From: Finance Class [mailto:FINANCE@LISTSERV.UMKC.EDU]
On Behalf Of Patrick Randolph
Sent: Friday, April 28, 2006 9:45 PM
Subject: [FINANCE] "Snuck in" Irregular DD: Massachusetts broadly interprets takings factors.
The editor just came across this case, which has some very unusual ad hoc analysis of the takings standard, based primarily on the Lingle case. He felt it might be of interest to other readers, and thus already has breached his vow of silence in preparation for his China trip.
CONSTITUTIONAL LAW; TAKINGS; REGULATORY TAKINGS; QUANTUM OF VALUE DESTROYED: Changing zoning of property from residential to conservation zone, prohibiting all building, does not amount to a regulatory taking when: (a) zoning is pursuant to legitimate state interest - protecting safety of rescue workers and residents in the event of natural disaster(b) the property has some residual value (here estimated reduction in value was from $346,000 to $23,000) and ( c) there are no “investment backed expectations” taken - which the court viewed as a kind of “general equity standard. Gove v. Zoning Bd. Of Appeals of Chatham, 831 N.E. 2d 864 (Mass 2005)
The degree of reduction in value here was severe, but not unprecedented. What makes the case more interesting is the discussion of “investment backed expectations.” This discussion hies back to the Penn Central case, which first applied the concept of “investment backed expectations.” It stated that there is no “set formula” or “mathematically precise variables” for evaluating whether a regulatory taking has occurred, emphasizing instead “important guideposts and “careful examination . . . of all relevant circumstances.”
Citing to the recent U.S. Supreme Court decision in Lingle, the court here stated that the relevant guidposts include:
“. . . the actual ‘economic impact of the regulation’ on the plaintiff; the extent to which the regulation ‘has interfered with a landowner’s ‘distinct investment-backed expectations;” and the ‘character of the governmental action. . . . In the end, the Penn Central inquiry turns in large part, albeit not exclusively, upon the magnitude of a regulation’s economic impact and the degree to which it interferes with legitimate property interests.”
The court characterized the landowner’s development potential in the lot as arising only belatedly and due to market fluctuations that are uncertain. Further, the parcel was broadly exposed to significant weather risk, and the court characterized its alleged value as “highly speculative.” (Although apparently the owner had the property sold for a high price contingent upon obtaining a building permit.) The court also noted that the landowner had not bought the property in question, but had inherited it, and stated that, although this is not a factor in evaluating whether she is entitled to compensation, it is a factor in determining whether she ever had any reasonable expectation that the property could be developed.
The court then emphasized that the purpose of the taking was a bona fide governmental purpose in protecting others against harm in the event of natural disaster.
Comment: The editor finds fascinating the last three pages of the opinion, where it goes into analysis of factors such as the means by which the landowner acquired the property and the character of the governmental purpose. These factors normally are not stated to be relevant to takings analysis. The court’s very general “all factors” approach certainly renders taking analysis far less certain and subject to judicial manipulation, for or against the interests of the public agency. This strikes the editor as inappropriate for Constitutional property right analysis, but the editor doesn’t live in Massachusetts.