Takings 101 — Regulatory Takings

There are four different categories of regulatory takings. Courts will apply a different test and analysis for each category in determining whether an unconstitutional taking has occurred.

Permanent Physical Invasions

When government action causes private property to suffer a permanent physical invasion, the court will find that a “per se” taking (meaning “in itself”) has occurred. Just compensation in these situations is always required.

  • Loretto v. Telempromptor Manhattan CATV Corp.: The owner of an apartment building was required by law to allow a cable company to install equipment on the building. The court found that no matter the size, or the purpose, of the permanent invasion, the owner must only show that the government required another party to enter without consent for there to be a regulatory taking requiring just compensation.
  • Eminent Domain: A local government has the ability to exercise its power of eminent domain by taking ownership of private property for public use in exchange for just compensation. The formal act that is undertaken in exercising this power is referred to as condemnation. In land condemnation actions, a local government will follow the procedures of state eminent domain law to insure that land is dedicated to public use and just compensation is paid to the owner.

Total/Near-Total Taking

When government action completely deprives a private property owner of “all economically beneficial use,” and the property is not in violation of nuisance or property law, the court will find that a “per se” taking has occurred. The burden of proof lies with the challenging property owner.

  • Lucas v. South Carolina Coastal Council: Regulations under the Beachfront Management Act prohibited a property owner from developing two privately owned lots. Because the regulations barred Lucas from building homes on the lots, the court concluded that he was forced to keep the land in its natural state. The court held that when a regulation leaves an owner with no economically beneficial or productive uses, the government is required to pay just compensation for the value of the land. A regulation requiring privately owned land to be left in its natural state is in essence dedicating private property for public use.
  • Court decisions finding a total taking are rare. In Wyer v. Board of Environmental Protection, a landowner alleged that the state’s newly enacted sand dune laws prohibiting him from building a home on his beachfront lot constituted a total taking of his property requiring just compensation. Relying on Lucas, the landowner argued that the property became substantially useless and lost all practical value following the law’s enactment. The court disagreed, ruling that the laws were not a total taking. The court found that offers from neighbors who sought to purchase the property to expand their lots, as well as the existence of many recreational uses stemming from its proximity to the beach (parking, picnics, and barbecues), left the owner with several economically beneficial uses.

Catch-All/Balancing Test

When a private landowner alleges a regulatory taking, and the facts don’t support a “per se” taking, the court will make its determination by using a three-factor balancing test referred to as the Penn Central test.

  • The three-factor Penn Central test looks at:

    1. The economic impact of the regulation on the private landowner.
    2. The degree to which the regulation interferes with the private landowner’s distinct investment-backed expectations.
    3. The character of the government action.
  • Penn Central Transportation Co. v. New York City: New York City’s landmark preservation law requires owners of historic landmark buildings to obtain a certificate of appropriateness prior to making any alterations to the outside of their buildings. Plaintiff Penn Central owned Grand Central Station, a landmark building, and was denied the required certificate needed to construct a 50-story addition. Penn Central alleged a regulatory taking, leading the court to balance several factors articulated by previous court decisions, resulting in the three-factor Penn Central test. The court ultimately found that no regulatory taking occurred.

Forced Entry Exactions

When the government demands that a private property owner dedicate an easement that allows the general public access to his or her property or gives government title to the land as a condition to obtaining a development permit, it must show both an “essential nexus” between the condition imposed and a legitimate public purpose, as well as a “rough proportionality” between the dedication and the impact the development will have on the public. If the government fails to meet its burden, the dedication will be considered a regulatory taking requiring just compensation, as the dedication denies a private property owner the fundamental right to exclude.

  • Nollan v. California Coastal Commission: In exchange for a building permit that allowed the private property owner to build a second floor on his home, the California Coastal Commission required dedication of an easement allowing the public to walk along a strip of private beach property between the seawall and mean high tide line. The requirement was seemingly to compensate the public for blocking visual access to the beach with the higher structure. Nollan challenged the dedication, and the court found that there was no “essential nexus” between the dedication and the preservation of the public benefit. In order to have an “essential nexus,” the government must be able to show that the conditions of approval on the permit bear some relation to the public good that is accomplished through the conditions. Because requiring lateral beach access on the ocean side of Nollan’s property did not alleviate the loss of visual access from the land side from adding a second floor, the regulation bears no relation to the dedication of a public easement along the strip of beach in front of the house. Therefore, the court ruled that the dedication was a regulatory taking requiring just compensation.
  • Dolan v. City of Tigard: Following the submission of a site plan to expand a commercial premise, the City of Tigard required the owner to dedicate portions of her property as a condition for granting a building permit. The city required the owner to dedicate: (1) a portion of the property lying within a flood plain to improve the storm drainage system; and (2) another portion of her land for a bicycle and pedestrian pathway. While the court found that the “essential nexus” requirement was satisfied, it rejected the dedications as neither were “roughly proportional” to the impact of the proposed development. For the “roughly proportional” requirement to be fulfilled, the government must make an individualized determination that the required dedication is related to both the nature and the extent of the proposed development’s impact. Because the city was unable to show that a public dedication for storm drainage improvement would be superior to a private dedication, and because their justification that a bicycle and pedestrian pathway could offset the increase in traffic was too general, the court held that the requirements constituted a regulatory taking requiring just compensation.