Regulatory Takings: When Permit Conditions Go Too Far

Posted on July 29, 2011 by Brad Kuhn

Anyone who's ever been involved in real estate development knows that as part of the permit approval process, developers are routinely required to make concessions to the government in order to move forward with proposed development plans.  And, if you're building near the coast, you usually need to jump through even more hoops (sometimes backwards and through fire) to please the Coastal Commission.  But when do the demanded concessions go too far?

We've covered in the past the "rough proportionality" and "nexus" requirements that development conditions must satisfy in order to withstand scrutiny, but a recent trial court decision in San Mateo County serves as a good reminder.  The case, Sterling v. California Coastal Commission, involves the owners of 143 acres of vacant land in Half Moon Bay challenging a dedication requirement imposed by the Coastal Commission.  The owners sought a permit to build a 6,000 square foot home, and in return, the Coastal Commission demanded that the owners convey an agricultural easement which would require farming the remainder of the property forever (with no other uses allowed).  You may be wondering, where's the nexus; where's the proportionality? 

As suspected, the "forced farming" condition was shot down by the court.  But the Coastal Commission decided to try again and came back with a new condition:  that the owners dedicate the remainder of the property to open space for the public good.  This imposed condition sure doesn't sound any better. 

The trial court once again shot down the condition, finding that the Coastal Commission's imposition of the open space requirement constituted an unconstitutional taking of property, as it is disproportionate to the public impact of the proposed development.  The Pacific Legal Foundation represented the owners, and it reports the court's ruling as follows:

The new condition, in the form of an open space deed restriction is not tailored to the development and is once again irreconcilable with Nollan and Dolan. As compared to the Commission’s prior failed attempt to impose an agricultural easement on the property, the Commission’s new attempt is a distinction without a difference.

The case serves as a good reminder that when conditions of approval go too far, they can constitute a regulatory taking of property.  You can read a more detailed summary by reviewing PLF's Press Release. 

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9th Circuit Rules Owner Suffering From Diminished Property Value Has Standing to Challenge Regulation on Another Property

Posted on February 10, 2011 by Brad Kuhn

The Clean Water Act requires states to identify rivers and creeks that fall below specified water quality standards.  Those water bodies are thereafter designated as "impaired" by the Environmental Protection Agency, and certain standards are imposed to limit pollution and runoff. 

If a river or creek's designation results in a nearby property suffering a decrease in value, does the property owner have standing to seek removal of the designation?  In Barnum Timber Co. v. United States Environmental Protection Agency, the Ninth Circuit Court of Appeals held that such a nearby owner suffering a diminution in property value did have standing. 

Barnum Timber Company, which was represented by the Pacific Legal Foundation, owns property and conducts timber-harvesting operations in the Redwood Creek watershed near Eureka, California.  Barnum argued that its property value decreased when the adjacent Redwood Creek was listed as "impaired."  In particular, Barnum claimed that the listing fed "the public's and the market's perception that Barnum's timber operations are restricted by the listing."  Barnum presented declarations from two Registered Professional Foresters, each explaining that when a listing occurs, the public perceives that the property will be subject to additional and onerous regulation, and the market reaction devalues the property. 

Based on the evidence presented, the Ninth Circuit agreed with the concept that "regulatory restrictions on one property that affect the uses to which a second property can be put [can] lower the second property's value."  The Court also agreed that a regulatory restriction need not be the "sole source of the [property's] devaluation."  The Ninth Circuit therefore held that Barnum -- based on the alleged property dimunition -- had standing to seek removal of the impaired listing.

While the Barnum Timber case strictly deals with the issue of standing, it will be interesting to see whether property owner advocates use the opinion to open up a new door of potential regulatory takings cases where a regulation on one property impacts the value of another property.  The Barnum Timber case may also arguably provide support for a regulatory takings claim where a property owner suffers a dimunition in value from a variety of factors. 

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City of Vista Seeking to Acquire Motel Property for Redevelopment Project

Posted on November 2, 2009 by Rick E. Rayl

 In an October 31 article for the North County Times, "VISTA: City wants to redevelop motel property," reporter Cigi Ross writes about the City of Vista's plans to acquire a motel property as part of a plan to redevelop the area:

The owner of a downtown Vista motel is accusing the city of trying to kick him out of his business and his home.

City officials announced Monday they're trying to purchase the Vista Riviera Motel as part of a redevelopment project along Vista Village Drive and Vista Way that could include a new car dealership. 

While the City's efforts currently involve a voluntary acquisition, the owner has already said that he does not want to sell, raising the possibility that the City could acquire the property through eminent domain.   Though this situation raises the specter of the often criticized Kelo decision, the situation is different, in that Vista's stated motivation in acquiring the property is to eliminate blight, a motivation missing in the Kelo case. 

Ms. Ross' article explains:

The land is prime real estate because Vista Village Drive is a main thoroughfare that cuts through the center of Vista and is used by an estimated 40,000 motorists every day.

Over the past few years, the city has spent at least $3 million to purchase properties in the downtown corridor as part of a long-term plan to spur economic development. Most recently, the City Council approved spending about $1.25 million on two sites near South Santa Fe Avenue.

Those properties, as well as the Vista Riviera Motel, lie within an expanded redevelopment zone that was created in 2008 when Vista's City Council approved an updated redevelopment plan.

That redevelopment plan says the city can use eminent domain ---- take properties for public use ---- in part to eliminate "blight." The city defines economic blight as properties with high crime rates, high vacancy or low lease rates, stagnant or declining property values or unsafe and unhealthy buildings. 

Tim Sandefur, an attorney with the Pacific Legal Foundation and a well known property rights advocate, was quoted, explaining why the property owner would likely have little success fighting any effort by Vista to condemn his property:

One argument has been that it's wrong to take property from one business owner so another can develop the site. But Proposition 99, a ballot measure passed in 2008, expanded municipalities' power of eminent domain by allowing that kind of redevelopment, Sandefur said.

That measure followed a 2005 Supreme Court ruling that said local governments could force property owners to sell off their land to make way for private economic developments even if the property isn't blighted.

"It was possible until recently to say, 'No, there are limits on that,'" Sandefur said. "Redevelopment is now defined as a public use in the state constitution.

"Unfortunately property owners have virtually no protection against eminent domain in California until the state constitution is amended," he said. 

Only time will tell how badly Vista really wants this property.  If the owner maintains his steadfast refusal to sell, eminent domain will be the only option.  But in the wake of Kelo, the use of eminent domain for redevelopment purposes is subject to considerable -- and generally unfavorable -- public scrutiny. 
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