The Effect of Zoning Violations on the Enforceability of Leases
| Publication year | 1990 |
| Pages | 2077 |
| Citation | Vol. 19 No. 10 Pg. 2077 |
1990, October, Pg. 2077. The Effect of Zoning Violations on the Enforceability of Leases
This article concerns an issue that has not been directly addressed by the Colorado courts: whether a lease may be enforced even though it restricts the use of the leased premises to one or more uses that violate applicable zoning laws. In most jurisdictions where this issue has been addressed, such a lease may not be enforced.
The article examines the various rationales used to support the general rule of non-enforceability and discusses the likely resolution of the issue in Colorado. Finally, it describes the remedies available to the parties to such a lease and briefly explores certain circumstances which cause some courts to depart from the general rule.
In jurisdictions other than Colorado, several different legal theories have been utilized to support the general rule of unenforceability.(fn1) It appears that the most commonly used theory is that leases which violate zoning laws constitute illegal bargains.
For example, the Ohio case of Weizman v. Chapin(fn2) involved the lease of a premises for the purpose of manufacturing screw machine products. According to the tenants, the subject of zoning had come up during negotiation, and the landlord had reassured them that there were other machine shops in the vicinity.
When the intended use was later discovered to conflict with the zoning ordinance, the tenant abandoned the premises, and the landlord sued for the rent. Although the court rejected the tenant's defense based on the landlord's alleged misrepresentation (about the "other machine shops"), the court nevertheless refused to enforce the lease because of the illegality of the proposed use of the premises.
Likewise, in Hartsin Construction Corporation v. Millhauser,(fn3) a New York court declared illegal a lease under which the premises were let solely for a business use prohibited by applicable zoning. The court refused to enforce the lease, notwithstanding a clause in the lease which required the landlord to seek a zoning variance on the issuance of an order against the business use.
Illegality is not the only rationale used to avoid leases violative of zoning laws. Some courts have used, instead, the doctrines of failure of consideration, mistake, commercial frustration and impossibility of performance, particularly when the zoning violation is unknown to the parties at the inception of the lease or when it arises subsequently because of a change in the zoning laws.
In Sine v. Rudy,(fn4) the Utah Supreme Court acknowledged that neither of the parties was aware of a zoning restriction which conflicted with a lease provision requiring the premises to be used only as a used car lot. Stating that "the nub of this case is mistake, or possibly lack of consideration," the court invoked equity and upheld a decision to dismiss the landlord's claim for unpaid rent.(fn5)
In McNally v. Moser,(fn6) the Maryland Court of Appeals conceded that a zoning change which newly prohibited the tenant's preexisting use of the premises might have created an impossibility of performance or a frustration of the purposes of the lease that would allow the tenant to terminate the lease and his remaining obligations. However, the court ultimately rejected the tenant's affirmative defense, simply because he had failed to prove that his use of the premises had become impossible. The tenant failed to prove the terms of the city zoning ordinances on which he relied, and the court apparently declined to take judicial notice of them. The tenant also failed to show that he was under an immediate order to vacate. Most significantly, the tenant failed to demonstrate
his inability to obtain a zoning variance or to continue the preexisting use of the premises as a non-conforming use.
In Colorado, as elsewhere, courts will not lend their aid to enforce an illegal contract.(fn7) Whether a contract which violates local zoning regulations is an illegal contract has been addressed by the Colorado Court of Appeals in Woodward v. Jacobs.(fn8)
In Woodward, the parties entered into a contract to construct a triplex dwelling in an area restricted by zoning to single family and duplex dwellings. The plaintiff-contractor sued for certain amounts due to him...
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