Supreme Court Expands Government´s Right to Temporarily Ban Development of Land Without Having to Pay Just Compensation

A recent U.S. Supreme Court case, Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 122 S. Ct. 1465; 2002 U.S. Lexis 3028 (April 23, 2002), examined the issue of whether a 32-month ban on all real estate construction around Lake Tahoe required the government to pay compensation to the land owners.

The case involved the Lake Tahoe Basin in California and Nevada. All parties agreed that Lake Tahoe is "uniquely beautiful" and a national treasure that must be protected and preserved. The clarity of its waters are renowned for their transparency and "noble sheet of blueness" (quoting Mark Twain, Roughing It, 1872). Lake Tahoe’s exceptional clarity is attributed to the absence of algae that obscures the waters of most other lakes.

Unfortunately, the lake’s pristine state has deteriorated rapidly over the past 40 years due to increased land development in the Lake Tahoe Basin. The upsurge in development has caused increased erosion which resulted in increased growth of algae. The trial court predicted that unless the process is stopped, the lake will lose its clarity and its trademark blue color becoming green and opaque for eternity.

In an effort to preserve Lake Tahoe, the states of California and Nevada with the approval of Congress adopted the Tahoe Regional Planning Authority (TRPA) to restrict development around the lake and to control runoff from the steep slopes and other sensitive areas around the lake. The TRPA adopted two moratoria that resulted in a 32-month ban on the construction of any new residences on certain lands in the Lake Tahoe Basin. The ban was enacted by the TRPA in order to develop a comprehensive land use plan for the area.

A group of some 400 individual owners of vacant land around the Lake Tahoe Basin (Land Owners) filed suit against the TRPA. These individuals purchased their properties prior to the enactment of the TRPA, with the expectation of constructing single-family homes "at the time of their choosing." The Land Owners alleged that TRPA’s ban on real estate development constituted an unconstitutional taking of property without just compensation.

The Fifth Amendment of the Constitution forbids the taking of private property for public use without just compensation. The Supreme Court noted: "Wehave recognized that this constitutional guarantee is designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." (Penn Central Transp. Co. v. New York City, 438 U.S. 104, 57 L.Ed. 2d 631, 98 S. Ct. 2646).

The Supreme Court has long followed a categorical rule that compensation is required when a governmental regulation deprives an owner of "all economic uses of his land." (Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 120 L.Ed. 2d 798, 112 S. Ct. 2886). The categorical rule is most often applied when the government physically takes possession of property or occupies the property for its own purposes. This rule may also be applied when the government enacts a regulation that permanently deprives an owner of all economic uses of his land. However, the categorical rule is limited to the extraordinary circumstances when no productive or beneficial use of land is permitted and there is a total loss of value.

Anything less than a total loss requires the Court to use an ad hoc analysis developed in the Penn Central decision. Under the ad hoc rule, the Court examines all the relevant facts, such as the landowner’s investment-backed expectations, the actual impact of the regulation on any individual, the importance of the public interest served by the regulation, and the duration of the restriction. (Penn Central, 438 U.S. at 123).

Because the Tahoe case involved a "temporary" taking for only 32 months, the Court, in its six-to-three decision, rejected applying a categorical rule requiring compensation. Instead, the Court followed the ad hoc rule and examined all the relevant facts, such as the investment-backed expectations of the land owners. The Court stated that the issue was whether the temporary regulation was even a taking.

The majority noted that regulations that temporarily deny an owner use of their property, for brief periods, do not constitute a compensable taking. For instance, a taking does not occur as a result of normal delays in many situations in obtaining building permits, changes in zoning ordinances or variances, restrictions arising from govern-mental orders temporarily prohibiting access to crime scenes, or regulations concerning health code violations or fire damaged buildings. The Court affirmed the line of cases which held that "where an owner possesses a full bundle of property rights, the destruction of one strand of the bundle is not a taking." (Tahoe, 122 S. Ct. at 1481).

The Court commented that such a categorical rule requiring compensation would require changes in practices that have long been considered permissible exercises of the police power. Moreover, "a rule that required compensation for every delay in the use of property would render routine governmental processes prohibitively expensive or encourage hasty decision making by the Government." (Tahoe, 122 S. Ct. at 1485). Such an important change in the law should be the product of the legislature and not the Court.

The Court held that its polestar for evaluating temporary regulatory takings remains the principles set forth in Penn Central and an examination of all the relevant facts. Penn Central does not supply mathematically precise variables, but instead provides guideposts that lead to the ultimate determination whether just compensation is required.

The Court observed that any moratorium that lasts for more than one year should be viewed with special skepticism. However, the trial court found that the 32-month time period to develop the regional plan was reasonable. Furthermore, the interest in protecting the decisional process is even stronger when an agency is developing a regional plan than when it is considering a permit for a single parcel. In the proceedings involving the Lake Tahoe Basin, the moratoria allowed the TRPA additional time to obtain the benefit of public comment from interested parties. The Court also noted there is a "reciprocity of advantage" with a moratorium because it protects the interests of all landowners against immediate construction that might be inconsistent with the regional plan that is ultimately adopted.

Tahoe reaffirms that any temporary taking will be judged on its own facts as to whether compensation is appropriate. There, even a 32-month regional ban on development was insufficient to support compensation. While the ruling in Tahoe is limited to its specific facts, the case may allow local governments in Indiana and elsewhere to "temporarily" restrict a landowners’ right to develop their land without paying just compensation.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.