Damage Awards as Public Policy in Inverse Condemnation Litigation
McGuire, Chester C., Real Estate Issues
EVOLUTION OF THE ISSUE
The Fifth Amendment to the Constitution states, among other things, that private property shall not be taken without paying just compensation, a provision known as the "takings clause." just compensation has usually meant fair market value for the property in its highest and best use. The government has two lawful means to obtain private property: outright purchase and eminent domain. Both measures result in the government purchasing the property and taking title. In eminent domain procedures, the property is legally condemned, and a fair price negotiated through the appraisal process, or litigation. Either way the private property owner is compensated for the loss of the use of the property.
Governments, however, have another way to acquire the use of private property, by regulatory intervention, in the name of the public interest-government regulation to strip away the right of an owner to use a property. This is reasonable when that use is a nuisance or danger to the community. For example, a person may be prohibited from using property as a garbage dump in a residential area. The courts would not consider this a regulatory taking. However, consensus among most legal scholars is that landowners should generally receive compensation for regulations, except when the offending land use would be prohibited by nuisance law (Epstein 1985).
Governments restrict the use of private property for a variety of reasons-for example, zoning regulations. The courts have held that there must be a reason and nexus between the property and a public purpose for the regulation to be lawful. However, when regulations are arbitrary or have no reasonable nexus between the property and a public purpose the regulation may be a "regulatory taking."
According to justice Oliver Wendell Holmes in his opinion in the Pennsylvania Coal case:
A strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying the charge... The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.1
Many landowners have been so frustrated by local governments that they have taken their grievances to court claiming inverse condemnation. Governments have enormous arsenals of delaying tactics and drawn-out administrative procedures that work against the property owner. Therefore, property owners are increasingly turning to the courts for remedies when they are restricted from using their property. The following description was provided for an actual case currently under review by the Supreme Court (Mandelker 1997):
In 1981, the property owners submitted a subdivision proposal to build 344 residential units. The plan was rejected, and city planners informed that a plan for 264 units would be reviewed favorably. The owners then submitted a plan for 264 units; city planners rejected it, and informed that a plan for 190 units would be viewed favorably. The owners then submitted a plan for 190 units; city planners rejected it, and the owners appealed to the city council. The city council found the plan "conceptually satisfactory," and granted a conditional 18-month use permit to commence construction for the project. Subsequently, the developer worked with planning board staff to meet the city council's conditions for the 190-unit development. Staff recommended approval of the site plan, but the planning board overrode staff s recommendation and issued a denial. The property owners then appealed this decision to the city council, which this time denied the site plan for 190 units. Meanwhile, a sewer moratorium was imposed, a request to extend the special use permit was rejected, and the permit expired. The local officials thus expected the developer to start from square one. Following this Kafkaesque process, the federal district court dismissed a taking claim for lack of ripeness, but the appellate court then reversed it. …