Pennsylvania Appeals Court Deals Setback To Struggling Commercial Landlords By Denying Them Access To Variances For Hardships Arising From Widespread Economic Conditions

By: Carl L. Engel

On December 15, 2022, the Pennsylvania Commonwealth Court dealt a setback to commercial property owners struggling to rent vacant properties because of changing economic conditions. In the case Center Street Luxury Apartments, LLC v. Township of Bloomsburg Zoning, it found that a commercial property owner could not obtain a variance from a town zoning board to allow residential apartments in his commercial space, even though he had shown substantial evidence that the town’s business district had been in steady economic decline for many years. This hardship, he argued, had made it impossible to rent his first-floor commercial space for the last four years. The court held, however, that where a commercial property owner is unable to rent space based on factors that affect the entire district in which a property is located, the owner must petition the town’s commissioners for a change in the zoning code, rather than petition for an individual variance.

At issue in Center Street was a three-story building in the Town of Bloomsburg, which had commercial space on the first floor and student housing on the second and third floors. The layout is compliant with the property’s location within the town’s “Commercial District” zone, in which student housing is allowed only on the second floor and above. After the commercial space had remained vacant for four years, notwithstanding an exhaustive search to find a tenant, the property owner applied for a variance with the town’s zoning hearing board.

At the zoning hearing, the property owner stated that other properties in the Commercial District had found it difficult to find tenants for their first-floor commercial spaces, and suggested that “big box” stores and online retailers had made it difficult for these local businesses to survive. The zoning board voted unanimously to deny the variance, because the hardship described by the property owner was not unique to the property. Therefore, the proper relief was either to rezone the Commercial District so it no longer included the property, or to amend the zoning ordinance so all properties therein could have first-floor student housing.

The property owner appealed to the trial court, which reversed the zoning board. In making its decision, the trial court reasoned that the property was “surrounded by neighboring residential (student housing) dwellings, many of which are located in the Commercial District, making the commercial space undesirable and unmarketable for its intended purpose.” It found further that the “changing economic climate” since the building was constructed in 2009 had rendered the first-floor commercial space “useless through no fault of [the property owner].” It observed also that the property owner had “tried every possible option for renting the space within the permitted uses, special exception or conditional uses to no avail.” The court concluded that these conditions demonstrated a hardship, and the zoning board’s refusal to grant the variance was an abuse of its discretion.

The Town of Bloomsburg appealed to the Commonwealth Court, which reversed the trial court. Although the Commonwealth Court observed that the town’s zoning ordinance allowed the zoning board to consider the conditions of the entire neighborhood when evaluating whether there was a hardship, it held that the Pennsylvania Municipalities Planning Code, which does not allow for a neighborhood-wide analysis, took precedence over the conflicting local code. In support of this decision, it observed that the Pennsylvania Supreme Court, in the case Appeal of Michener, 115 A.2d 367 (Pa. 1955), had advanced a public policy of prohibiting zoning boards from granting variances to individual properties based on changes in its district, because otherwise they would be “virtually enacting zoning legislation” in a “piecemeal” fashion, instead of simply administering the town’s zoning law.

Based on this policy, the Commonwealth Court found that the property owner’s complaints of competition from big-box stores and online businesses did not support the issuance of a variance, because “the Commercial District as a whole, not only the Property, is suffering from the same difficulty.” It held that the trial court, therefore, had erred when it reversed the zoning board.

Although the Commonwealth Court’s decision presents a setback for commercial landlords seeking to convert vacant commercial space into other uses, it does provide guidance for how to affect this change. Indeed, the court did not state that commercial property owners are doomed to the painful dilemma of either slashing rents to untenable levels or holding the property vacant indefinitely. Rather, it made clear that the solution is political, and that commercial landlords struggling in declining business centers must petition their local commissioners for a rezoning or a change in the town’s zoning code, rather than engage in a fruitless pursuit of an individual variance.