This summer, in Murr v. Wisconsin, the United States Supreme Court will make an important decision on property rights and regulatory takings under the Takings Clause of the Fifth Amendment of the U.S. Constitution. At issue in the case is whether two legally distinct parcels of land can be treated as one for regulatory purposes if they share common ownership. In a time when planning and zoning regulations change sporadically, this case has broad implications for owners of commercial property, farmers, developers, mining operations and others that hold legal title to adjoining properties, so these groups should pay particular attention to this case.
The primary determination before the Court is how parcels of real property are defined in the context of government regulation. At issue in this case is a “regulatory takings claim”, wherein a landowner claims that government regulation has stripped a piece of property of nearly all marketable uses. The theory behind this type of claim is that the government has effectively “taken” the property by eliminating or heavily damaging its value, and the landowner is entitled to just compensation. The question then turns as to the value of the property before and after the “taking,” and that’s where theMurr analysis becomes relevant.
In Murr, the Murr family purchased a parcel of land next to a lake and built a cabin for recreational use. They later purchased an adjoining lot for investment purposes. Subsequent to the Murr’s purchase of the adjacent parcel, certain zoning regulations changed, which precluded development of the property, and as a result, the sale of the parcel by itself was nearly impossible. When the Murr family sued, the Wisconsin courts treated the two adjoining parcels as one parcel due to common ownership, and held that, because the two parcels together continued to have beneficial and practical uses, no “taking” had occurred.
As a result of Wisconsin court’s ruling, the Supreme Court is faced with resolving two competing theories. The first theory is that contiguity and common ownership of the parcels evinces a desire to treat the separate parcels as one unit of property, and that the “taking” analysis should account for such commonality. The second theory, espoused by the Murr family, is that legally separated parcels should be treated as separate and distinct for takings purpose, as the government treats such parcels as being separate for all other purposes (i.e., assessing property taxes). In other words, in treating the adjoining parcels as one parcel in a takings analysis, the government wants to have its cake and eat it, too!
In summary, the Supreme Court will either drive another obstacle in the way of regulatory takings claims or open the floodgates to more claims. In light of the ever-changing planning and zoning regulations, commercial real estate owners and developers in particular should pay attention to the Court’s resolution of this case, because either way, the decision will have an impact on property rights of those owning adjoining parcels