What does it mean to be ‘grandfathered’?


wpid-rps20141121_124028_777.jpgOne of the terms often used when it comes to land uses is “grandfathered.”  Generally speaking, the term refers to something  that would now be forbidden or illegal as a new use or activity but is allowed because the use, structure, or activity was instituted before it became illegal.  Accordingly, it is essentially a legal concept. However,

you would be hard pressed to find this term in any code or statute.  In my own city (San Diego) and I suspect many others, the term used in the municipal code is “previously conforming use.”  It can apply to behavior, i.e., “uses” or it can apply to the form or construction of a building or other structure.  The City of San Diego has published a Previously Conforming Uses – Fact Sheet that is very informative, both about the general concept and the specific limits to it in that city.

With respect to uses, they can be many and varied: industrial or reclamation uses zoned out of a neighborhood that has become more residential. The same is true of agricultural uses. Social services and penal facilities are also common targets of regulations that have become more restrictive. Construction code changes, e.g., seismic requirements or disabled access requirements. Watch out for “grandfathering” of the latter – it is a deceptive trap for the unwary – a subject for a later post. And of course, alcoholic beverage and entertainment uses are a major source grandfathering issues, as restrictions regulating them have become increasingly numerous and come from an increasing number of agencies.

In California, alcoholic beverage sales used to be regulated almost exclusively by the state, i.e., the Department of Alcoholic Beverages (ABC). However, increasingly municipalities have jumped into the act of adopting their own regulations and “licenses” for these uses. Moreover, multiple local agencies may have their own processes and permits, e.g., the local police department, the planning department, and the redevelopment agency (or it’s vestige, if any, since the elimination of redevelopment in California). In downtown San Diego, each of these agencies have their own process and permit for certain alcoholic beverage or entertainment uses. Often these municipal licenses are largely redundant with the ABC license, as well as each other, and seem to be born out of a belief that the state’s or other agency’s process or enforcement is inadequate – a debatable belief since municipalities are not precluded from enforcing ABC laws or licenses. As local municipalities have adopted new regulations requiring their own “license” or “permit,” these will often not apply to existing businesses based on constitutional notions of taking and seizure of property. It is important here to distinguish between “discretionary” and “ministerial” licenses / permits. The former refers to the ability of an agency to use its “discretion” – usually guided by written criteria – to deny a license. The latter are often referred to as “over-the-counter” licenses that simply require the completion of application forms and supporting documents, the payment of a fee, and review based on objective criteria, such as zoning or building codes not requiring the exercise of discretion. It is these discretionary processes and licenses / permits that are most often implicated by the grandfathering concept when it comes to alcoholic beverage or entertainment uses.

Knowing the peculiarities of the regulations applicable to a use or structure can create advantages for a prospective business, property owner, or developer. For example, years ago a client of mine was in negotiations to purchase the license of a tavern in a highly restricted area that would not normally have allowed a new such use. The seller was losing his lease and had to move. Having a vague understanding that his use was “grandfathered,” he wanted an exorbitant amount for his license. He also erroneously believed, despite our efforts to dissuade him of the belief, that his license would retain it’s “grandfathering” anywhere in the city that he decided to relocate. We knew that the “grandfathering” attached to the premises, not the license. Moreover, we knew that under ABC law, we could transfer a new license to that location within 90 days of the date that the previous business was open and operating under that type of license and we would receive largely the same benefit of having purchased the original license. Thus, we did not have to pay a premium for the grandfathered status of that license. Years later, another client acquired that same license and relocated it to another location within the same census tract based on other provisions of both ABC law and local law that essentially gave us a limited right to “transport” this grandfathered status to a new location. Thus, this client was able to a transport a tavern use into a neighboring “dining” district allowing only restaurant uses. This circumstance was but one of the many counter-intuitive regulatory quirks that exist in a variety of grandfathering situations applying to uses and structures.

There are also efforts to reign in some of the grandfathered uses. For structures, these efforts can come in the form of phased-in seismic upgrades imposed over a number of years, upon transfer of ownership, or upon change in use – or a hybrid of all three. For alcoholic beverages sales, such efforts most recently are coming in the form of the “deemed approved” ordinances being adopted by many municipalities. These deemed approved ordinances generally create a set of operational criteria, allowing law enforcement to cite the business for violations. An administrative hearing process is involved allowing for the revocation or limitation of the “grandfathered” use. This allows the municipality to essentially retrofit the grandfathered business with a discretionary use permit, including conditions of operation, if it has become a nuisance. Sometimes these ordinances include new onerous restrictions on the transfer of grandfathered uses – it remains to be seen how much of these ordinances will withstand judicial scrutiny.

As urban areas densify, dining and entertainment districts increase in size and number near dense residential areas. In turn, tension between these uses will also increase, resulting in more restrictions. The quirks of regulations around the grandfathering notions will create possibilities for pitfalls and opportunities for profit. Get to know the various regulations regarding your concern (or consult your land use attorney). The rules may be may be far different than you assume.

About William Adams

Attorney at Norton, Moore, & Adams, LLP.
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