California Eminent Domain Report

Those don't quite sound like the lyrics to the early-90's popular Ace of Base hit, "The Sign."  But they likely describe the situation of many travelers on the I-10 freeway in Los Angeles thanks to a recent California Court of Appeal decision denying a property owner's inverse condemnation action, and upholding Caltrans' required removal of an 8,000 square foot "wallscape" advertising space on the 155 West Washington Boulevard building.  

In West Washington Properties v. California Department of Transportation, a property owner filed an action against Caltrans seeking to (1) bar Caltrans from enforcing the Outdoor Advertising Act which would have required the removal of the wallscape, or (2) require Caltrans to pay damages for a taking of the owner's property rights.  The wallscape was first placed on the 155 West Washington Boulevard building in 1984 in connection with the Olympics.  When West Washington purchased the building in 1999, it located permits from the City of Los Angeles for the wallscape, but it never contacted Caltrans to determine whether there were any state-issued permits.

The wallscape was visible from the I-10 freeway, and for the first time in 2006, a Caltrans field inspector issued a notice that it violated the Outdoor Advertising Act because there was no permit for the wallscape.  The owner claimed that Caltrans should be estopped from enforcing the Act given over 20 years had passed and Caltrans had never before issued a violation.  The owner further claimed that if Caltrans required the removal of the wallscape, it constituted a taking, and the wallscape generated $50,000 per month in revenue, meaning the future capitalized value of the wallscape exceeded $12 million.

In a published decision, the Court rejected the owner's estoppel claim, finding that the owner did not rely on an affirmative statement from Caltrans when it purchased the building, and in fact never even attempted to determine whether the wallscape had a valid Caltrans permit. The Court explained that government inaction cannot form a proper basis to estop the government from enforcing a law intended to benefit the public. 

The Court also rejected the owner's inverse condemnation claim, explaining that general regulations restricting the use of property -- such as Caltrans' enforcement of the Outdoor Advertising Act --constitute an exercise of the police power for an authorized purpose and do not constitute takings.  The Court concluded that there was no strong public policy to provide compensation to a property owner upon the removal of a display that had been unlawful since its erection.

So, travelers along the I-10 freeway will no longer "see the sign".  And the property owner will receive no compensation for the loss of its massive revenue stream.  I suppose the moral of the story is to do your due diligence before purchasing any piece of property.