In Sharper Focus: Regulatory Takings

This post was written by Student Contributor Greg Kendall, a second year student at the University of Cincinnati College of Law.

In two cases it recently heard, the Ohio Supreme Court has been asked to apply the doctrine of regulatory takings to new fact situations involving owners of land contiguous to property that was re-zoned by a municipality. In one case, Clifton v. Village of Blanchester, the Court held that the plaintiff lacked standing to sue because his land had not been re-zoned and he did not live within the city limits. The other case, Moore v. City of Middletown, has yet to be decided.

 The most basic form of taking requiring just compensation occurs where the government directly appropriates or physically invades private property. In Pennsylvania Coal Co. V. Mahon, 260 U.S. 393 (1922), the U.S. Supreme Court recognized that government regulation of property can sometimes be the practical equivalent of a direct appropriation where the regulation requires an owner to suffer a permanent physical invasion of the property, or where the regulation deprives the owner of all economically beneficial use of the property.

A major case in regulatory takings doctrine was Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978). At issue in the case was New York City’s historical landmarks preservation law, which required owners of historical landmarks to seek administrative approval before altering any of the exterior architectural features of the building. The owners sought to construct an office building in the airspace above the terminal, but the city rejected the plans under the landmark preservation law. The owners sued, arguing that the law constituted a regulatory taking in violation of the Fifth Amendment.

 The U.S. Supreme Court identified three factors relevant to regulatory takings analysis. These are: (1) the economic impact of the regulation on the claimant, (2) the extent to which the regulation has interfered with the claimant’s “distinct investment-backed expectations,” and (3) the character of the governmental action. As to the last factor, the Court explained that a taking is more readily found when the governmental action can be characterized as a “physical invasion by government,” as opposed to interference “aris[ing] from some public program adjusting the benefits and burdens of economic life to promote the common good.” In rejecting Penn Central’s claims that the city’s actions constituted a taking, the Supreme Court established two important principles. First, mere diminution in property value, without more, is not enough to establish a taking. Second, a plaintiff cannot establish a taking “simply by showing that they have been denied a property interest that [the plaintiff] heretofore had believed was available for development.”

 More recently, the U.S. Supreme Court was asked to address how the nature of the public purposes served by a regulation affects the regulatory taking analysis. In Lingle v. Chevron U.S.A, 544 U.S. 528 (2005), the Court reviewed a Hawaii statute which limited the amount of rent oil companies could charge dealers leasing company-owned gas stations. Chevron argued that the rent cap constituted an impermissible taking of property. The lower courts held that the statute constituted a taking because it did not “substantially advance legitimate state interests” in controlling retail gas prices, applying a test established in Agins v. City of Tiburon, 447 U.S. 255 (1980).

 The Lingle Court overturned the Agins “substantially advances” test. It explained that the test conflated the issue of whether a regulation is effective in meeting legitimate public purposes with the issue of whether a taking actually occurs; the test was also more of the nature of a due process test, which the Court explained has “no proper place” in takings clause analysis.

 The Lingle Court also described four major categories of regulatory takings:

1. A physical invasion of property. See Loretto v. Teleprompter Manhattan CATV Corp.,458 U.S. 419 (1982) (law requiring landlords to allow cable companies access to install cable facilities in apartment buildings).

2. Regulations that completely deprive an owner of “all economically beneficial use” of the property. See Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) (state law prohibiting construction of permanent habitable structures on beachfront, challenged by owner of parcels of beachfront property who intended to build single-family homes on the property).

 3. A Penn Central-style taking, i.e. a regulation depriving the owner of some, but not all, economically beneficial use of the property, such as by interfering with the owner’s “distinct investment-backed expectations.”

 4. Land-use exactions, i.e. government demands that a landowner grant an easement allowing public access to the property as a condition of obtaining a development permit. See Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994).





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