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SUBJECTS › LEGAL › Regulatory Takings
Reviewed 07/09

Regulatory Takings

Contents

Introduction

The subject of governmental "takings" of private property has become a prominent issue in the past two decades as state and local governments have started seriously confronting the issue of urban sprawl and its effect upon the quality of life - urban and rural - and the environment. A consequence of confronting this issue has been an increase in governmental regulation of private property, which, in turn has resulted in a burgeoning property rights movement. A recent example of the strength of that movement is the November 2004 adoption by Oregon voters of Measure 37 (see Measure 37 information below) , which requires that local governments either compensate landowners when land use restrictions reduce the value of their property or waive the offending restrictions. The underlying premise of efforts such as Measure 37 is an assertion of "rights" that goes far beyond the private property rights recognized in the federal and state constitutions that protect against uncompensated takings of private property by governments. (Measure 37 was amended by Oregon voters in November 2007 by their approval of Measure 49.)  A somewhat similar measure, Initiative 933, was on the November 2006 ballot in Washington State and was rejected by the voters.  The purpose of this page on regulatory takings is to present information on the attempt to strike a balance between the public and private interests in the use of land that is represented in the concept of takings.

Both the federal and Washington State constitutions provide that the government may not take private property unless it is for a public use and just compensation is paid. Just compensation is considered to be the fair market value of the property at the time of the taking. A government may "take" property in two basic ways: (1) by physically appropriating the property, such as for a right-of-way; or (2) by regulating or limiting the use of property under the government's police power authority in such a way as to destroy one or more of the fundamental attributes of ownership (the right to possess, exclude others, and to dispose of property), deny all reasonable economic use of the property, or require the property owner to provide a public benefit rather than addressing some public impact caused by a proposed use. In the first instance, the government typically institutes eminent domain proceedings, also called condemnation. In the second instance, the government can be sued for a taking. A suit alleging a taking is also called an "inverse condemnation" action.

The state constitution at article 11, section 11 grants cities and counties the police power authority to protect the public health, safety and welfare. Pursuant to that authority, a city or county may regulate the use of property. They may regulate property for purposes such as abating nuisances, enforcing building and health codes, zoning and planning, and environmental protection. However, both federal and state courts have recognized that government regulation can go "too far" so as to have the same effect on a property owner as if the government had actually physically appropriated the land. The U.S. Supreme Court first recognized such regulatory takings in 1922. See Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).

A regulation does not, however, go "too far" so as to require compensation for a takings when it merely decreases property value or prevents property owners from doing exactly what they want with their property. As long as a regulation allows property to be put to productive economic use, the property has value and the regulation will not be deemed to deny all reasonable economic use of the property; there is no regulatory taking in that situation. Property owners do not have a constitutional right to the most profitable use of their property.

In Washington State, the courts have also used a "substantive due process" test to analyze the burdens imposed by land use regulations.. Both the federal and state constitutions provide due process protections through the Fourteenth Amendment and article 1, section 3 respectively. Substantive due process basically requires that a land use regulation be imposed reasonably and fairly. Under this test, a regulation must not only have a legitimate public purpose, but it must also use means to achieve that purpose that do not impose an unfair burden on affected property owners. So, under Washington law, a land use regulation may be challenged either as an unconstitutional taking or as a violation of substantive due process, or both. A regulation is a taking if it violates the constitutional requirement of compensation when private property is taken for a public use, while a substantive due process violation occurs when a regulation exceeds the constitutionally permissible scope of the police power. Unlike the remedy for a takings, the remedy for a substantive due process violation is invalidation of the regulation.

Statutes and Constitutional Provisions

Selected Court Decisions

U.S. Supreme Court decisions

  • Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).
    A state law that forbade coal mining in a way that caused the subsidence of, among other things, any structure used as a human habitation was applied to property subject to a deed that allowed such mining and under which the grantee assumed the risk. In this case, the U.S. Supreme Court established the regulatory takings doctrine, holding that a mere restriction by government on the use of land, in the absence of any physical occupation or appropriation of land, can trigger a Fifth Amendment right to compensation. If a regulation "goes too far," it will be recognized as a taking.
  • Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).
    The New York City Landmarks Preservation Commission designated Grand Central Terminal as an historic landmark, and it denied an application to build a 55-story office building atop the terminal. In denying the claim for a taking, the court announced the rule that three relevant factors must be looked at to determine whether a regulatory taking has occurred: the character of the regulation; the economic impact on the landowner; and the extent of interference with investment-backed expectations.
  • Agins v. Tiburon, 447 U.S. 255 (1980).
    In a challenge to a city ordinance that limited development of the Agins' five-acre lot to between one and five homes, the Court adopted a two-part test for regulatory takings challenges. The application of a general zoning law to particular property is not a taking if the regulation substantially advances legitimate state interests and does not deny an owner economically viable use of his land.
  • Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).
    A state law required that landlords allow the installation of cable television on their property and limited the payment from the cable company to no more than an amount determined by a state commission to be reasonable.  The Court ruled the statute unconstitutional, holding that a permanent physical occupation of real property is a taking to the extent of the occupation, without regard to whether the action achieves an important public benefit or has only minimal economic impact on the property owner. The Court reasoned that, to the extent that the government permanently occupies physical property, it effectively destroys the owner's rights to possess, use, and dispose of the property.
  • First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304 (1987).
    The county adopted an "interim ordinance" that barred construction or reconstruction of buildings within an interim flood protection zone. The Court determined that "temporary" regulatory takings that deny landowners all use of their property are not different in kind from permanent takings for which the Constitution clearly requires compensation. Invalidation of the regulatory ordinance without payment of fair value for the use of the property during the period of the taking is a constitutionally insufficient remedy.
  • Nollan v. California Coastal Commission, 483 U.S. 825 (1987).
    When the granting of a land use permit is conditioned upon a physical invasion of private property (e.g., dedication of easement), the condition must substantially advance the same governmental purpose as the asserted justification for that condition. There must be a logical "nexus" between the negative impact of the project and the need for a public easement across the owners' property. The Court rejected the exaction of an easement along the beach, even though the Nollans' new beachfront house would make it more difficult for passersby to see the ocean from the road, because allowing people to walk on the beach was not related to restoration of the view from the road.
  • Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).
    A state law prohibited the plaintiff from building residential structures on two beachfront lots. The court held that, if a regulation results in either a "physical invasion" or a "total taking (a denial of all economic use of the land)," the owner has suffered a per se taking and is entitled to just compensation regardless of the public interest advanced in support of the restraint, unless the government can identify "background principles of nuisance and property law" that prohibit the uses the owner intends under the circumstances in which the property is presently found.
  • Dolan v. City of Tigard, 512 U.S. 374 (1994).
    The city conditioned a permit approval on the dedication of property for storm drainage and for a pedestrian/bicycle pathway. The Court held that a dedication of property as a condition of development permit approval must be roughly proportional to the impact of a proposed development.
  • City of Monterey v. Del Monte Dunes, 526 U.S. 687 (1999).
    The city denied a permit application for an oceanfront development based on environmental impacts and access issues. The developer claimed that the city's permit denial had deprived it of all economic use of its property. The Court recognized the right to a jury trial in a regulatory takings case, and it upheld a $1.45 million jury award to the landowner based on loss of economically viable use of its property. The Court characterized the Dolan test of rough-proportionality as inapplicable to a takings claim based on denial of a development permit.
  • Palazzolo v. Rhode Island, 533 U.S. 606 (2001).
    The plaintiff owned property that included land protected as "coastal wetlands" on which development was greatly limited, and the plaintiff acquired the property after the restrictions had been enacted. The Court held that acquisition of title after the effective date of a regulation does not automatically bar a regulatory taking claim. Because the property retained some value, the Court rejected a Lucas-based takings claim, but it remanded the case for a determination of whether a takings occurred using the Penn Central three-factor balancing test.
  • Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning, 535 U.S. 302 (2002).
    The Tahoe Regional Planning Agency imposed two moratoria, totaling 32 months, on development in the Lake Tahoe Basin while formulating a comprehensive land-use plan for the area. The Court held that this was not a per se taking and that there is no per se rule regarding the issue of whether a temporary land use restriction (even if a complete denial of all use is imposed for a finite and reasonable period), such as a moratorium, can constitute a taking.
  • Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005).
    This case, which involved a challenge to legislation that limits the rent oil companies may charge dealers leasing company-owned service stations, is significant because it repudiates the test outlined in Agins v. Tiburon, 447 U.S. 255 (1980). The Court held that the Agins "substantially advance[s]" formula is not an appropriate test for determining whether a regulation effects a Fifth Amendment taking. That test requires an inquiry in the nature of a due process test, which reveals nothing about the magnitude or character of the burden a particular regulation imposes upon private property rights or how any regulatory burden is distributed among property owners.

Ninth Circuit Court of Appeals decisions

  • McClung v. City of Sumner, 545 F.3d 803 (9th Cir. 2008), cert. denied, ___ U.S.  ___ (June 8, 2009).
    The court addressed whether a legislative, generally applicable development regulation that does not require the owner to relinquish rights in real property, as opposed to an adjudicative land use exaction, should be addressed under the Penn Central or Nolan/Dollan framework, the latter of which would require that the "essential nexus" and "rough proposrtionality" tests be applied.  In this case, the generally applicable development regulation required that all new developments include a 12-inch storm pipe.  The court held that this requirement is subject to review under the Penn Central analysis and that, under that analysis, the requirement did not effect a regulatory taking.

Washington State Supreme Court decisions

  • Orion Corp. v. State, 109 Wn.2d 621 (1987), cert. denied, 486 U.S. 1022 (1988).
    A corporation owning tidelands within a designated estuarine sanctuary claimed under various theories that the state and a county had taken its property by regulating its use under the Shoreline Management Act. In remanding the case for factual determinations, the court noted that the primary problem caused by an excessive police power regulation is that it requires the landowner to shoulder an economic burden, which in justice and fairness the public should rightfully bear. Landowners can be protected from the unfair burden by invoking either the constitutional guaranty that property will not be deprived without due process of law, or the constitutional requirement of just compensation whenever the state exercises its power of eminent domain to take private property for public use. The crucial difference lies in the remedy to be applied: invalidation or the payment of just compensation.
  • Estate of Friedman v. Pierce County, 112 Wn.2d 68 (1989).
    Property owners challenged designation of their property as open space. The court held that exhaustion of administrative remedies is necessary before a court can properly determine a takings claim. A regulatory takings claim is not ripe for court review until the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue
  • Presbytery of Seattle v. King County, 114 Wn.2d 320, cert. denied, 498 U.S. 911 (1990).
    An owner of property containing wetlands sought damages under the theory of inverse condemnation after the county adopted an ordinance that prohibited new construction within wetland boundaries and buffer zones. The court held that, for purposes of determining whether application of a land use regulation effects an unconstitutional taking of property, the inquiry must be directed to the entire parcel of property. To determine whether a regulation violates substantive due process, the court used the three-pronged due process test: (1) whether the regulation is aimed at achieving a legitimate public purpose; (2) whether it uses means that are reasonably necessary to achieve that purpose; and (3) whether it is unduly oppressive on the landowner.
  • Guimont v. Clarke, 121 Wn.2d 586 (1993), cert. denied, 510 U.S. 1176 (1994).
    Owners of mobile home parks sought a declaration invalidating the Mobile Home Relocation Assistance Act and a permanent injunction against enforcement of the Act. The court determined that no unconstitutional taking of property without just compensation occurred because the regulation did not deny property owners all economically viable use of their property. However, the court determined that the regulation was unduly oppressive and therefore violated the property owners' substantive due process rights.
  • Sparks v. Douglas County, 127 Wn.2d 901 (1995).
    The court determined that a nexus existed between the requirement of short plat approval of a dedication of rights-of-way for road improvements and the county's interest in the promotion of road safety. The court also determined that the exactions demanded by the county were roughly proportional to the impact of the proposed development under Dolan v. City of Tigard because they were the result of an individualized analysis conducted by the county.
  • Isla Verde Int'l Holdings, Inc. v. City of Camas, 146 Wn.2d 740 (2002).
    The challenged subdivision conditions included the provision of a secondary limited access road into the proposed development for emergency vehicles. The court upheld the secondary access road against a substantive due process challenge.

Washington State Court of Appeals decisions

  • Luxembourg Group v. Snohomish County, 76 Wn. App. 502, review denied, 127 Wn.2d 1005 (1995).
    The county denied a subdivision application because the applicant would not agree to dedicate a stub road access to a landlocked neighboring property as a condition for approval.  The court determined that the dedication requirement would not remedy any problem caused by the applicant's proposed subdivision.  The court held that a dedication requirement that would not remedy any problem caused by the subdivision effects an unconstitutional taking of property without compensation.  
  • Burton v. Clark County, 91 Wn. App. 505 (1998), review denied, 137 Wn.2d 1015 (1999).
    A requirement that a developer build a road across his property that would eventually connect with a road to be built in the future on adjacent property was invalidated as a takings. The county's requirement lacked "rough proportionality" to the nature and extent of the impact of the proposed development.
  • Edmonds Shopping Ctr. Assocs. v. City of Edmonds, 117 Wn. App. 344 (2003)
    A city ordinance banning cardrooms as applied to an existing, permitted cardroom was deemed by the court to be a reasonable exercise of the city's police power.  The court held that the ordinance neither destroyed a fundamental attribute of ownership nor imposed a private burden for a public benefit.  The court also rejected a substantive due process claim by concluding the ordinance achieves a legitimate public purpose and was not unduly oppressive on the property owner.
  • Paradise Village Bowl v. Pierce County, 124 Wn. App. 759 (2004).
    The court upheld the county's ban on social cardrooms as applied to an existing cardroom, finding that the prohibition was not a taking. The court held that the prohibition did not destroy the economic viability of the property. The court also held that the prohibition did not violate substantive due process: the prohibition was for a legitimate public purpose, it was reasonably necessary to achieve that purpose, and it was not unduly oppressive (it did nothing more than regulate the activity responsible for the harm created by the activity).
  • City of Des Moines v. Gray Businesses, 130 Wn. App. 600 (2005).
    The owner of a mobile home park did not comply with an ordinance requiring that the owners of nonconforming uses file a site plan to legally continue their nonconforming uses, and the city notified the owner that the use was no longer allowable. The court of appeals held that the city's ordinance was a valid regulation, not a taking, because the "right" to use the property for a particular use is not a fundamental attribute of ownership.  Rather, it is a contigent right that is dependent upon state law and local regulations such as business license requirements and zoning.
  • Peste v. Mason County, 133 Wn. App. 456 (2006).
    The court of appeals rejected a regulatory takings challenge to the county's denial of the plaintiff's rezone request following the county's adoption of comprehensive plan amendments and development regulations that resulted in his rural property being designated RR 20, with an allowed residential density of one dwelling unit per 20 acres.  The plaintiff had requested that his property be rezoned to allow one dwelling unit per five acres.  The court's opinion presents a comprehensive overview of how "as applied" and "facial" takings challenges to land use regulations are analyzed.

Documents

Links

Information on Oregon Measures 37 and 49 

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