Regulatory Takings as Involuntary Transfers of Real Property

Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Sometimes the government 'takes' your property without even taking it. In this lesson, you'll learn about regulatory takings, including what they are and what they mean to property owners. A short quiz follows the lesson.

Regulatory Taking

Bryce is a bit of a loner who owns some land on a secluded part of a river next to his city where he plans to build a private retreat. Unfortunately for Bryce, his state legislature passed a conservation law that applies to his riverfront property that prohibits him from building any structures on it or altering the natural habitat in any artificial manner.

The government has not physically taken the property, and Bryce still legally owns the land. However, the new law drastically effects how Bryce may use his property. In fact, he doesn't even know why anyone would be willing to buy the dirt from him since no one can do anything with it. Bryce goes to a lawyer to find out what he can do to stop the government's interference with his property. His lawyer has both good news and bad news for Bryce.

The bad news is that the state has the power to enact the conservation law pursuant its police power. Police power is the power that state and local governments have to protect and advance the general welfare, health and safety of the public. The good news for Bryce is that the new law may constitute a regulatory taking, which requires the government to give 'just' compensation for a taking of property pursuant to the Fifth Amendment of the United States Constitution.

Tests to Determine Regulatory Taking

A regulatory taking doesn't happen just because a piece of dirt is subject to regulations. If a regulation results in a total invasion of the land by the government or deprives the owner of all economic use of the land, courts will find a regulatory taking under the Supreme Court's decision in Lucas v. South Carolina Coastal Council. This type of regulatory taking is often referred to as a total taking.

If there is no total regulatory taking, courts will utilize the criteria set forth in the Supreme Court's opinion in Penn Central Transportation Company v. New York City. In that case, the court announced three factors to determine whether a taking had occurred. First, the character of the regulation must be examined - does it amount to a physical intrusion or occupation of the property, or does it merely regulate the use for the public good, like pollution regulations? Second, the degree of economic impact the regulation has on the owner must be examined. Finally, in the context of economic impact, the court examines the level of interference the regulations has on the owner's 'investment-backed expectations.' Does the regulation unduly interfere with the reasonable expectations that the owner had for the property? Unfortunately, there is no bright line rule, and courts have to make decisions on a case-by-case basis applying the factors to the facts.

A regulatory taking can occur in other circumstances as well. If the government regulation results in a permanent occupation of part of the land, a partial taking has taken place. A regulatory taking may even occur if it's just temporary and the government will have to compensate for the temporary taking.

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