I've seen it  (in 1.01.012).  It's SHOULDN'T be because I was too close to a city, because I got this error after getting a too-close-to-city message and moving 1 square farther away.  I thought at first it might be because I didn't have much money, but now I think a bug in the distance calc is more likely.  The other possibility was that the new city would have been near hills & mountains with too few open-land squares nearby.

I kept getting a must build on open ground error message once. I moved a few tiles away and it fixed itself but I could later build improvements on those tiles so I'm not sure why I couldn't start a city there.

I think there can be a problem if there was a goodie hut on that tile. Last game I couldn't expand my city in such a tile.

btw, is there a way to remove forest? I find it annoying to build my citys arround a forest, mountains can be lowered, but I can't cut down a forest?