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Real Property • Takings
PROP#254
Legal Definition
When a zoning ordinance substantially reduces the value of property, it may constitute a taking. However, where the ordinance regulates activity that is considered a nuisance, it is not a taking even if it leaves the land with no economic value.
Denial of all economic value is a taking, but denial of nearly all economic value results in a balancing test of the (1) social goals of the regulation; (2) diminution in value of the property, and (3) the owner's reasonable expectations for use of the property.
Denial of all economic value is a taking, but denial of nearly all economic value results in a balancing test of the (1) social goals of the regulation; (2) diminution in value of the property, and (3) the owner's reasonable expectations for use of the property.
Plain English Explanation
We'll dive deeper into these concepts in our Constitutional Law deck, but this is one of those common cross-over legal issues that pops up in property law worthy of a discussion. Put simply: the government isn't allowed to take stuff of value from citizens without providing compensation for it. In other words, when the government takes, it triggers necessary constitutional protections and analyses. Thus, when you see the government depriving citizens of property, you should ask yourself, "Does this constitute a taking?"
As we discussed in other cards, zoning ordinances are a necessary element of the state's ability to perform its obligations of maintaining health, safety, and welfare for citizens. However, the citizens that get caught up in the larger goals can sometimes be victims of those ordinances. The law cares about them, too, and so it tries to strike a balance.
The most obvious, and least common, example of takings are when the government ordinance takes away all economic value of the property. For example, if the government says that a piece of land cannot be developed or used because it is home to a rare, endangered species of bird, all economic value of that property is now gone.
The less obvious, and more tested example is when the government takes away nearly all, which triggers a balancing test. In your arguments, you will need to assess the overarching social goals of the regulation, the impact and reduced value on the property, and the owner's reasonable expectations that they should be able to enjoy their land.
As we discussed in other cards, zoning ordinances are a necessary element of the state's ability to perform its obligations of maintaining health, safety, and welfare for citizens. However, the citizens that get caught up in the larger goals can sometimes be victims of those ordinances. The law cares about them, too, and so it tries to strike a balance.
The most obvious, and least common, example of takings are when the government ordinance takes away all economic value of the property. For example, if the government says that a piece of land cannot be developed or used because it is home to a rare, endangered species of bird, all economic value of that property is now gone.
The less obvious, and more tested example is when the government takes away nearly all, which triggers a balancing test. In your arguments, you will need to assess the overarching social goals of the regulation, the impact and reduced value on the property, and the owner's reasonable expectations that they should be able to enjoy their land.
Hypothetical
Hypo 1: Amy owns a piece of beach front property. She wants to build a vacation home on the property. Unfortunately, the local government passes a regulation that prohibits building any permanent structure on property within 500 feet of the beach, which included Amy's land. Result: This would be a complete denial of all economic value of Amy's land. She essentially can't use it, since just about every valuable use would require her to build a permanent structure on it.
Hypo 2: Bob owns a large piece of farmland. It has been in his family for generations. In more recent years, the town around him has become more and more residential. Bob realizes he can make a lot more money if he turns his farm into a residential area, but it is not zoned for that. He petitions the government to rezone his land from agricultural to residential. The government denied it. Result: Even though Bob could make a lot more money if the land was rezoned and he was allowed to develop it into a residential area, the government's regulation and restriction hasn't stopped Bob from being able to still use it for his farm to generate income.
Hypo 3: Amy buys a piece of property that borders a lake in HypoTown. She plans on using the property to rent boats and skis to the tourists that visit throughout the year. Before she can get started, HypoTown passes an ordinance restricting the use of the lake for boating due to its environmental impact on the wildlife in the lake and near its beaches. Result: Amy can no longer use her property to make money catering to boaters, but there are still other opportunities for her to make use of the property. She can rent it out for people to stay in, or turn it into a restaurant, etc. Though it has greatly reduced the value of her plan to use it, the social goals of maintaining environmental balance likely outweigh her private interests.
Hypo 2: Bob owns a large piece of farmland. It has been in his family for generations. In more recent years, the town around him has become more and more residential. Bob realizes he can make a lot more money if he turns his farm into a residential area, but it is not zoned for that. He petitions the government to rezone his land from agricultural to residential. The government denied it. Result: Even though Bob could make a lot more money if the land was rezoned and he was allowed to develop it into a residential area, the government's regulation and restriction hasn't stopped Bob from being able to still use it for his farm to generate income.
Hypo 3: Amy buys a piece of property that borders a lake in HypoTown. She plans on using the property to rent boats and skis to the tourists that visit throughout the year. Before she can get started, HypoTown passes an ordinance restricting the use of the lake for boating due to its environmental impact on the wildlife in the lake and near its beaches. Result: Amy can no longer use her property to make money catering to boaters, but there are still other opportunities for her to make use of the property. She can rent it out for people to stay in, or turn it into a restaurant, etc. Though it has greatly reduced the value of her plan to use it, the social goals of maintaining environmental balance likely outweigh her private interests.
