December 11, 2003

When the government takes your property

  • At what point does a restriction go too far?
    McCullough Hill Fikso Kretschmer Smith


    “That's a taking of my property, isn't it? They can't do that, can they?”

    These are questions I often hear from clients when they discover their property can't be developed as they had planned because it has wetlands, steep slopes, is outside the urban growth area or has just been downzoned.

    Frustrated and dismayed, they ask if they can sue the government for a taking, and obtain just compensation.

    Sometimes they can, and when they do and succeed, it makes headlines. Most often they can't, and when they file a lawsuit anyway and pursue it to a desultory conclusion, they are poorer but wiser.

    As development pressures intensify, political resistance to change results in ever increasing government restriction on property rights. By and large, the courts endorse those restrictions as legitimate police power regulation in the public interest. When those regulations go “too far,” however, the courts will find the government action constitutes a taking under the U.S. Constitution, and will require the government to compensate the property owner.

    The trick is to define at what point the restriction has gone “too far.”

    What is a taking?
    Takings are limited, in the words of the U.S. Supreme Court, “to bar government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”

    As a legal doctrine, regulatory taking law offers more confusion than clarity. However, in recent court decisions, the major principles of the doctrine are increasingly well defined. There are three types of takings: categorical, ad hoc and regulations that do not advance a legitimate state interest.

    The remedy for a taking is just compensation. But the federal courts have made it very difficult to bring a takings case to them by imposing a number of procedural hoops a property owner must jump through before filing a case.

    Categorical takings

    If a regulation results in the government permanently, physically occupying a portion of your property, the court will find it has taken your property and the government must pay you just compensation no matter how significant the public interest.

    For example, in Loretto v. Teleprompter, the government adopted a regulation giving cable companies the right to install cable lines on apartment building roofs. The Supreme Court held that regulation “took” a portion of the apartment building owner's property, and that just compensation must be paid.

    In addition, if a regulation deprives a property owner of all reasonable economic use of the property, a taking will be found. In Lucas v. South Carolina Coastal Council, the court found that South Carolina's regulations that prevented the owner of a single-family lot from building anything on his property, ostensibly to protect the shorelines, was a taking. After the court's decision, the state bought the lot. Once it became the property owner, the state built and sold a single-family home on it!

    Ad hoc takings

    If a regulation goes “too far,” the court may also, after looking at all the facts and balancing the public interest against the impact of the regulation on the landowner, find a taking. Factors the court will look at include the character of the government action, the owner's reasonable investment-backed expectations, and the extent of loss in value caused by the regulation.

    In a key case, Penn Central Transp. Co. v. New York, the court found that a landmark regulation that restricted development of the Grand Central train terminal did not constitute a taking, since, among other things, the regulation provided Penn Central with the opportunity to transfer the property's development potential to another site in Manhattan.

    Failure to advance legitimate state interest

    A governmental regulation that does not advance a legitimate state interest effects a taking. For example, government permit conditions and exactions will constitute a taking unless: (1) they are necessary to mitigate adverse project impacts; and (2) the burden imposed is roughly proportional to those impacts. These are commonly called the “nexus” and “rough proportionality” tests.

    In Nollan v. California Coastal Comm'n, the state required as a condition of a permit to build a waterfront home that the property owner dedicate an easement along the beach. The court held there was no “nexus” between any impact of the project and the easement condition, and that it was therefore a taking.

    In Dolan v. City of Tigard, the city conditioned a store expansion on the grant of a “greenway belt” to the public. The court held there was no “rough proportionality” between the greenway belt easement and the impacts of the project, and that the condition was therefore a taking.

    Remedy is just compensation

    Until 1987, there was a controversy about what the remedy would be for a court's finding that the government had engaged in a “regulatory taking.” Government lawyers advocated merely invalidating the regulation. Then, of course, there would be no penalty to the state. The government could then merely revise the regulation slightly, and start all over again.

    The Supreme Court in 1987 decided First English Evangelical v. County of Los Angeles and answered that when a governmental regulation took all the value of a piece of property, the remedy was not merely invalidation. Rather, the property owner was in fact entitled to monetary, just compensation.

    If, however, the use prohibition is temporary, as for example a development moratorium, the government may not be liable for just compensation. In Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, the state agency adopted a lengthy moratorium preventing any property development. The court held that if the regulation allows development at some time in the future, it does not necessarily require just compensation.

    And if the taking is for a private purpose, as for example when the Washington Legislature gave mobile home tenants a right of first refusal to purchase mobile home parks, invalidation will be the remedy, because the government is prohibited from taking private property for private purposes.

    Procedural barriers

    Even if the facts seem to justify a sound “regulatory taking” argument, it may be difficult for the property owner to get into court. First, the property owner must file a development application, have it rejected, seek a variance and have it rejected, and seek any available state compensation remedy. Only then, in most cases, will the federal courts be willing to consider a “regulatory taking” claim.

    There are exceptions. For example, if pursuit of the development process would be futile, the court may consider the claim. Also, if the regulation is clearly a taking on its face, the court may consider the claim. In both cases, however, the claim will face what the Supreme Court has described as “an especially steep uphill battle.”

    Claim of last resort

    A “regulatory taking” claim will always be a claim of last resort for property owners. There are cases, however, where government regulations clearly go too far, and in those cases the courts will provide redress. For that is a hallmark of our courts — to vindicate our constitutional rights.

    G. Richard Hill is a litigation and land use attorney with McCullough Hill Fikso Kretschmer Smith in Seattle. He is the editor of Regulatory Taking: The Limits of Land Use Controls.

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