While we routinely hear from small business owners with various zoning issues, we are most alarmed when local authorities force a company into a choice between closing shop or moving from an established place of business. Fortunately, some states hold this sort of regulation unconstitutional. For example, in 2013 we helped convince the Minnesota Supreme Court that it would violate the state constitution to allow a city to “revoke” the right of a commercial campground to continue lawful operations. But in other states the case law is stacked against small business owners who wish to continue with a “non-conforming” use.
Take the story of Hinga Mbogo who started his own auto shop in Dallas. After purchasing his property, and after years of operating on the site, he was told that he had to relocate his business because of a newly enacted ordinance. Sometimes zoning codes will allow for “grandfather rights,” whereby previously established uses are allowed to continue. But in this case the City was intent on eliminating auto repair businesses in this area. So, Mr. Mbogo was forced to chose between closing the business he had built from the ground up or moving to another site that might be less convenient for his customers.
The trouble is that Texas courts have long upheld this sort of regulation. In the 1970s the Texas Supreme Court ruled that it was within the police powers of the state to force an owner to abandon an established use of private property, and that no compensation is owed in these cases. Since then, Texas courts have consistently held that businesses were without recourse when ordered to discontinue operations with a change in the local zoning.
But small businesses cannot easily pick-up and continue their business elsewhere. Studies show that many small businesses close when displaced by government action, and or they suffer lost profits for a long time after moving. To be sure, when you’ve been operating in a specific location for years, you have an established customer base that is often lost (or much reduced) when forced to move—and that is assuming that you can find a comparable site to continue at an affordable price point.
The time has come for the Texas Supreme Court to overturn its past decisions and to, once and for all, make clear that small business owners have a constitutionally protected right to continue in an established use.