P R O B A T E   &   P R O P E R T Y
July/August 2003
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Environmental Law Update

Environmental Law Update Editor: Rafe Petersen, Holland & Knight LLP, 2099 Pennsylvania Ave., N.W., Suite 100, Washington, DC 20006-6801, rapeters@hklaw.com .

Environmental Law Update provides information on developments in environmental law as it applies to property, probate, and trust matters. The editors of Probate & Property welcome information and suggestions from readers.

When Do Environmental Restrictions Trigger "Takings" of Private Property

A common complaint of private property owners is that restrictions imposed on development of private property can be so onerous as to amount to a "taking" of property by the government agency. The Fifth Amendment of the Constitution provides that "private property [shall not] be taken for public use, without just compensation." Although use of the government's power of eminent domain under formal condemnation proceedings is a straightforward "taking" of private property, a "taking" via regulatory restrictions is much harder to prove. Indeed, the most recent Supreme Court ruling on this issue allows state and local governments to impose relatively lengthy development moratoria without having to compensate private landowners for the losses they suffer when not being able to develop their property.

Takings Clause jurisprudence has identified two types of takings: possessory and regulatory. When the government condemns property for its own use, for example to build a road, it has physically taken possession of the property and must compensate the former owner for its value. In contrast, when the government imposes development moratoria or otherwise restricts the use of real property, this triggers a potential "regulatory taking." In such circumstances, the government may have to compensate the property owner for "taking" the property if the regulation has gone "too far." The difficult question is how "far" the government may go before it has stepped over the line and "taken" the property.

There are two types of regulatory takings: categorical takings or takings determined after "ad hoc, factual inquiries." A categorical taking occurs when the government regulation compels the property owner to suffer a (1) permanent physical invasion or (2) denies all economically beneficial or productive use of the property. Demonstrating that the regulation has denied all economically beneficial use of the property is difficult, as most regulations leave the owner with some viable use of the property. Thus, for example, a property that is zoned for a less valuable type of development such as farm use may still have some economic value, despite the fact that the owner's intention was a more valuable, if not a better, use such as residential or commercial units.

When a regulation restricts development without denying all viable use, a court must assess the purpose and the effect of the regulation. To determine whether this second type of regulatory taking has occurred, the court undertakes an ad hoc, factual inquiry that considers three factors: (1) the economic impact of the regulation on the claimant, (2) the extent to which the regulation has interfered with distinct investment-backed expectations, and (3) the character of government action.

In this analysis, the court will weigh these factors while looking at the "parcel as a whole," both spatially and temporally. For example, the whole parcel may include the air rights above the property, the support rights below the property, and all the acreage of a particular parcel. The temporal question is also a complex element in this analysis.

In April 2002, the U.S. Supreme Court in Tahoe-Sierra Regional Planning Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002),upheld a 32-month development moratorium put in place by the Tahoe-Sierra Preservation Council as not "automatically" or in fact a taking. The Tahoe Regional Planning Agency (TRPA) was formed under an agreement between California and Nevada in response to concerns that development that increases nutrient loading via runoff and erosion was threatening Lake Tahoe's color and transparency. The TRPA was required to develop standards for water quality, air quality, and vegetation conservation and to adopt a regional plan to achieve such standards. To allow sufficient time to implement its plan, the TRPA placed a moratorium on development. Frustrated with the progress of the plan, landowners in the area sued, claiming that the development moratorium, although temporary, constituted a regulatory taking of their property.

Noting a long line of cases allowing local governments to regulate land use, the Court rejected the landowners' argument that any temporary moratorium on development, regardless of whether it prohibits all use of the property, automatically should constitute a taking. Justice Stevens also found it important that the moratorium fostered the thoughtful planning process that land-use regulation requires. The Court feared a legal standard that would "render routine government practices prohibitively expensive or encourage hasty decision making." Thus, the Court determined a temporary development moratorium would not be a taking unless its goes too far based upon the specific facts and circumstances of each case.

After considering numerous facts, the Court upheld the TRPA moratorium. Unfortunately, however, the Court did not provide a simple formula for future analysis. The factor that the Court appeared to find the most persuasive was the duration of the TRPA moratorium. The Court felt 32 months was a reasonable time period given the complexity of the issues in the plan. Again, the Court showed a strong interest in a thoughtful planning process, especially given that the planning process was for a regional plan. The Court noted that government agencies often use moratoria to keep the status quo in place while developing a permanent plan. Moreover, the Court found that the TRPA had not improperly stalled or delayed preparation or implementation of the regional water quality plan. Hence, if TRPA had taken longer than necessary to develop its plan, or had it been considering a permit for a single parcel, the result might have been different.

Whatever one's viewpoint on what should constitute a regulatory taking, one should agree that the Tahoe decision gives local government agencies wide discretion to enact development moratoria without having to compensate landowners for taking their real property. Although such regulations must not completely deny any development of the property for too long a time, moratoria have clearly been legitimized as planning tools. Finally, the Tahoe case also makes clear that to successfully challenge a development moratorium, the opponent must demonstrate by factual evidence that the moratorium was unreasonably restrictive in light of all the circumstances. As a result, challenges to moratoria and other similar land-use restrictions probably will be relatively infrequent because of the high cost and unpredictability of such ad hoc factual contests.