How Much Control?

It is not uncommon to find municipalities regulating the use of property through zoning codes so that issues of similarity of use in a specific area and traffic flow can be handled to benefit the public at large. Very few would argue that, in some measure, municipal regulation to protect the health, safety, and welfare of the public at large, a.k.a., police power, is an appropriate use of the power of government, especially in light of monetary remedies, rather than a taking. However, perhaps as a backdoor to overcome public concerns over the perceived overuse of the powers of eminent domain and while the country waits for any action from Congress on takings, there appears to be an increasing trend in municipalities in the United States to regulate aesthetics and use through the development of 'chronic nuisance' statutes that permit property closure, and regulation of vacant properties.

In enacting these regulations, municipalities make the arguments of protecting the health, safety, and welfare of the public. However, these types of regulations continue to fuel the undercurrent of debate as to how far is too far in the regulation of property and whether such regulations are in fact merely the use of eminent domain power in what can be a carefully crafted disguise. Just how far can a municipality go in enacting legislation regarding real property?

To begin a discussion of the topic, it is necessary to pinpoint from where the authority to make property use regulations stems. The Constitution of the United States ('Constitution') is the source of the higher authority of law with the right delegated to Congress through the enumerated powers of Article I, '8 to make law that is not contrary to the Constitution and its enacted Amendments. The caveat of Amendment V, and the argument which is used reliably in cases of those pushing against eminent domain and the compensation therefore, provides that no individual shall be 'deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation.' The question always becomes: When has a taking for public use occurred?

The powers of the Constitution flow down through the constitutions of each state and the various codifications of law promulgated by the states. Most states, for example, the state of Illinois, closely follow the particulars of the Constitution somewhat verbatim. For instance, the Constitution of the state of Illinois ('Illinois Constitution') states in Article I, '2 that, 'No person shall be deprived of life, liberty or property without due process of law nor be denied the equal protection of the laws.' Article 1, '15 of the Illinois Constitution states that, 'Private property shall not be taken or damaged for public use without just compensation as provided by law ' ' In researching this article, however, I also found a most interesting section of the Illinois Constitution, '17, which states quite on point that 'All persons shall have the right to be free from discrimination on the basis of race, color, creed, national ancestry and sex in the hiring and promotion practices of any employer or in the sale or rental of property (emphasis added).' While it is beyond the scope of this article and must be left to the courts for decision, the question occurred to me that if an Illinois municipality targets a certain area of its municipality with property restrictions and that area is of any specific race, color, creed, national ancestry, or sex, has the municipality in fact violated the Illinois Constitution?

Illinois State Municipal Code

A municipal code for each state codifies those laws pertaining to the powers of the state's municipalities. The Illinois State Municipal Code (65 ILCS 5) ('Illinois Code'), in accordance with the Illinois Constitution, includes a section regarding the formation, powers, and duties of the various forms of Illinois municipal governmental entities. Article 11 of the Illinois Code is titled 'Corporate Powers and Functions' and contains sections regarding the rights of a municipality to enact legislation in regard to health; fire; safety; public welfare; planning; zoning; urban rehabilitation; building and construction; types of specific businesses which can be regulated by the municipality (65 ILCS 5/Art. 11, Div. 42); and other like provisions, including, but not limited to, the state laws regarding commercial blight areas. Article 11 of the Illinois Code and case law of the state link the use of police power to municipal intervention. Clearly, however, police power was not considered strong and appropriate enough authority to permit aesthetic design review.

At present, a pertinent amendment to the Illinois Code, Public Act 095-0475, provides that a municipality can, 'establish local standards for the review of exterior design of buildings and structures, excluding utility facility and outdoor off-premises advertising signs, and designate a board or commission to implement the review process.' This law in the making has been sent to the Illinois governor for signature. Clearly, if this type of law is enacted in the municipalities of Illinois, many landlords and tenants will have difficulty, and will see additional costs incurred in the development and leasing process. Does this law go too far and impose a great burden on business, or is such a law a useful addition to the municipal arsenal seeking to provide a physically attractive place within which to live and do business?

In the municipal level, by way of example again in Illinois, a municipality can only enact those laws that the state permits. In this state, chronic nuisance laws have sprung up abundantly in various communities. The most interesting of these laws permits a closure of the property for a period of not less than 30 to not more than 180 days for chronic nuisance defined as any real property, whether occupied by an owner or a tenant, to which the police department has responded at least three times in any consecutive 90-day period, and on each response has found nuisance activity or multiple instances of nuisance activity that meet the definitions below. The finding of chronic nuisance must be confirmed in adjudication.

Chronic nuisance is defined as:

• Disorderly conduct, as defined in 720 ILCS 5/26-1;
• Unlawful use of weapons, as defined in 720 ILCS 5/24-1 et seq.;
• Mob action, as defined in 720 ILCS 5/25-1;
• Discharge of firearm, as defined in 720 ILCS 5/24-1.2 and 5/24-1.5;
• Gambling, as defined in 720 ILCS 5/28-1;
• Possession, manufacture or delivery of controlled substances, as defined in 720 ILCS 570/401 et seq.;
• Assault, battery, or offenses related thereto, as defined in 720 ILCS 5/12-1 et seq.;
• Sexual abuse or related offenses, as defined in 720 ILCS 5/12-15 et seq.;
• Public indecency, as defined in 720 ILCS 5/11-9;
• Prostitution, as defined in 720 ILCS 5/11-14;
• Criminal damage to property, as defined in 720 ILCS 5/21-1 et seq.;
• Possession, cultivation, manufacture, or delivery of cannabis, as defined in 720 ILCS 550/1 et seq.; and
• Illegal consumption or possession of alcohol, as defined in 235 ILCS 5/1 et seq.

Understandably there is public interest in avoiding the above behaviors, but in a landlord-tenant context especially, at what point do we have a regulation of use which is in essence a version of temporary eminent domain and which has not been appropriately compensated? Illinois courts in the past have held certainly that any permanent taking, even of a nuisance property, is compensable.

Other municipalities have dealt with vacancy and nuisance in other ways, some of which may not bear constitutional muster and others that appear to be constitutional and informative, as well as lucrative, for the municipality. While not possible to confirm fully, some municipalities have discussed requiring that landlords and tenants execute an agreement providing that there would be no criminal activity on the property as witnessed by police citation, report, or landlord observation. If such activity is witnessed, observed, or reported, the tenant lease would be terminated, even for one violation. Clearly, this type of prohibition on criminal activity exists in the rules and regulations sections of most leases, whether retail or office. However, leases, unlike such a potential law, provide due process where the tenant is permitted a cure period. If the landlord is concerned about criminal activity due to the type of tenancy, one would question why a landlord would lease to such a tenant, but more importantly, certainly landlord and tenant can bargain for a quick agreed-upon termination for more than one violation. A municipality requiring such an agreement by law may avoid the issue of a direct taking by the municipality, but requiring such an agreement may subject the municipality to charges of unconstitutionality by landlords and tenants and may result in a chilling effect on business.

Next month's installment will discuss the Chicago Municipal Code and its more lucrative form of legislation regarding vacancy of properties.

Carole Laude Pechi has 20 years of experience in the commercial real estate industry, with experience both as in-house counsel at commercial real estate companies and outside counsel. Pechi has been a frequent speaker at the International Council of Shopping Centers ('ICSC') meetings and sits on the editorial boards of two newsletters. She founded Laude Pechi Law in 2006 and can be reached at 630-790-9210. This article was written with research assistance from Mark Nora, of Holland & Knight LLP.

It is not uncommon to find municipalities regulating the use of property through zoning codes so that issues of similarity of use in a specific area and traffic flow can be handled to benefit the public at large. Very few would argue that, in some measure, municipal regulation to protect the health, safety, and welfare of the public at large, a.k.a., police power, is an appropriate use of the power of government, especially in light of monetary remedies, rather than a taking. However, perhaps as a backdoor to overcome public concerns over the perceived overuse of the powers of eminent domain and while the country waits for any action from Congress on takings, there appears to be an increasing trend in municipalities in the United States to regulate aesthetics and use through the development of 'chronic nuisance' statutes that permit property closure, and regulation of vacant properties.

In enacting these regulations, municipalities make the arguments of protecting the health, safety, and welfare of the public. However, these types of regulations continue to fuel the undercurrent of debate as to how far is too far in the regulation of property and whether such regulations are in fact merely the use of eminent domain power in what can be a carefully crafted disguise. Just how far can a municipality go in enacting legislation regarding real property?

To begin a discussion of the topic, it is necessary to pinpoint from where the authority to make property use regulations stems. The Constitution of the United States ('Constitution') is the source of the higher authority of law with the right delegated to Congress through the enumerated powers of Article I, '8 to make law that is not contrary to the Constitution and its enacted Amendments. The caveat of Amendment V, and the argument which is used reliably in cases of those pushing against eminent domain and the compensation therefore, provides that no individual shall be 'deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation.' The question always becomes: When has a taking for public use occurred?

The powers of the Constitution flow down through the constitutions of each state and the various codifications of law promulgated by the states. Most states, for example, the state of Illinois, closely follow the particulars of the Constitution somewhat verbatim. For instance, the Constitution of the state of Illinois ('Illinois Constitution') states in Article I, '2 that, 'No person shall be deprived of life, liberty or property without due process of law nor be denied the equal protection of the laws.' Article 1, '15 of the Illinois Constitution states that, 'Private property shall not be taken or damaged for public use without just compensation as provided by law ' ' In researching this article, however, I also found a most interesting section of the Illinois Constitution, '17, which states quite on point that 'All persons shall have the right to be free from discrimination on the basis of race, color, creed, national ancestry and sex in the hiring and promotion practices of any employer or in the sale or rental of property (emphasis added).' While it is beyond the scope of this article and must be left to the courts for decision, the question occurred to me that if an Illinois municipality targets a certain area of its municipality with property restrictions and that area is of any specific race, color, creed, national ancestry, or sex, has the municipality in fact violated the Illinois Constitution?

Illinois State Municipal Code

A municipal code for each state codifies those laws pertaining to the powers of the state's municipalities. The Illinois State Municipal Code (65 ILCS 5) ('Illinois Code'), in accordance with the Illinois Constitution, includes a section regarding the formation, powers, and duties of the various forms of Illinois municipal governmental entities. Article 11 of the Illinois Code is titled 'Corporate Powers and Functions' and contains sections regarding the rights of a municipality to enact legislation in regard to health; fire; safety; public welfare; planning; zoning; urban rehabilitation; building and construction; types of specific businesses which can be regulated by the municipality (65 ILCS 5/Art. 11, Div. 42); and other like provisions, including, but not limited to, the state laws regarding commercial blight areas. Article 11 of the Illinois Code and case law of the state link the use of police power to municipal intervention. Clearly, however, police power was not considered strong and appropriate enough authority to permit aesthetic design review.

At present, a pertinent amendment to the Illinois Code, Public Act 095-0475, provides that a municipality can, 'establish local standards for the review of exterior design of buildings and structures, excluding utility facility and outdoor off-premises advertising signs, and designate a board or commission to implement the review process.' This law in the making has been sent to the Illinois governor for signature. Clearly, if this type of law is enacted in the municipalities of Illinois, many landlords and tenants will have difficulty, and will see additional costs incurred in the development and leasing process. Does this law go too far and impose a great burden on business, or is such a law a useful addition to the municipal arsenal seeking to provide a physically attractive place within which to live and do business?

In the municipal level, by way of example again in Illinois, a municipality can only enact those laws that the state permits. In this state, chronic nuisance laws have sprung up abundantly in various communities. The most interesting of these laws permits a closure of the property for a period of not less than 30 to not more than 180 days for chronic nuisance defined as any real property, whether occupied by an owner or a tenant, to which the police department has responded at least three times in any consecutive 90-day period, and on each response has found nuisance activity or multiple instances of nuisance activity that meet the definitions below. The finding of chronic nuisance must be confirmed in adjudication.

Chronic nuisance is defined as:

• Disorderly conduct, as defined in 720 ILCS 5/26-1;
• Unlawful use of weapons, as defined in 720 ILCS 5/24-1 et seq.;
• Mob action, as defined in 720 ILCS 5/25-1;
• Discharge of firearm, as defined in 720 ILCS 5/24-1.2 and 5/24-1.5;
• Gambling, as defined in 720 ILCS 5/28-1;
• Possession, manufacture or delivery of controlled substances, as defined in 720 ILCS 570/401 et seq.;
• Assault, battery, or offenses related thereto, as defined in 720 ILCS 5/12-1 et seq.;
• Sexual abuse or related offenses, as defined in 720 ILCS 5/12-15 et seq.;
• Public indecency, as defined in 720 ILCS 5/11-9;
• Prostitution, as defined in 720 ILCS 5/11-14;
• Criminal damage to property, as defined in 720 ILCS 5/21-1 et seq.;
• Possession, cultivation, manufacture, or delivery of cannabis, as defined in 720 ILCS 550/1 et seq.; and
• Illegal consumption or possession of alcohol, as defined in 235 ILCS 5/1 et seq.

Understandably there is public interest in avoiding the above behaviors, but in a landlord-tenant context especially, at what point do we have a regulation of use which is in essence a version of temporary eminent domain and which has not been appropriately compensated? Illinois courts in the past have held certainly that any permanent taking, even of a nuisance property, is compensable.

Other municipalities have dealt with vacancy and nuisance in other ways, some of which may not bear constitutional muster and others that appear to be constitutional and informative, as well as lucrative, for the municipality. While not possible to confirm fully, some municipalities have discussed requiring that landlords and tenants execute an agreement providing that there would be no criminal activity on the property as witnessed by police citation, report, or landlord observation. If such activity is witnessed, observed, or reported, the tenant lease would be terminated, even for one violation. Clearly, this type of prohibition on criminal activity exists in the rules and regulations sections of most leases, whether retail or office. However, leases, unlike such a potential law, provide due process where the tenant is permitted a cure period. If the landlord is concerned about criminal activity due to the type of tenancy, one would question why a landlord would lease to such a tenant, but more importantly, certainly landlord and tenant can bargain for a quick agreed-upon termination for more than one violation. A municipality requiring such an agreement by law may avoid the issue of a direct taking by the municipality, but requiring such an agreement may subject the municipality to charges of unconstitutionality by landlords and tenants and may result in a chilling effect on business.

Next month's installment will discuss the Chicago Municipal Code and its more lucrative form of legislation regarding vacancy of properties.

Carole Laude Pechi has 20 years of experience in the commercial real estate industry, with experience both as in-house counsel at commercial real estate companies and outside counsel. Pechi has been a frequent speaker at the International Council of Shopping Centers ('ICSC') meetings and sits on the editorial boards of two newsletters. She founded Laude Pechi Law in 2006 and can be reached at 630-790-9210. This article was written with research assistance from Mark Nora, of Holland & Knight LLP.