first-year law review

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Oct. 31-Nov. 1 Property: Regulatory Takings

The main factors in deciding if a regulation is a taking are:

  • Degree of diminished property value
  • Remaining economic viability
  • Degree to which investment-backed expectations have been thwarted
  • Character of the government’s action
  • Whether the regulation affords a reciprocal advanatage to the owner

Let’s see how these play out in a few cases.

The first case is Pennsylvania Coal v. Mahon. In this case, the Penn Coal wanted to mine coal from under Mahon‘s house. Penn Coal had subsurface rights and Mahon had surface rights. There was a regulation that said mining couldn’t occur under a human-habited structure to avoid sinking. Penn Coal argued that the regulation was a taking because it didn’t have access which meant the diminution was substantial. It didn’t have the coal to sell and that was the coal’s only benefit. The Supreme Court held that while governments to have the police power (the authority to control the actions of others), that power can be streteched too far. The instant case is an example of police power gone too far. Even if the government doesn’t actually take title of the property, it can still be a taking if it completely devalues the property.

The next case is Pennsylvania Central Transportation v. New York. In this case, Penn Central sold the airspace rights above Penn Central station to a company to build a twenty-story tower. The New York Landmark Commission, however, designated the train station a landmark which meant Penn Central had to get permission to go forward with its plan. The court focused on the character of the regulation and on the nature and extent of the interference with rights in the parcel as a whole when deciding if the regulation effected a taking. The Court said that the restrictions were for the general welfare and they permitted the owners to enhance the building and other properties to get the value. The Court said that the original purpose of the station wasn’t interferred with, nor did the regulation prohibit Penn Central from maximizing the profit to be gained from the building as it presently stood. If the Court had looked at only the airspace rights, they may have found a taking since the plans to build the tower were frustrated. The Court, however, looked at the entire parcel and said there was still plenty of value. The Court also said they could transfer their property rights. To get the value out of the airspace, the Court said they could sell their airspace to other developers so they could build their buildings higher than would ordinarily be allowed.

The point of all this is that you have to do a balancing test with several different criteria. The Penn Central analysis will come into play later. It’s also good to know that the Court declined to set a brightline rule, preferring instead to look at things on a case-by-case basis using the Penn Central analysis.

The next case is Lucas v. South Carolina Coastal Council. Here, Lucas had a couple of waterfront properties that were rendered valueless by a regulation passed by the SCCC which said you couldn’t put structures in a critical area which was a certain distance from the beach. The regulation was to prevent erosion, but it also prevented Lucas from doing anything with the land. The Court said that when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking. This ruling and Loretto make the only two brightline rules that the Court has set forth as far as takings go. Thus, for Lucas if all value is lost, the government has to compensate the owner for the loss. The only way for the government to get out of compensating the owner is if the regulation takes away a right that the owner didn’t have in the first place.




November 1, 2006 - Posted by | Property

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