{"id":30921,"date":"2022-07-27T13:59:40","date_gmt":"2022-07-27T18:59:40","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/constitution\/amendment5\/annotation13.html"},"modified":"2022-07-27T13:59:40","modified_gmt":"2022-07-27T18:59:40","slug":"annotation13","status":"publish","type":"constitution","link":"https:\/\/constitution.findlaw.com\/amendment5\/annotation13.html","title":{"rendered":"Regulatory Takings"},"content":{"rendered":"\n
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Regulatory Takings<\/h1>\n
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\n By FindLaw Staff<\/a> | Legally reviewed by Laura Temme, Esq.<\/a>\n | Last reviewed\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

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A regulatory taking is a situation where the government limits the legal use of private property to the point that the owner essentially cannot use it. <\/p>\n\n <\/div>\n\n

In addition to the physical taking of land for government use, the Fifth Amendment also covers \u201cregulatory takings.\u201d As with physical takings, under the Fifth Amendment, this cannot happen without just compensation. It has been the job of the Supreme Court to determine what constitutes a regulatory taking as well as the amount of compensation required.<\/p>\r\n

What the Fifth Amendment Says<\/h2>\r\n

\u201c\u2026nor shall private property be taken for public use, without just compensation.\u201d<\/i><\/p>\r\n

What It Means<\/h2>\r\n

United States Library of Congress, The Constitution of the United States of America: Analysis and Interpretation<\/i><\/b><\/p>\r\n

Although it is established that government may take private property, with compensation, to promote the public interest, that interest also may be served by regulation of property use pursuant to the police power, and for years there was broad dicta that no one may claim damages that result from a police regulation designed to secure the common welfare, especially in the area of health and safety.1<\/sup> What distinguishes eminent domain from the police power is that the former involves the taking<\/i> of property because of its need for the public use while the latter involves the regulation<\/i> of such property to prevent the use thereof in a manner that is detrimental to the public interest.2<\/sup> But regulation may deprive an owner of most or all beneficial use of his property and may destroy the values of the property for the purposes to which it is suited.3<\/sup> The older cases flatly denied the possibility of compensation for this diminution of property values,4<\/sup> but the Court in 1922 established as a general principle that if regulation goes too far it will be recognized as a taking.5<\/sup><\/p>\r\n

In Pennsylvania Coal v.<\/i> Mahon<\/i><\/a>, Justice Holmes, for the Court, over Justice Brandeis\u2019 vigorous dissent, held unconstitutional a state statute prohibiting subsurface mining in regions where it presented a danger of subsidence for homeowners. The homeowners had purchased by deeds that reserved to the coal companies ownership of subsurface mining rights and that held the companies harmless for damage caused by subsurface mining operations. The statute thus gave the homeowners more than they had been able to obtain through contracting, and at the same time deprived the coal companies of the entire value of their subsurface estates. The Court observed that [f]or practical purposes, the right to coal consists in the right to mine, and that the statute, by making it commercially impracticable to mine certain coal, had essentially the same effect for constitutional purposes as appropriating or destroying it.6<\/sup> The regulation, therefore, in precluding the companies from exercising any mining rights whatever, went too far.7<\/sup> However, when presented 65 years later with a very similar restriction on coal mining, the Court upheld it, pointing out that, unlike its predecessor, the newer law identified important public interests.8<\/sup><\/p>\r\n

The Court had been early concerned with the imposition upon one or a few individuals of the costs of furthering the public interest.9<\/sup> But it was with respect to zoning, in the context of substantive due process, that the Court first experienced some difficulty in this regard. The Court\u2019s first zoning case involved a real estate company\u2019s challenge to a comprehensive municipal zoning ordinance, alleging that the ordinance prevented development of its land for industrial purposes and thereby reduced its value from $10,000 an acre to $2,500 an acre.10<\/sup> Acknowledging that zoning was of recent origin, the Court observed that it must find its justification in the police power and be evaluated by the constitutional standards applied to exercises of the police power. After considering traditional nuisance law, the Court determined that the public interest was served by segregation of incompatible land uses and the ordinance was thus valid on its face; whether its application to diminish property values in any particular case was also valid would depend, the Court said, upon a finding that it was not clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.11<\/sup> A few years later the Court, again relying on due process rather than taking law, did invalidate the application of a zoning ordinance to a tract of land, finding that the tract would be rendered nearly worthless and that to exempt the tract would impair no substantial municipal interest.12<\/sup> But then the Court withdrew from the land-use scene until the 1970s, giving little attention to states and their municipalities as they developed more comprehensive zoning techniques.13<\/sup><\/p>\r\n

As governmental regulation of property has expanded over the years\u2014in terms of zoning and other land use controls, environmental regulations, and the like\u2014the Court never developed, as it admitted, a set formula to determine where regulation ends and taking begins.14<\/sup> More recently the Court has observed that, [i]n the near century since Mahon<\/i>, the Court for the most part has refrained from elaborating this principle through definitive rules.15<\/sup> Indeed, [t]his area of the law has been characterized by \u2018ad hoc, factual inquiries, designed to allow careful examination and weighing of all the relevant circumstances.\u201916<\/sup> Nonetheless, the Court has now formulated general principles that guide many of its decisions in the area.17<\/sup><\/p>\r\n

In Penn Central Transportation Co. v. City of New York<\/i><\/a>,18<\/sup> the Court, while cautioning that regulatory takings cases require essentially ad hoc, factual inquiries, nonetheless laid out general guidance for determining whether a regulatory taking has occurred. The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are relevant considerations. So too, is the character of the governmental action. A \u2018taking\u2019 may more readily be found when the interference with property can be characterized as a physical invasion by government than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.19<\/sup><\/p>\r\n

At issue in Penn Central<\/i> was the City\u2019s landmarks preservation law, as applied to deny approval to construct a 53-story office building atop Grand Central Terminal. The Court upheld the landmarks law against Penn Central\u2019s takings claim through application of the principles set forth above. The economic impact on Penn Central was considered: the Company could still make a reasonable return on its investment by continuing to use the facility as a rail terminal with office rentals and concessions, and the City specifically permitted owners of landmark sites to transfer to other sites the right to develop those sites beyond the otherwise permissible zoning restrictions, a valuable right that mitigated the burden otherwise to be suffered by the owner. As for the character of the governmental regulation, the Court found the landmarks law to be an economic regulation rather than a governmental appropriation of property, the preservation of historic sites being a permissible goal and one that served the public interest.20<\/sup><\/p>\r\n

Justice Holmes began his analysis in Mahon<\/i> with the observation that [g]overnment hardly could go on if to some extent values incident to property could not be diminished without paying for every change in the general law,21<\/sup> and Penn Central’s<\/i> economic impact standard also leaves ample room for recognition of this principle. Thus, the Court can easily hold that a mere permit requirement does not amount to a taking,22<\/sup> nor does a simple recordation requirement.23<\/sup> The tests become more useful, however, when compliance with regulation becomes more onerous.<\/p>\r\n

Several times the Court has relied on the concept of distinct [or, in most later cases, \u2018reasonable\u2019] investment-backed expectations first introduced in Penn Central<\/i>. In Ruckelshaus v. Monsanto Co.<\/i><\/a>,24<\/sup> the Court used the concept to determine whether a taking had resulted from the government\u2019s disclosure of trade secret information submitted with applications for pesticide registrations. Disclosure of data that had been submitted from 1972 to 1978, a period when the statute guaranteed confidentiality and thus formed the basis of a distinct investment-backed expectation, would have destroyed the property value of the trade secret and constituted a taking.25<\/sup> Following 1978 amendments setting forth conditions of data disclosure, however, applicants voluntarily submitting data in exchange for the economic benefits of registration had no reasonable expectation of additional protections of confidentiality.26<\/sup> Relying less heavily on the concept but rejecting an assertion that reasonable investment backed-expectations had been upset, the Court in Connolly v. Pension Benefit Guaranty Corp<\/i><\/a>.<\/i>27<\/sup> upheld the retroactive imposition of liability for pension plan withdrawal on the basis that employers had at least constructive notice that Congress might buttress the legislative scheme to accomplish its legislative aim that employees receive promised benefits. However, where a statute imposes severe and substantially disproportionate retroactive liability based on conduct several decades earlier, on parties that could not have anticipated the liability, a taking (or violation of due process) may occur. On this rationale, the Court in Eastern Enterprises v. Apfel<\/i><\/a>28<\/sup> struck down the Coal Miner Retiree Health Benefit Act\u2019s requirement that companies formerly engaged in mining pay miner retiree health benefits, as applied to a company that spun off its mining operation in 1965 before collective bargaining agreements included an express promise of lifetime benefits.<\/p>\r\n

On the other hand, a federal ban on the sale of artifacts made from eagle feathers was sustained as applied to the existing inventory of a commercial dealer in such artifacts, the Court not directly addressing the ban\u2019s obvious interference with investment-backed expectations.29<\/sup> The Court merely noted that the ban served a substantial public purpose in protecting the eagle from extinction, that the owner still had viable economic uses for his holdings, such as displaying them in a museum and charging admission, and that he still had the value of possession.30<\/sup><\/p>\r\n

The Court has made plain that, in applying the economic impact and investment-backed expectations factors of Penn Central<\/i>, courts are to compare what the property owner has lost through the challenged government action with what the owner retains. Discharging this mandate requires a court to define the extent of plaintiff\u2019s property\u2014the parcel as a whole\u2014that sets the scope of analysis.31<\/sup> In Murr v. Wisconsin<\/i><\/a>, the Court stated that "[l]ike the ultimate question whether a regulation has gone too far, the question of the proper parcel in regulatory takings cases cannot be solved by any simple test." Courts must instead define the parcel in a manner that reflects reasonable expectations<\/i> about the property.32<\/sup> In Murr<\/i>, the owners of two small adjoining lots, previously owned separately, wished to sell one of the lots and build on the other. The landowners were prevented from doing so by state and local regulations, enacted to implement a federal act, which effectively merged the lots when they came under common ownership, thereby barring the separate sale or improvement of the lots. The landowners therefore sought just compensation, alleging a regulatory taking of their property.<\/p>\r\n

In ruling against the landowners, the Supreme Court set forth a flexible multi-factor test for defining the proper unit of property to analyze whether a regulatory taking has occurred.33<\/sup> The Court continued the approach of prior cases whereby the boundaries of the parcel determine the denominator of the fraction of value taken from a property by a governmental regulation, which in turn can determine whether the government has taken private property.34<\/sup> Under this formula, regulators have an interest in a larger denominator\u2014in the Murr<\/i> case, combining the two adjoining lots\u2014to reduce the likelihood of having to provide compensation, while property owners seeking to show that their property has been taken have an interest in the denominator being as small as possible. The Murr<\/i> Court instructed that, in determining the parcel at issue in a regulatory takings case, no single consideration can supply the exclusive test for determining the denominator. Instead, courts must consider a number of factors, including (1) the treatment of the land under state and local law35<\/sup>; (2) the physical characteristics of the land36<\/sup>; and (3) the prospective value of the regulated land.37<\/sup><\/p>\r\n

In the course of its opinion in Penn Central<\/i> the Court rejected the principle that no compensation is required when regulation bans a noxious or harmful effect of land use.38<\/sup> The principle, it had been contended, followed from several earlier cases, including Goldblatt v. Town of Hempstead<\/i><\/a>.39<\/sup> In that case, after the town had expanded around an excavation used by a company for mining sand and gravel, the town enacted an ordinance that in effect terminated further mining at the site. Declaring that no compensation was owed, the Court stated that [a] prohibition simply upon the use of property for purposes that are declared, by valid legislation, to be injurious to the health, morals, or safety of the community, cannot, in any just sense, be deemed a taking or an appropriation of property for the public benefit. Such legislation does not disturb the owner in the control or use of his property for lawful purposes, nor restrict his right to dispose of it, but is only a declaration by the State that its use by anyone, for certain forbidden purposes, is prejudicial to the public interests.40<\/sup> In Penn Central<\/i>, however, the Court denied that there was any such test and that prior cases had turned on the concept. These cases are better understood as resting not on any supposed \u2018noxious\u2019 quality of the prohibited uses but rather on the ground that the restrictions were reasonably related to the implementation of a policy\u2014not unlike historic preservation\u2014expected to produce a widespread public benefit and applicable to all similarly situated property.41<\/sup> More recently, in Lucas v. South Carolina Coastal Council<\/i><\/a>,42<\/sup> the Court explained noxious use analysis as merely an early characterization of police power measures that do not require compensation. Noxious use logic cannot serve as a touchstone to distinguish regulatory \u2018takings\u2019\u2014which require compensation\u2014from regulatory deprivations that do not require compensation.43<\/sup><\/p>\r\n

Exceptions to the General Rule<\/b><\/h2>\r\n

Penn Central<\/i> is not the only guide to when an inverse condemnation has occurred; other criteria have emerged from other cases before and after Penn Central<\/i>. The Court has long recognized a per se takings rule for certain physical invasions: when government permanently44<\/sup> occupies property (or authorizes someone else to do so), the action constitutes a taking regardless of the public interests served or the extent of damage to the parcel as a whole.45<\/sup> The modern case dealt with a law that required landlords to permit a cable television company to install its cable facilities upon their buildings; although the equipment occupied only about 1\u00bd cubic feet of space on the exterior of each building and had only a de minimis economic impact, a divided Court held that the regulation authorized a permanent physical occupation of the property and thus constituted a taking.46<\/sup> Recently, the Court sharpened further the distinction between regulatory takings and permanent physical occupations by declaring it inappropriate to use case law from either realm as controlling precedent in the other.47<\/sup> Physical invasions falling short of permanent physical occupations remain subject to Penn Central<\/i>.<\/p>\r\n

A second per se taking rule is of more recent vintage. Land use controls constitute takings, the Court stated in Agins v. City of Tiburon<\/i><\/a>, if they do not substantially advance legitimate governmental interests, or if they deny a property owner economically viable use of his land.48<\/sup> This second Agins<\/i> criterion creates a categorical rule: when, with respect to the parcel as a whole, the landowner has been called upon to sacrifice all<\/i> economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking.49<\/sup> The only exceptions, the Court explained in Lucas<\/i>, are for those restrictions that come with the property as title encumbrances or other legally enforceable limitations. Regulations so severe as to prohibit all economically beneficial use of land cannot be newly legislated or decreed (without compensation), but must inhere in the title itself, in the restrictions that background principles of the State\u2019s law of property and nuisance already place upon land ownership. A law or decree with such an effect must, in other words, do no more than duplicate the result that could have been achieved in the courts\u2014by adjacent land owners (or other uniquely affected persons) under the State\u2019s law of private nuisance, or by the State under its complementary power to abate [public] nuisances, or otherwise.50<\/sup> Thus, while there is no broad noxious use exception separating police power regulations from takings, there is a narrower background principles exception based on the law of nuisance and unspecified property law principles.<\/p>\r\n

Together with the investment-backed expectations factor of Penn Central<\/i>, background principles were viewed by many lower courts as supporting a notice rule under which a taking claim was absolutely barred if based on a restriction imposed under a regulatory regime predating plaintiff\u2019s acquisition of the property. In Palazzolo v. Rhode Island<\/i><\/a>,51<\/sup> the Court forcefully rejected the absolute version of the notice rule, regardless of rationale. Under such a rule, it said, [a] State would be allowed, in effect, to put an expiration date on the Takings Clause.52<\/sup> Whether any role is left for preacquisition regulation in the takings analysis, however, the Court\u2019s majority opinion did not say, leaving the issue to dueling concurrences from Justice O\u2019Connor (prior regulation remains a factor) and Justice Scalia (prior regulation is irrelevant). Less than a year later, Justice O\u2019Connor\u2019s concurrence carried the day in extended dicta in Tahoe-Sierra<\/i>,53<\/sup> though the decision failed to elucidate the factors affecting the weighting to be accorded the pre-existing regime.<\/p>\r\n

The or otherwise reference, the Court explained in Lucas<\/i>,54<\/sup> was principally directed to cases holding that in times of great public peril, such as war, spreading municipal fires, and the like, property may be taken and destroyed without necessitating compensation. Thus, in United States v. Caltex, Inc.<\/i>,<\/a>55<\/sup> the owners of property destroyed by retreating United States armies in Manila during World War II were held not entitled to compensation, and in United States v. Central Eureka Mining Co.<\/i>,<\/a>56<\/sup> the Court held that a federal order suspending the operations of a nonessential gold mine for the duration of the war in order to redistribute the miners, unaccompanied by governmental possession and use or a forced sale of the facility, was not a taking entitling the owner to compensation for loss of profits. Finally, the Court held that when federal troops occupied several buildings during a riot in order to dislodge rioters and looters who had already invaded the buildings, the action was taken as much for the owners\u2019 benefit as for the general public benefit and the owners must bear the costs of the damage inflicted on the buildings subsequent to the occupation.57<\/sup><\/p>\r\n

The first prong of the Agins<\/i> test,58<\/sup> asking whether land use controls substantially advance legitimate governmental interests, has now been erased from takings jurisprudence, after a quarter-century run. The proper concern of regulatory takings law, said Lingle v. Chevron U.S.A. Inc.<\/i>,<\/a>59<\/sup> is the magnitude, character, and distribution of the burdens that a regulation imposes on property rights. In stark contrast, the substantially advances test addresses the means-end efficacy of a regulation, more in the nature of a due process inquiry.60<\/sup> As such, it is not a valid takings test.<\/p>\r\n

A third type of inverse condemnation, in addition to regulatory and physical takings, is the exaction taking. A two-part test has emerged. The first part debuted in Nollan v. California Coastal Commission<\/a><\/i>,61 <\/sup>and holds that in order not to be a taking, an exaction condition on a development permit approval (requiring, for example, that a portion of a tract to be subdivided be dedicated for public roads)62<\/sup> must substantially advance a purpose related to the underlying permit. There must, in short, be an essential nexus between the two; otherwise the condition is an out-and-out plan of extortion.63<\/sup> The second part of the exaction-takings test, announced in Dolan v. City of Tigard<\/i><\/a>64<\/sup> specifies that the condition, to not be a taking, must be related to the proposed development not only in nature, per Nollan<\/i>, but also in degree. Government must establish a rough proportionality between the burden imposed by such conditions on the property owner, and the impact of the property owner\u2019s proposed development on the community\u2014at least in the context of adjudicated (rather than legislated) conditions.<\/p>\r\n

Nollan<\/i> and Dolan<\/i> occasioned considerable debate over the breadth of what became known as the heightened scrutiny test. The stakes were plainly high in that the test, where it applies, lessens the traditional judicial deference to local police power and places the burden of proof as to rough proportionality on the government. In City of Monterey v. Del Monte Dunes at Monterey, Ltd.<\/i><\/a>,65<\/sup> the Court unanimously confined the Dolan<\/i> rough proportionality test, and, by implication, the Nollan<\/i> nexus test, to the exaction context that gave rise to those cases. Still unclear, however, is whether the Court meant to place outside Dolan<\/i> exactions of a purely monetary nature, in contrast with the physically invasive dedication conditions involved in Nollan<\/i> and Dolan<\/i>.66<\/sup> The Court clarified this uncertainty in Koontz v. St. Johns River Water Management District<\/i><\/a> by holding that monetary exactions imposed under land use permitting were subject to essential nexus\/rough proportionality analysis.67<\/sup><\/p>\r\n

The announcement following Penn Central<\/i> of the above per se rules in Loretto<\/i> (physical occupations), Agins<\/i> and Lucas<\/i> (total elimination of economic use), and Nollan<\/i>\/Dolan<\/i> (exaction conditions) prompted speculation that the Court was replacing its ad hoc Penn Central<\/i> approach with a more categorical takings jurisprudence. Such speculation was put to rest, however, by three decisions from 2001 to 2005 expressing distaste for categorical regulatory takings analysis. These decisions endorse Penn Central<\/i> as the dominant mode of analysis for inverse condemnation claims, confining the Court’s per se rules to the relatively narrow physical occupation and total wipeout circumstances, and the special context of exactions.68<\/sup><\/p>\r\n

Read More: Remedies for a Taking<\/h3>\r\n

More on the Fifth Amendment<\/h3>\r\n