This summer, the U.S. Supreme Court will decide a critical question that will determine whether some landowners will receive compensation for regulations that restrict the uses of their land. The case, Murr v. Wisconsin, may have widespread implications for commercial property owners, real estate developers, mining, oil and gas and other industries that own multiple tracts of land that are in various stages of development.
The Murr court will decide the deceptively straightforward question of how to define the property that is being regulated by the government. The dispute in Murr involves two contiguous parcels along the St. Croix River in Wisconsin. Both parcels are owned by the Murr family, but were acquired at different times, are legally distinct, and are taxed separately. The Murrs built a vacation cabin on the first parcel but never developed the second. When the Murrs tried to sell the second parcel, the county prohibited the sale. Under zoning regulations adopted after the parcels were purchased, the second parcel is now too small to be developed. The Murrs claimed the regulations are a taking because they restrict any economically viable use of the second parcel. The County claimed there is no taking because the parcels, when combined, can be developed. The Wisconsin courts agreed with the county and denied the Murrs compensation.
The specific issue in Murr is whether physically contiguous parcels owned by the same party, even if the parcels are legally distinct, should be considered one parcel for purposes of a takings claim. In a typical eminent domain case, a government entity has exercised its power of eminent domain to take private property, which entitles the landowner to compensation. In a "regulatory takings" claim, which is what the Murrs claim occurred, a landowner seeks compensation for government regulations that restrict the uses of the owner's property. A regulation that goes "too far" and restricts nearly all uses of the property are typically deemed a taking, whereas a regulation that merely restricts some uses (for example, limiting buildings to no more than two stories) is typically not deemed a taking. To determine when a regulation goes "too far" requires comparing the value of the property before and after the regulation was enacted. InMurr, the U.S. Supreme Court will decide what property should be considered when calculating the "before" value, and whether the Murrs' two parcels are in effect one for purposes of a takings claim.
The U.S. Supreme Court's decision could have widespread implications for landowners in myriad industries. For instance, if the Court finds against the Murrs, owners of vacant investment property adjacent to an existing development like a mall or oil field may be denied compensation if a local government adopts regulations that prohibit further development or exploitation of the vacant land. On the other hand, a decision in favor of the Murrs could give rise to more regulatory takings claims. The Supreme Court is likely to hear oral argument this spring and issue its opinion later this summer.