What happens when zoning laws change the value of a property?

Let’s say an imaginary developer named Harold Dumas owns a 100-acre tract of land along a major river. Harold plans to build a riverfront community
on this property; however, just before Harold applies for his building permit, he learns that the County has changed the zoning on his land. He is now prohibited from building residential development on this property. His property currently used as farmland can be used only as farmland or for light industrial usage. Can Harold expect compensation from the county for the loss he thinks he has suffered?

Harold could expect compensation for his property if the land was physically taken by the government. This is not the case.  He could also expect compensation for his property if the county overly regulated the property so that all economic value is lost. Both of these case would be described in legal terms as “inverse condemnation”.

Unfortunately for Harold, inverse condemnation presents a very high standard to meet. His property can’t be used as a residential subdivision, but the the property is not useless. Thus Harold could expect no compensation.

Can a lender deny credit to a crime ridden neighborhood?

Harold the Developer (from above) has made quite a bit of money redeveloping apartment buildings. He has excellent credit and has a great relationship with his bank.  But the lender turns down his latest project because they feel the neighborhood is a crime risk.  Is this legal?

If the bank turned down the loan because the area is occupied by members of a protected class, this could be considered redlining.  But if the bank has just cause to believe that crime will doom the project, it is permissible to turn down Harold’s loan. The Fair Housing Act serves protected classes, but criminals are not a protected class.

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Real Estate Law

Will Nesbitt

View posts by Will Nesbitt
Will is the principal broker of Nesbitt Realty and Condo Alexandria. He is licensed in anywhere in the Commonwealth of Virginia, but focuses on those communities found in and around Alexandria, Arlington, Mount Vernon and Springfield/Franconia. Will has been involved in real estate management, sales and investment for more than twenty years. He is a veteran of the U.S. Army. While in the army, he studied Russian at Monterey's Defense Language Institute. He is also a "veteran of the dotcom wars" and built most of the sites associated with NesbittRealty.com Will currently resides in Belle Haven Estates just outside Old Town, overlooking New Alexandria. He is a former president of the Mount Vernon Youth Athletic Association and founded the Alexandria Fun with Friends Group. Will is the author of BattlestorM, a tabletop fantasy game, which was published by Ral Partha Publishing in the late '90's, and Arthur's Realm, a boardgame available at the Gamecrafter.