Sometimes a new city ordinance or building code change will immediately cause hundreds of older buildings to be in violation. Rather than penalize the buildings' owners, the government will insert a grandfather clause into the language of the new regulation. A grandfather clause is an exemption which allows current businesses or property owners to continue operating under the previous laws. A historic restaurant may be exempt from modern sprinkler laws, for example, because the retrofitting would be too expensive or difficult. A new restaurant built next door, however, would be required to meet the current fire safety codes.

A grandfather clause may also extend to private home ownership and zoning. If a new zoning regulation called for 10 feet of clearance on all sides, it would not be practical to physically move all of the current homes built before the zoning change. A grandfather clause would allow exemptions to homes built before the zoning change went into effect. It is important to note, however, that not all contingencies are automatically covered by a grandfather clause. Some changes require everyone affected by the law to take action, regardless of the age or condition of their home.

The current usage of the term grandfather clause is fairly benign, but the history behind the phrase is not. The original grandfather clause concept arose during the segregationist Jim Crow period following the Civil War. In an effort to discourage African-Americans from voting, laws were enacted in certain southern states which restricted voting rights to those who could prove an ancestor had legally voted before 1857. Since slaves could not legally vote before the Civil War years, their descendants were also deemed ineligible. Jim Crow voting laws were eventually struck down, but the idea of a grandfather clause remained.

For the most part, a grandfather clause benefits those who would otherwise face financial or personal hardship under new regulations. Occasionally, however, the practice has been used to allow unsafe businesses to continue operating without new oversight. Lawmakers must walk a line between the interests of the business community and the interests of private citizens. Grandfathering may not remove a current point of contention, but the new laws and regulations can make sure it is the last of its kind.