How will my business sign be regulated?

The following article originally appeared on the Small Business Administration website in February 2001, but it was subsequently removed.

Signage is regulated through the following two categories:

Building and electrical codes
The construction, installation, and operation of any permanent business sign will need to conform to all applicable building and electrical codes. Because compliance with these codes requires specialized technical expertise, a business owner should specify that conformity to these codes is the responsibility of the sign company that builds and installs a business sign. This responsibility would extend to the sign company’s subcontractors.

Local zoning or sign codes
Nearly every local government regulates the display of business signs. Such regulations are found either in the local zoning code or a separate “sign code.” Most codes will contain the following provisions regarding business signs:

  • A. Regulation of the size, number and location
  • B. Permit application requirements and review procedures
  • C. Provision for a “variance”
  • D. Treatment of “nonconforming” signs

A) Regulation of the size, number and location of signs
A local zoning or sign code will normally regulate the location, number, size, etc. of business signs. For example, a typical code might specify that:

  • A business is permitted only the following permanent signs: one “wall” sign, one “freestanding” sign, and one “directional” sign at each vehicular entry/exit.
  • The “wall” sign must be located on the “front” of the business, and may not exceed [a specified maximum size].
  • The “freestanding” sign must be set back [a specified distance] from the public right-of-way, and may not exceed [a specified maximum height and size].
  • The “directional” sign must be within [a specified distance] from the edge of the entry/exit, must be set back [a specified distance] from the public right-of-way, and may not exceed a [specified maximum height and size].

Typically, sign regulations, like those above, vary depending on the zoning district in which a business is located. For example, businesses located in a “Highway Business” district might be allowed larger or taller signs than those located in a “Local Business” district. Such differences in regulatory treatment may be justified by differences in the size and speed of the roadways in each district.

Local governments are increasingly under scrutiny by federal and state courts to assure that differing treatment between sign users does not offend the First and Fourteenth Amendments of the Constitution. (See “How do the First and Fourteenth Amendments affect sign regulations?”)

B) Permit applications and approvals
The permit process usually begins when the sign company or business owner obtains an application from a zoning or building official in the local government office. While applications normally require the applicant to submit information related to the construction and installation of the sign, and the site where it will be installed, requirements will vary from community to community.

The application must be filled out completely and accurately. In most communities, the application fee must be paid in full before the application will be reviewed.

There are two basic procedures for local-government review of a sign-permit application: (1) administrative approval, which stresses quantitative criteria, and (2) design review, which goes beyond quantitative criteria to consider qualitative guidelines.

Administrative approval is a straightforward process based on objective criteria. An administrator approves or rejects the application based on whether the proposed sign will be in compliance with the numerical standards in the sign code.

Design review, in contrast, supplements numerical standards with qualitative guidelines. These guidelines attempt to “fine-tune” sign-approval decisions by evaluating the relationship between the sign and its proposed site, based on specified criteria. For example, a design-review process might try to achieve greater “compatibility” between structures and signs by adding design standards related to sign materials, lighting, and design.

Proponents of design review claim that the addition of this discretionary process promotes creativity and permits greater flexibility in sign approval. Critics argue that the process creates uncertainty about permit approvals and significantly increases both the cost and time required to obtain permit approval.

A design-review code is more likely to run into First and Fourteenth Amendment problems than an administration approval code. For example, if the code is too subjective or gives the government too much leeway in deciding which signs to permit and which to disallow, either or both of these amendments may be violated. (See “How do the First and Fourteenth Amendments affect sign regulations?”)

C) Provision for a variance
A variance is a “flexibility” device that allows a local government to provide a property owner with relief from the normal application of a restriction in the zoning code, such as minimum lot or building size or setback requirements. And it also applies to relief from a sign-code provision. In effect, a variance works like a special code section or exception, specifically enacted by the local government on behalf of a specific property, or property interest. And once granted, a variance “runs with the land.” In other words, subsequent owners are entitled to the same “right to vary” as granted the original applicant.

A sign-permit applicant should request a variance when special circumstances, unique to the property in question, would create practical difficulties or hardship if the applicable code section is enforced as written. A business owner should never hesitate to request a variance if strict adherence to the sign code would seriously compromise the visibility of the subject sign, and thus potentially harm the economic viability of the business. This situation can occur, for example, when a significant grade difference exists between the property and an adjacent street or highway from which the business is expected to draw significant vehicular traffic. In such cases, limitations on height, type or location may render the site virtually invisible to passing motorists.

In the event a code provision, if enforced, would seriously impede a sign’s ability to communicate with passersby, and thereby destroy most of a site’s economic utility, then a variance should be granted. If a variance is not granted in these or similar circumstances, the government must justify its restriction on protected speech by proving the restriction advances a substantial state interest that can’t be advanced in a manner less burdensome on speech. (See “How do the First and Fourteenth Amendments affect sign regulations?”)

When applying for a variance, the prudent business owner will consult a signage-valuation expert to construct a benefit-cost analysis. The analysis should not only discuss the benefits of the proposed sign to the business, and the costs to the business if not permitted, but also the benefits that will likely accrue for the community if the proposed sign is permitted.

In most cases, the benefits conferred on the community by a business able to maximize street visibility outweigh the costs to the community if the code is not strictly enforced as to the applicant. Generally, restrictive sign codes are enacted under the umbrella of “improving community aesthetics.” Seldom do these codes take into consideration the benefits that flow from a local business that is economically viable because its sign catches the attention of mobile consumers who may have either a present or future need of the business’s product or services. The benefits flowing from a successful business minimally include enhancement of local tax bases and employment opportunities. Additional benefits include preservation of a healthy business zone, in lieu of deterioration when businesses fail and leave to locate further out. Blight and flight often lead to urban sprawl — something most communities would like to avoid.

The evident benefits of attractively designed and appropriately visible, legible and readable signage should outweigh the subjective aesthetic factor. Most of today’s sign companies can craft a sign that reflects community standards while still effectively communicating to potential customers or clients. (For examples of signs, visit the “Types of Signs” section. For information about working with a sign company, tour “Obtaining Your Signage”.)

D) Treatment of nonconforming signs and amortization provisions
Local governments commonly revise sections of zoning ordinances and sign codes from time to time. Less frequently, a local government will enact a comprehensive revision that replaces an existing zoning or sign code in its entirety. In either case, there will normally be a number of building lots, structures, or uses (including signs) that were in compliance with or “conformed” to the “old” code, but are out of conformance or compliance under the “new” code. A sign finding itself in this category becomes a “legal non-conforming” sign.

As a general matter, a business owner may retain a legal non-conforming sign, and does not have to bring it into compliance with new regulations. The owner may also maintain and repair the existing sign face and structure without running afoul of the new code. In these cases, the sign is said to have been “grandfathered in.” Also, as a general rule, if the owner sells the business, the new owner has the right to retain the non-conforming sign, although some sign codes make it unlawful to change sign-face copy or design without making the whole sign conform to the new code. However, such a rule raises serious legal questions because it is a limitation of free speech. (See “How do the First and Fourteenth Amendments affect sign regulations?”)

In contrast, examples of limitations on a non-conforming sign that are clearly lawful include a prohibition on increasing the area or height of a non-conforming sign, or requiring that a replacement sign structure conforms to the new regulations when a non-conforming sign structure is removed.

Some sign codes contain provisions requiring the removal of non-conforming signs within a specified time limit — generally 2-10 years. This “grace period”, referred to in the codes as an “amortization period”, is based on what the local government has judged to be a sufficient passage of time to allow the owner to recoup the cost of the sign. In the absence of an express statutory provision that amortization is disallowed as a form of “just compensation”, a majority of state courts have found, to date, that amortization is a constitutionally acceptable method for achieving removal or severe downsizing of non-conforming signs without paying monetary compensation. Where amortization has been upheld, the general rule is that the amortization period must provide the sign owner a reasonable time to recoup the initial investment.

Federal legislation has made amortization an impermissible method for compensating owners of signs that are removed or relocated pursuant to the federal Highway Beautification Act and amendments. This proscription applies to all signs located within 660 feet of interstate and primary highways. Federal legislation and policy also requires payment of just compensation whenever a sign is removed, or its visibility compromised, as a result of highway or street improvements that in any way involve federal funds.

At the state and local level, business owners should be aware that amortization is a hotly debated, and rapidly changing, area of the law. The primary reason for this is the increasing awareness by legislative and judicial bodies that an on-premise business sign is worth far more than its original cost, and that an amortization period will not fairly compensate a business owner for business revenues that will be lost when the owner must finally conform to a code that limits the sign’s visibility.

A business owner who has been informed that a non-conforming sign must be removed, due to the expiration of an amortization period, is well advised to consult legal counsel before agreeing to remove the sign without receiving compensation, or, as an alternative a variance or exception to enforcement of the code. (For an example of a legal case regarding sign valuation and a legally non-conforming sign, visit the Michaels’ Store Legal Case study.)

Wade Swormstedt

Wade Swormstedt

Wade is Executive Director of the Foundation for the Advancement of the Sign Industry. Formerly he was Editor and Publisher of Signs of the Times magazine.

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Posted in 1st Amendment / Freedom of Speech, Amoritzation, Sign Codes, Sign Questions Answered, Signs' Advertising Value, Small Business Administration, Supreme Court.