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Appraisers play a key role in land use and zoning litigation. Highest and best use analysis, traditionally a 4-step process, provides the backbone of all real estate analysis, but is inadequate in testing a property's constitutional use. A 5th step must be added to address community concerns and public interest. The result is appropriate use analysis, which can provide the court the proper land use test. This test for constitutionality is the judge's role. The issues regarding appropriate use and the highest and best use are highly relevant today, particularly in high-growth areas and in static or declining population centers. While court testimony on straightforward valuation issues has provided a constant need for appraisal services for many decades, the unparalleled explosive growth in many areas has only recently produced a new need for professional appraisal services.

Zoning ordinances and comprehensive plans are typically made up of text and map elements. Rezoning requires changing both the land use and zoning maps, but the ordinance texts are typically general enough not to require modification. In some jurisdictions, court-imposed zoning changes may not be indicated on the map.

When real estate is offered to the local government for rezoning analysis and a formal vote, a four-step process is typically applied, as follows:

1. Initial contact is made with a staff planner and the zoning administrator regarding forms, fees, plats required, notice to nearby property owners, etc. The staff personnel provides insights into the neighborhood and may suggest modifications that will make the proposed change more compatible and acceptable.

2. The application for rezoning is formally filed with the zoning department and formal staff evaluation is begun, including research on the capacities of water, sewer, streets, schools and all other impacted infrastructure, and zoning map uses; evaluation of deficit/surplus facilities; and issuance of the results of the infrastructure and zoning map evaluation. The staff makes a recommendation to the professional planning commission and to the governing body (council, aldermen, commissioners, etc.).

3. A meeting is held with neighborhood leaders to ensure that plans are understood and to attempt to neutralize the opposition and-potentially secure its support.

4. The planning commission is typically a small group of appointees with some experience in urban planning, sociology, or local business. They will review the package created by the planning staff and issue a nonbinding approval or disapproval to the governing body.

5. The governing body makes the final determination based on staff and planning commission recommendations in a public hearing. Much pressure exists when proposals are controversial and the environment in which this decision is made is far more volatile than the prior two decisions. However, typically there is no appeals process other than the constitutional challenge in the local court system. This challenge is the focus of this article.

The appraiser is a central figure in an appealed case about rezoning. The jurisdiction declining the rezoning application must now be sued for "arbitrary and capricious" decsions considered not to be constitutionally based. Therefore, the property owner must litigate against his or her own government at personal cost.

Litigation in which a property owner sues his governing body on constitutional grounds is now allowed in most states. Thus, all three houses of government-executive, legislative, and judicial-are now firmly entrenched in land use matters and planning decisions. This appeals system is slow and costly but allows a property owner to appeal outside the normally elected commission, council, or board decisions.

The neighborhood and market analyses are also required as part of every appraisal and are key to a successful appropriate use analysis. The proposed new use is evaluated as a good or a poor fit for the existing neighborhood fabric, with at least the following items being considered:

Thoroughfare patterns and the mix of land uses

Adequacy of the infrastructure, including sewer and water; schools, hospitals, police, and fire protection; and public parks and flood plains

Range of property values, personal incomes, and property rents

Analysis of the market's needs for the proposed property (i.e., supply and demand) The following case study helps to illustrate.

CASE STUDY

The subject is a proposed store located in an upscale neighborhood homogeneously zoned for half-acre lots. The subject parcel of 2.0 acres lying at the intersection of a minor and collector thoroughfare had been planned by the property owner as a convenience commercial site (convenience store but with no gas sales) for many years. Other commercial uses are located outside the neighborhood on major highways /thoroughfares. These retailers have oriented their facilities to the driveby and nonlocal purchaser rather than the neighborhood-based market that the subject provides. The future patrons of the proposed store are challenging the rezoning request and may control the outcome of the hearing-based commission vote.

This is a typical case. The constitutional test is applied to this property's usefulness to the owner and the community at large as zoned rather than to the value that the new zoning will create. The property owner must show that the subject has little to no marketability as zoned and that the value is declining under the current residential zoning. The proposed use is a freestanding drugstore that attracts the population in the immediate area.

Since higher-density zoning (office, hotel, and other commercial) almost always produces higher values than less intensive uses (residential, multifamily, industrial, etc.), no constitutionality test was conducted. The case made must, therefore, be based on other concepts. Most local courts would depend on the highest and best use analysis alone in determining the constitutionality of a zoning decision.

Highest and Best Use

Highest and best use analysis is the foundation of any appraisal, market study, or appropriate use analysis. Buyers and sellers are surveyed to determine the use or uses that maximize the value of the subject property to the owner. The following definition describes the scope of a highest and best use analysis well:

[T]hat reasonable and probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility and maximum profitability.1

Appropriate Use

Appropriate use analysis is the best method to use to compare the property owneroriented highest and best use against the community-based criteria. Many commercial users, such as financial institutions, restaurants, grocers, drug stores, etc., desire to penetrate and serve otherwise homogeneous residential neighborhoods. They may provide local services only and seek to offer convenient service rather than add to the traffic passing through a neighborhood. Appropriate use weighs their opinions against the community's. Appropriate use analysis begins with highest and best use analysis; they are not opposed to each other.

Tests of Constitutionality

The jurisdictional court must find that the subject property's value is not increasing at the same rate as other properties similarly zoned. Otherwise situated single-family properties must also find an appropriate land use balance that will result, with no detriment to the values of adjoining properties. An appraisal is necessary to provide such a comparison between three possibilities: commercial as proposed, residential as exists, and residential as otherwise situated (see figure 1). The highest and best use criteria are applied first, then the appropriate use criterion. The appraiser must enter this information into the court documents through his or her expert witness testimony.

Although hypothetical this case is typical in rapidly growing suburban areas. An argument can be made that a suitably buffered commercial facility that serves the immediate neighborhood can be properly (appropriately) located within it. The infrastructure analysis is also relevant in analyzing the level of disruption that a new center will create as it displaces three to four home sites. The effects are usually on the following segments of the infrastructure:

The proposed use will result in fewer families entering the neighborhood and thus lower the number of school children.

The developer is expected to donate land for acceleration / deceleration lanes. The adequacy of the existing streets is a traffic engineering matter.

The retail building will use less of the sewer and water utilities than the subdivision will.

The proposed subject will be sprinklered and have multiple alarms that most homes do not have.

Landscaping in a deep buffer is proposed to protect neighboring homes from light and noise. Low lighting will be employed.

The appropriate use and highest and best use are sometimes the same, showing that it would be unconstitutional to keep the site for single-family use.

Part of the burden of proof is in supporting that the existing zoning has resulted in a value less than other similarly zoned parcels and/or a value in decline compared with other such residentially zoned properties.

Key Court Cases

The court cases relevant to the constitutionality of zoning vary from state to state. In Missouri, the court of appeals upheld the decisions of a trial court, which had agreed with property owners that (1) the property was worth markedly less as zoned than as proposed for commercial, (2) the location near the commercial property made the property undesirable for residential use, and (3) no substantial public interest would be served by holding the property for residential use.2

Guhl Criteria

The condensed findings from a landmark Georgia Supreme Court case (Guhl et al. v. Holcomb Bridge Road Corporation et al.) and a Georgia statute (the Steinberg Act) regarding the constitutionality of zoning categories follow.3 Between the two cases are six overlapping points. The Guhl criteria, which is required by the state, is applied here first.

1. Will the proposed rezoning permit a use suitable in view of the use and development of adjacent and nearby properties? Yes, the proposed drug store will be an asset and convenience to the neighborhood that it will serve. The store will have limited parking and is not likely to generate traffic that would disrupt the neighborhood.

2. To what extent is the subject's value diminished by the existing zoning? The valuations arrived at from local land sales provide values as follows.

The more relevant comparison is with the better located residentially zoned tracts. The diminution in value compared with the value of better-situated residential tracts is still great. The values of the subject and better located R-100 parcels is estimated to be $4,500 per acre and $30,000 per acre, respectively, or $9,000 per parcel and $60,000 per parcel, respectively. This is a key test for the judge in deciding the constitutionality.

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3. To what extent are the health, safety, morals, or general welfare of the public served by keeping the property's use as is? The rezoning will not change the residential aspect of this neighborhood nor affect the health, safety, morals, or general welfare of the public. The County Land Use Plan forecasts the addition of 1,966 acres of commercial/services to the standing inventory of 1,834 acres between 1990 and 2000, and then 900 acres more between 2000 and 2010. These increases represent 107% and 24%, respectively. Given this forecast, the appraiser can support that the subject ranks with the best of the county's other sites that would be included in the commercial inventory.

Further, the subject qualifies for commercial use by being at a major crossroad, within a major development parcel, and across the road from existing commercial. This property would become part of a small activity node.

4. What is the relative gain to the public of the present zoning? None. The subject will remain undeveloped for the indefinite future. Large lots are available in much better locations. Since residential is not the property's highest and best use, no one will build homes on the subject parcel. A land use change is proposed in keeping with the nodal concept in land use planning. The public typically gains when good planning theory such as this is employed. The node is already started by the other store's presence.

5. What is the subject's suitability for residential use as zoned? None. On a proposed five-lane road, the subject will not be suitable for medium or even smalllot, single-family development for the foreseeable future. It is now located diagonally across the street from a new convenience store and at the corner of a major thoroughfare / minor collector intersection. No one would want to buy a new home in such a location.

6. How long has the property been vacant as zoned? Not applicable. Except for the addition of a small house or barn, the subject has not been developed.

Steinberg Act

The Steinberg Act is a good planning analysis and has been required in Georgia's two most urban counties. Single-sentence abbreviations of how the narrative case study responses to the Act's review standards might read are as follows:

1. Will the zoning proposal permit a use that is suitable in view of the use and development of adjacent and nearby property? Yes, the proposed low-density building will be similar to the building diagonally across the road and at most other major intersections in the county.

2. Will the zoning proposal adversely affect the existing use or usability of adjacent or nearby property? No, the county's buffer requirements are adequate to protect the few future homes that may be developed near the subject.

3. Will the property to be affected by the proposed rezoning have a reasonable economic use as currently zoned? No, this is not a desirable corner location for a new subdivision since homes would have to back onto both thoroughfares and face a convenience center.

4. Will the zoning proposal result in a use which will or could cause an excessive or burdensome use of existing streets, transportation facilities, utilities, or schools? No, schools and utilities will not be affected, and the drug store will probably use less water and sewer services than a subdivision.

5. Is the proposed rezoning in conformity with the policy and intent of the land use plan? Yes, the nodal development policy planning of the comprehensive plan's narrative portion calls for commercial uses at major intersections of major thoroughfares.

6. Are there other existing or changing conditions affecting the use and development of the property that give supporting grounds for approval of the zoning proposal? Yes, there are locations for singlefamily zoning vastly superior to this potentially significant commercial corner.

CONCLUSION

Issues discussed in this article are highly topical to high-growth areas and may become so in lower-growth areas where exclusionary zoning prevails. The appraiser's role is unique and cannot be replaced by combining the efforts of other professionals. The court must consider a variety of testimony on value issues to decide the constitutionality of land use patterns. This article has addressed a sequence of analyses that will vary among the 50 different state supreme courts. While court testimony on straightforward valuation issues (confirmation of value in bankruptcy, foreclosure, condemnation, etc.) has provided a constant need for appraisal services for many decades, the unparalleled explosive growth in many areas has only recently produced this new need for professional appraisal services.

[Author Affiliation]

Terrence L. Love, Sr., MAI, PhD, is chair of the Board of LDA, Inc. (Land Development Analysts) in Atlanta. He has taught at Georgia State University and Georgia Institute of Technology, Atlanta, and for the Appraisal Institute. Mr. Love has written a monograph on appraisal office management, a seminar on residential property construction and inspection, and articles for The Appraisal Journal. He is also a member of the Appraisal Journal Board. Contact: Land Development Analysts, Inc.; 91 W. Wieuca Road, Suite 400; Atlanta, GA 30342. (404) 256-0690. Fax 255-1057. Ida@mindspring.com.