf course and
- that implied restrictive covenant was not extinguished by the bankruptcy sale.
On March 28, 2007, the state court granted the homeowners’ summary judgment motion, finding that the 'implied restrictive covenants'
- did exist requiring the operation of the property as a golf course or similar facility,
- ran with the land and
- were enforceable against Liberty despite the free and clear nature of the bankruptcy sale.
B) Can a City legally down-zone a property after it is sold to someone who reasonably believes it is zoned for residential construction?
There are certain limitations on downzoning. The first limitation is the constitutional prohibition against taking private property without just compensation, stated in the Fifth Amendment of the Constitution. This has been interpreted as meaning that property cannot be rezoned to a category that leaves it with 'no reasonable economic use.'
For instance, property used as a golf course may be rezoned from residential (which usually permits golf course and other uses) to a category that allows the property to be used only as a golf course. This prevents redevelopment and presumably insures that the property will continue to be used as a golf course.
Contrary to the popular opinion, zoning does not go too far simply because it causes a loss. That act alone does not constitute a 'taking.'
In the case of the Escondido City Council's adaptation of the Homeowners Property Rights Initiative that effectively rezones the golf course as 'park/open space use only,' the new zoning would still allow the property to be used as a golf course.
Therefore, the new owner cannot claim the land has no reasonable use. He bought a golf course and can, reasonably, still use it as a golf course if he chooses.