On March 3, 1995, the U.S. House of Representatives, by a vote of 277 to 148, passed H.R 925, the proposed "Private Property Protection Act of 1995." H.R. 925 would require the federal government to compensate owners of private property for the effect of certain regulatory restrictions, most notably wetlands and endangered species protection which results in a loss of property value. In its consideration of H.R. 925, the House adopted an amendment, by a vote of 338 to 83, which increased "the minimum threshold for payment of compensation for loss in property value of any portion of the property from 10 percent to 20 percent." In addition, the House adopted an amendment which defines the term "fair market value" in H.R 925 as follows:
[T]he most probable price at which property would change hands, in a competitive and open market under all conditions requisite to a fair sale, between a willing buyer and a willing seller, neither being under the compulsion to buy or sell and both having knowledge of relevant facts, at the time the agency action occurs.
Further, the House approved an amendment which "requires agencies to inform affected property owners of their rights under the bill and the procedures necessary to obtain compensation.
The U.S. Senate will now consider the proposed "Private Property Protection Act." The Senate can be expected to conduct a more probing review of the direct and indirect fiscal and environmental costs associated with H.R. 925 or similar legislative initiatives. Under the rubric of private property rights, H.R. 925 would undoubtedly make federal environmental regulation prohibitively expensive. In so doing, H.R. 925 would frustrate the legislative objectives of federal environmental laws, such as the Clean Water Act, Endangered Specie Act, and Clean Air Act.
What Cost for Who's Benefit?
According to the House Committee on the Judiciary, in its report on H.R. 925 (Report 104-46) the purpose of the proposed "Private Property Rights Protection Act of 1995 is to ensure that private property owners are compensated when the use of their property is limited by overreaching Federal regulations."
Courts must engage in ad hoc factual inquiry on a case-by-case basis to determine whether a compensable taking has occurred as a result of regulation. The burden of the uncertainty of takings law falls most heavily on small property owners who are intimidated by the power of bureaucrats. Takings litigation is a long and expensive process which only the most well-financed and dedicated property owner can endure. Small property owners do not have the time or money to bring a lawsuit against the Federal government.
In response, the Committee report noted that "H.R 925 require the Federal government to compensate an owner of property when a limitation placed on the use of that owner's property by a Federal agency action causes the fair market value of the property to be reduced by ten percent or more." (As cited above, the full House raised this minimum threshold to 20 percent.)
As described in the House report, H.R. 925 would establish the following "procedural mechanism for compensation":
An owner seeking compensation under the Act is required to make a written request for compensation to the agency whose action resulted in the limitation within 180 days of receiving actual notice of the agency action.
The section allows the agency to bargain with the owner to establish the amount of compensation. If they agree on an amount of compensation, the agency is required to promptly pay the owner the amount agreed upon. If the agency and the owner cannot come to an agreement within 180 days after the written request is made, the owner may seek compensation through binding arbitration or a civil action and can obtain reasonable attorney fees and appraisal fees.
Once compensated, however, H.R. 925 would prohibit the owner "from engaging in the use for which he has been compensated, even if the agency action that limited the use is later rescinded or vitiated, unless the owner elects to refund the compensation to the Federal government. …