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U.S. Supreme Court Adopts a Holistic Approach to Defining "Property" for Regulatory Takings Analysis

supreme-court-property

On June 23, 2017, the U.S. Supreme Court held in Murr v. Wisconsin, 137 S.Ct. 1933 (2017), that an ordinance preventing two contiguous parcels from being sold independently of one another did not result in a compensable regulatory taking of real property. The Court held that the petitioners, the owners of two adjacent lots, were not deprived of all economically beneficial use of their property through the denial of the sale of a single lot. The decision rejected a formalistic approach to takings issues and, instead, applied a flexible analysis of the underlying fairness and factual circumstances.

Underlying Facts

The parents of Joseph P. Murr and his siblings (the Murr children) purchased two adjacent lots (Lots E and F) in St. Croix County, Wisconsin in 1960. Each lot had less than one acre of land suitable for development. In 1994 and 1995, the parents transferred Lots F and E, respectively, to their children, unifying the ownership of the lots after the effective date of state and local laws prohibiting the separate use or sale of commonly-owned adjacent lots unless each lot has at least one acre of land suitable for development. Under state law, the lots effectively merged. The Murrs later sought to sell only Lot E, not Lot F. The County Board of Adjustment denied the children's application to sell the lots separately.

The Murrs sued the state and county, claiming that the ordinance resulted in an uncompensated taking of their property and deprived them of all, or practically all, of the use of Lot E because it cannot be sold or improved separately. The trial court granted summary judgement to the state and county and the Court of Appeals of Wisconsin affirmed.

Holding

The Court affirmed the judgment in a decision for Wisconsin, with Justice Kennedy writing the plurality opinion.

While governmental regulation of property generally does not constitute a taking, regulation may be so burdensome that it becomes a taking. The analysis essentially requires courts to balance the rights of property ownership against the government's power to adjust rights for the good of the public, which is a fact-intensive inquiry.

In order to properly conduct this inquiry, an essential step was to determine the property unit to be analyzed— that is, to determine the "denominator" of the takings inquiry. The Court determined that neither defining the property unit as only the portion targeted by the challenged regulation nor allowing state law to define the property adequately protected the property rights at stake. Instead, the Court held that other factors, such as the treatment of land under state and local law, the physical characteristics of the land, and the prospective value of the land in question, should be considered in determining the "property unit" that is subject to the alleged taking. The inquiry should be objective and should examine the landowner's reasonable expectation about whether the property at issue would be treated as a single parcel or as separate ones.

In this case, the Court found that after the proper application of these factors, the two parcels in question should be evaluated as a single whole for takings analysis purposes. When the property was considered as a whole, continuous parcel, the Court found that there was neither a deprivation of all "economically beneficial use" of the property nor a complete deprivation of use, and thus no taking.

Chief Justice Roberts wrote a dissent in which Justices Thomas and Alito joined. (Justice Gorsuch did not participate in the discussion or decision of the case.) The Chief Justice argued that the Takings Clause of the Fifth Amendment applied to established private property rights, which state law has historically defined. He argued that using state law to define the relevant property for takings analysis purposes simplified the analysis.

In a separate dissent, Justice Thomas wrote that the Court should reexamine its decisions on regulatory takings to determine whether such a concept was actually grounded in the original meaning of the Fifth and Fourteenth Amendments. 

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Sunday, 22 October 2017

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