Regulatory taking

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Regulatory taking refers to a situation in which a government regulates a property to such a degree that the regulation effectively amounts to an exercise of the government's eminent domain power without actually divesting the property's owner of title to the property.

In recent years, the concept of regulatory taking has been used more loosely by property rights groups, extending to include regulations that reduce property values by lesser amounts. Ballot initiatives based on this interpretation (such as Oregon's Measure 37) have been advanced in at least seven states in the years 2000 to 2006. All these states are in the American west, but a significant portion of the funding for the initiatives has come from sources on the east coast.[1]

Contents

[edit] Examples

  • Note: Reg. taking operates as a de facto taking - it is not the exercise of the government's eminent domain power (mentioned above)in that "just compensation" element will not be met

Suppose a piece of property is situated within a residential subdivision and is twenty meters deep. If the zoning for the property prohibits the construction of structures within the front ten meters or the rear five meters, and the building code requires one room in every house to be at least six meters deep, no house can be built consistent with all applicable law. The owner could argue that the government has taken the property with its zoning regulation. The burden of proof would be on the property owner to verify that all economic benefit of the property was lost as a result of the regulation.

Proponents of stringent regulation of property (usually but not always environmentalists) have argued that absent physical invasion of privately owned land, no degree of regulation should amount to an uncompensated taking. In 1987, the U S. Supreme Court disagreed and held that where a regulation deprives the property owner of economically viable use of his or her property, that is the equivalent of a taking for which just compensation has to be paid by the government. To establish a regulatory taking the property owners must show that they have been deprived of all or virtually all utility or value of their property, or that the challenged law requires them to donate property to the government without lawful justification.

[edit] Political significance

The opening gun in the current fight over effects of stringent regulation of private property in America was fired in 1973 when the Council on Environmental Quality adopted the British approach of viewing the right to develop land as a public rather than private right. To that end its proponents argued that there should be no such thing as a regulatory taking, and the owners of land subjected to confiscatory regulations should only be able to get a judicial declaration that the regulation is invalid. The owners' response has been that this is no remedy because it can take many years to get relief from the courts, and even when land owners win in court they remain uncompensated for potentially huge losses incurred during the legal battle, such as loss of the property by foreclosure. This doctrinal confrontation raged until 1987 when the U.S. Supreme Court decided First English Evangelical Lutheran Church v. County of Los Angeles, in which it held that a taking of property was no less a taking when it was effected by non-physical means; i.e., by regulations that denied land owners use of their property, even when it did so on a temporary basis.

The always controversial concept of regulatory taking has drawn much attention in more recent years, as legislation - some by ballot initiative - restricting land use regulations has been promoted in western states. The best known example was Oregon's adoption of law severely restricting the government's property regulation powers, and requiring compensation for diminution in value of the regulated property. In a few other states, legislatures adopted similar laws, a prominent example being Florida's Bert Harris Property Protection Act.

Because of widespread property ownership in the United States, this anti-regulation sentiment tapped into populist sentiments among the electorate. John Tillman, president of Americans for Limited Government, says the group's interest is in "…restoring property rights for the average citizen."[2] Others argue that this legislation would benefit large corporate interests, often at the expense of private citizens.[3]

[edit] Legal status and consequences

[edit] United States law

In common law jurisdictions, governments traditionally enjoy the police power, under which a governments may regulate a variety of aspects of the lives of its subjects. Under American law, however, this power does not extend to the outright divestiture of title to private property, nor to the de facto equivalent of it. Instead, the power of eminent domain is a separate and distinct power which allows a government to divest a property owner of title to such property for public use, and with just compensation. This power is limited in the Fifth Amendment to the United States Constitution, and extends to the states under the Due Process Clause of the Fourteenth Amendment. (The Fifth Amendment prohibits the federal government from taking property for public use without "just compensation," which American courts have interpreted in the usual case to mean "fair market value.") This prohibition is deemed incorporated in the Due Process Clause of the Fourteenth Amendment (which bars state governments from depriving people of their property without due process of law.)

The issue of regulatory takings arises from the interaction between exercise of the traditional police power and exercise of eminent domain. The police power is the inherent government power, usually exercised by the legislature, to do what is reasonably necessary to promote and protect public health, safety, welfare and morals. But that power can be applied so broadly that it conflicts with the Constitution. To take a common example, the application of the police power to regulation of obscenity often comes into conflict with the First Amendment's freedom of speech, typically in regulations of adult businesses. The same is true of regulations of land -- they can conflict with constitutional provisions. That is, a government action effects a regulatory taking when it burdens property to such a degree that it impinges on the rights of the owner so harshly as to become a de facto exercise of the power of eminent domain. When a government regulation effects a taking of private property by such excessive regulation, the owner may initiate inverse condemnation proceedings to recover the value of the taken property .

The United States Supreme Court has established a number of tests under which a state regulation constitutes a taking per se. These are physical invasion, denial of all economically viable private property uses, or requiring the owners to dedicate some of their property to the government without a justifying reason for so doing. For example, when the owners' proposed land use will result in a significant increase in traffic they may be required to dedicate a strip of their land to improve an adjacent road. But when an action does not fall into a category addressed by one of these tests, the Court relies primarily on an ad hoc inquiry into the specifics of such individual case. This approach has been the subject of much criticism because of its unpredictability.

[edit] Diminution-of-value test

The Supreme Court first held that state regulations may effect a taking in the 1922 case of Pennsylvania Coal Co. v. Mahon. There, Justice Holmes wrote for the majority that "[t]he 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."

In Penn Central Transportation Co. v. New York City, the court denied the Penn Central Company the right to build an office building on top of the Grand Central terminal in New York City, and identified the following as being of particular importance in the determination of whether a regulatory taking has occurred: (1) The economic impact of the regulation on the property owner, (2) the extent to which the regulation interferes with the owner’s reasonable investment-backed expectations, and (3) the character of the regulation. When inquiring into the character of the regulation, the court will look to the magnitude of the regulation, how the regulation distributes the burdens and benefits among property owners, and whether it violates any of the owner’s essential attributes of property ownership, such as the right to exclude.

[edit] Physical invasion test

In Kaiser Aetna v. United States, the Supreme Court held that a Corps of Engineers' regulation requiring the owners of a private marina to admit members of the public was a taking of property.

In Loretto v. Teleprompter Manhattan CATV Corp., the Supreme Court ruled that a regulation is generally considered a per se taking when it forces land owners to endure a permanent physical occupation on their land, such as the permanent physical presence of cable lines on a residential building. The Court argued that any permanent physical presence destroyed the property owner's right to exclude, long recognized as one of the key rights in the "bundle of rights" commonly characterized as property.

[edit] Total takings test

In Lucas v. South Carolina Coastal Council, the Supreme Court ruled that a regulation that forbade construction on the owner's land thus depriving him of all economically beneficial uses constituted a per se taking unless the proscribed use interests were not part of the title to begin with. In other words, a law or decree with the effect of depriving all economically beneficial use must do no more than duplicate the result that could have been achieved in the courts under the law of nuisance.

[edit] The denominator problem

In the Penn Central Case, the Supreme Court ruled out of the rule that taking law does not divide property into discrete segments and therefore a taking occurs only when an owner's entire ownership is excessively regulated, and the owners are therefore not entitled to compensation where a part of their land remains economically viable. This gave rise to the question of what is the "denominator" of the ownership fraction; i.e., what is the larger ownership whose part is being subjected to confiscatory regulation, since the regulatory taking of a part of it (the "numerator") is not compensable.

The question thus arises: What is the "denominator" of the regulated parcel? For example: in Pennsylvania Coal Co. v. Mahon(260 U.S. 393) Pennsylvania Coal owned the mineral rights in a property (as well as the right to surface support under Pennsylvania law), and Mahon owned the surface rights of that land. Relying on Pennsylvania statutory law, the surface owners wanted mining under their [surface] land stopped to prevent subsidence. The court agreed with the coal company and held that the state statute forbidding such mining was a taking of the coal company's property.

Thus, the Pennsylvania Coal Company suffered a 100% taking, because all of its property (the underground coal deposits) had been effectively extinguished by the regulation. It could no longer extract its own coal. On the other hand, under the more recent Penn Central approach, if one defines the "denominator" as the total property rights in a particular parcel (i.e., both surface and mineral rights), then there would be only a partial taking, because the mineral rights were only a part of the total rights in the property (even if those rights were distributed between two owners). This theory was more recently applied by the U S Court of Appeals in Whitney Benefits v. United States, holding that a federal regulation forbidding strip mining of large coal deposits in Wyoming, took the owners' property, requiring payment of compensation which, with interest and attorneys' fees, came to $200 million

In his dissent to Pennsylvania Coal Justice Brandeis argued that inasmuch as the police power regulation promoted public safety, the state statute forbidding mining under inhabited land trumped the coal company's property right to its coal. That theory has gained acceptance in the Supreme Court case of Keystone Bituminous Coal Association v. DeBenedictis (480 U.S. 470), but only to the extent that the prohibition of mining was partial, not total.

[edit] See also

[edit] Notes

  1. ^ See Patricia E. Salkin and Amy Lavine, Measure 37 and a Spoonful of Kelo, 38 The Urban Lawyer 1065 (Fall 2006)
  2. ^ Anger Drives Property Rights Measures - New York Times
  3. ^ http://www.oregonlive.com/editorials/oregonian/index.ssf?/base/editorial/116502450362510.xml&coll=7

[edit] References

  • Epstein, Richard A. (1985). Takings: Private Property and the Power of Eminent Domain. Cambridge: Harvard University Press, ISBN 0674867289.
  • Eagle, Steven J. (2005). Regulatory Takings. Newark, NJ: LexisNexis, ISBN 0820574937.
  • Frieden, Bernard, The Environmental Protection Hustle (1979 MIT Press).
  • Meltz, Robert, Merriam, Dwight H., and Frank, Richard M. (1999). The Takings Issue: Constituttional Limits on Land Use Control and Environmental Regulation. Washington, D.C. & Covelo, California: Island Press, ISBN 1559633808.

[edit] External links