Can government place an “expiration date” on property rights?

Did you know that courts across the country are now saying that your constitutionally protected property rights are subject to an expiration date? This comes as a shocking surprise for those of us who believe that the Constitution was intended to protect our “inalienable rights.” But in a troubling trend, many courts across the country are now holding that property rights are effectively extinguished once government adopts land use restrictions on what you can do with your property.

Of course most zoning restrictions are going to be upheld as valid regulatory enactments because the state and her municipalities generally have police powers to control land use and development. But if a regulation “goes too far” in limiting what you can do with your property, you may be entitled to compensation under the Fifth Amendment’s Takings Clause. And while the rub is often in “proving” that the regulation is unduly burdensome, it is certainly true that in some cases government will be required to pay for restricting your property rights. However, many courts across the country are now saying that the right to obtain compensation is necessarily extinguished once a landowner sells his or her (overly-regulated) property to someone else.

This week we asked the Supreme Court to take up a case (MHC Financing v. San Rafeal) challenging an aggressive rent control ordinance because the Ninth Circuit ruled that business owners could not seek compensation for regulations that were adopted before they acquired their land. And this is the fourth time that NFIB Legal Center has asked the Supreme Court to take up the issue of whether takings claims are automatically extinguished once land is sold or transferred. In fact the Supreme Court is still considering whether to take up a similar case—which NFIB Legal Center is supporting as amicus curiae. In Mehaffy v. United States the Federal Circuit held that a small business owner was barred from seeking compensation for restrictions resulting from enforcement of the Clean Water Act on his land, notwithstanding the fact that his company owned the land before enactment of the CWA; the Federal Circuit held that, at the time ownership transferred from the company to the owner, the right to initiate a takings claim was extinguished.

Importantly, these cases—extinguishing the right to bring takings claims on transfer of title—have unfortunate real world implications. As we argued in Mehaffy, this especially hurts small business owners, ordinary landowners, and the elderly. This is because they usually lack the economic resources to bring a costly lawsuit, which is usually necessary to get the compensation you are owed. As a result, they are essentially without any meaningful opportunity to recoup lost values when government enacts overly-aggressive land use restrictions. And in practical terms it means that property rights could be entirely extinguished throughout the country within a generation, because property is almost always going to change hands once the owner passes away.
To see our brief in Mehaffy, click here. For more commentary on the Mehaffy case check out NAHB’s summary here. And for more commentary on our filing in MHC Financing, check out this Fox and Hounds post.

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About Luke Wake

Luke A. Wake is a senior staff attorney at the NFIB Small Business Legal Center. Wake has particular expertise on environmental and land use issues, and has worked on numerous other constitutional issues and matters of importance to small business owners. He is an ardent defender of private property rights, which he believes are essential to the free enterprise system and the foundation of American liberty. As a strong advocate of individual rights and economic liberties, he has built his career defending small business interests. Since joining the NFIB Legal Center, Wake has focused on a whole host of issues, from employment law matters to regulatory compliance. In addition to serving as a resource for small business owners, Wake remains committed to the Legal Center’s pledge to ensure that the voice of small business is heard in the nation’s courts. He is also working to advance small business interests in law review articles, including publications in the Berkeley Journal of Law & Ecology, the Texas Journal of Law and Politics, and Competition Magazine. See R.S. Radford & Luke A. Wake, Deciphering and Extrapolating: Searching for Sense in Penn Central, 38 Ecology L.Q. 731, 746-747 (2011); Damien M. Schiff, Luke A. Wake, Leveling the Playing Field in David v. Goliath: Remedies to Agency Overreach, 17 Tex. L. Rev. & Pol. 97 (2012); Jarod M. Bona and Luke A. Wake, The Market-Participant Exception to State-Action Immunity From Antitrust Liability, J. of Antitrust and Unfair Competition of the State Bar of Ca., Vol. 23, No. 1, 156 (Spring 2014); James S. Burling and Luke A. Wake, Takings and Torts: The Role of Intention and Foreseeability in Assessing Takings Damages, in Condemnation 101: Making the Complex Simple in Eminent Domain 449-51 (ALI-ABA Committee on Continuing Professional Education eds. 2011). Before joining the Legal Center’s team, Wake completed a prestigious two-year fellowship as an attorney in the Pacific Legal Foundation’s (PLF) College of Public Interest Law. Wake is a graduate of Case Western Reserve University School of Law in Cleveland Ohio. He is a member of the California Bar, the District of Columbia Bar, and the U.S. Supreme Court Bar. He completed his undergraduate studies at Elon University in North Carolina in 2006 where he focused on political theory and corporate communications.
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