The Constitutional Law of Property Rights "Takings": An Introduction
The Constitutional Law of
Property Rights “Takings”: An Introduction
Robert Meltz
Legislative Attorney
American Law Division
Summary
This report introduces the Takings Clause of the Fifth Amendment: “[N]or shall
private property be taken for public use, without just compensation.” The Clause,
extensively explicated by the courts in recent decades, seeks to strike a balance between
societal goals and the burdens imposed on property owners to achieve those goals. In
filing a “taking action” in court, the property owner first must surmount threshold
hurdles such as ripeness and the statute of limitations. If successful, the court then will
address whether a taking occurred, the criteria depending on whether the claim is of the
regulatory taking, physical taking, or exaction taking variety. If a taking is found, the
constitutionally required remedy is usually compensation of the property owner, rather
than invalidation of the government action. Takings actions against the United States,
as opposed to state and local governments, have some special procedural and
substantive-law features.
The Fifth Amendment of the U.S. Constitution closes with twelve simple words:
“[N]or shall private property be taken for public use, without just compensation.”
Long a constitutional sleeper, this “Takings Clause” has been thrust into the limelight in
recent decades by increased government land use controls combined with a more
conservative Supreme Court interested in securing protections for property owners.
This report covers but the high points in the court-made law construing the Takings
Clause; full coverage would require volumes. Regrettably, too, this case law is not a
model of clarity. Nonetheless, some broad principles have emerged, so that in a few
situations one may predict how a court will rule on a “taking action” with some
reasonable chance of proving right.
Basics of the Takings Clause
The Takings Clause is a balancing act. It seeks to strike an accommodation between
the goals of the public (as represented by government) and the burdens imposed on
private property owners to achieve those goals. When the private burden is sufficiently
severe or of a certain kind, the courts say that a “taking” has occurred, and that “just
compensation” must be paid to the property owner. In determining what is and is not a
taking, the courts have developed a host of rules, factors, defenses, and policy
considerations. Some of these takings indicators are amorphous balancing factors. Others
are per se rules — rules that brand certain government actions as automatic takings
without much site-specific inquiry.
This report focuses on the Takings Clause in the U.S. Constitution, which applies
both to the federal government and, through the Fourteenth Amendment Due Process
Clause, to states and localities. Takings clauses in state constitutions are generally, though
not always, construed the same as their federal counterpart.
Threshold Hurdles
Before a court will address a property owner’s taking claim, several threshold
hurdles must be surmounted, among them —
Is the property owner in the right court? While takings suits against states and
localities are filed in state or federal courts of general jurisdiction, takings suits against
the United States usually must be filed in a single, specialized court: the U.S. Court of
Federal Claims (CFC). Exceptions from the CFC’s exclusive jurisdiction exist only for
takings suits seeking $10,000 or less or those filed under certain program statutes, which
may/must be filed in federal district court. The CFC is headquartered in Washington,
D.C., but has nationwide jurisdiction and routinely holds trials around the country.
Has the statute of limitations expired? Takings actions must be filed within the
requisite number of years after the date of the alleged taking. For takings actions against
the United States, the limitations period is six years. In a few circumstances, a court may
be willing to “toll” (stop the running of) the limitations period — e.g., when the facts
giving rise to the alleged taking were not known to plaintiff until after the period, due to
the government’s failure to disclose.
Is the taking claim ripe? While statutes of limitations seek to ensure that lawsuits
are not filed too late, ripeness doctrine seeks to ensure they are not filed too early. The
Supreme Court has developed two ripeness criteria for takings claims.
First, the property owner must have obtained a “final decision” from the land-use
regulating authority as to the nature and extent of development permitted on the property.
“Final decision” is a legal term of art. To get a final decision, it may be necessary for the
property owner, after his/her initial development proposal is rejected, to reapply with
scaled-down or reconfigured proposals. The rationale: reapplication may reveal some
type of development, sufficient to avert a taking, that the regulating authority will accept.
For the same reason, opportunities for variances or other exceptions from generally
applicable restrictions must be exhausted.
The property owner need not pursue reapplications or exceptions when doing so
would be futile. Successful invocation of this futility exception to the final decision
ripeness criterion demands that the owner show more than long odds of getting the
development approved, or onerous procedural requirements.
An agency’s mere designation of a parcel as within its permitting jurisdiction cannot
by itself be a taking, since it leaves open the possibility that the permit, if applied for, will
be granted.
The second takings/ripeness criterion applies only to takings actions against states
and localities. For such a claim to be ripe in federal court, it must initially be brought in
state court — as long as the state’s courts make a compensation remedy available for
takings. Many plaintiffs who go to state court, however, find themselves barred from
refiling in federal court, owing to legal doctrines precluding the relitigation of claims and
the Federal Full Faith and Credit Act.1
“Property” and Related Considerations
Even if the economic impact of government action is severe, the Takings Clause is
not implicated unless that impact falls upon “property,” as that term is used in the Takings
Clause. Almost all common interests in land — fee simple absolutes, leases, easements,
water rights, etc. — are indisputably property, plus many intangible interests such as
patents, trademarks, copyrights, most contract rights, and trade secrets.
Even when “property” is adversely affected by government conduct, takings law
offers a remedy only if the effect is direct. Thus, the denial of a permit to fill a wetland
may effect a taking of that wetland. However, it cannot work a taking of a nearby
commercially zoned parcel whose value is reduced by the fact that no residential
subdivision, hence no potential customers, will come to the wetland property. The value
loss in the commercial parcel is termed “consequential damages,” which takings law
holds noncompensable.
The Three Types of Takings Claims, and the Tests Used for Each
There are three fairly distinct types of takings actions that property owners may
bring. Each is evaluated under a different Supreme Court-created test.
The regulatory taking claim asserts that a government action has taken one’s
property merely by restricting its use. Regulatory takings claims break down into two
subcategories, involving government restrictions that cause (1) a complete elimination of
a land parcel’s economic use or value (called a “total taking” claim), or (2) a less-than-
complete elimination of such use or value (called a “partial taking” claim).
Complete elimination of use or value by the government is held to be a per se taking,
with a big exception. If the government restriction prompting for the taking claim is
implicit in “background principles of the State’s law of property and nuisance” existing
when the property was acquired, no taking occurs — total loss of use/value
notwithstanding. The rationale for this exception is that the government has not taken any
right that the property owner ever had. Definition of precisely what constitutes a
background principle is an ongoing issue in takings law.
1 28 U.S.C. § 1738.
Complete elimination of use or value also is not a per se taking when imposed
through a regulatory measure known at the outset to be temporary — for example, a
moratorium on new building permits while a land-use study is being done. The
anticipated resumption of use and value after the measure is lifted leads courts to view
this situation as not involving a complete loss (see temporal parcel as a whole rule, page
5). Thus, prospectively temporary restrictions generally are assessed under the balancing
test for less-than-total takings, as follows.
Less-than-total eliminations of a property’s use or economic value are evaluated
quite differently than total takings. Here, the courts apply the Penn Central balancing
test, under which the government action is assessed for its economic impact, the degree
to which it interferes with reasonable investment-backed expectations, and its
“character.”2 These three vague factors have been explicated only rarely by the Supreme
Court, leading many commentators to complain that this test is muddled. It certainly does
not make for predictable court rulings, beyond the fact that in the large majority of cases,
the required degree of economic impact is very substantial and the government action is
held not to be a taking. Typically, takings plaintiffs first seek to convince the court they
have suffered a total taking resulting in per se compensability, then argue as a backup that
if the court discerns only a less-than-total elimination of use/value, there is still a taking
under Penn Central.
An important issue in regulatory takings law is the role played in the takings
determination by laws existing when the property was acquired, even when such laws do
not amount to background principles. The Supreme Court instructs that the pre-
acquisition existence of the regulatory scheme at issue in a takings case is not a per se bar
against maintaining a taking claim, but is to be given some weight. Lower courts continue
to give great weight to pre-acquisition schemes, arguing that they undercut the property
owner’s reasonable expectations of development in the Penn Central analysis. Note, too,
that the background principles concept, first stated in a “total taking” case, has been held
to apply as well to partial regulatory takings claims. Thus, if the pre-acquisition scheme
constitutes a background principle, it also presents an absolute bar to the partial regulatory
taking claim.
Under either subcategory — total or partial regulatory takings — a court must define
the physical extent of the property it will evaluate. This is known as the “parcel as a
whole” or “relevant parcel” issue. Its pertinence stems from the fact that takings law
looks at the economic impact and interference with investment-backed expectations
factors in a relative, rather than absolute, sense. For example, a person who suffers a
$100,000 drop in property value due to government action may have a strong taking claim
when the “relevant parcel” retains little value, but only a weak claim if the relevant parcel
is still worth $200,000. The property owner’s loss is evaluated relative to what he/she
still has.
The Supreme Court says that the relevant parcel cannot be limited to the portion of
the parcel subject to the challenged use restriction, at least not solely on that basis. Thus,
when one is denied a permit to fill in a wetland on a tract, the fact that a significant
portion of the tract is buildable nonwetland generally will defeat the taking claim.
2 Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124 (1978).
Beyond this, however, the many issues that arise in defining the relevant parcel have been
left to the lower courts. For example, should a court include in its takings analysis
acreage owned by the plaintiff that is noncontiguous with the regulated tract or
subdivided as different lots? In most cases, contiguous acreage in common ownership is
deemed the parcel as a whole. One principle is that a developer’s intentions are key;
where it regarded a project as a single unit for purposes of planning, financing, and
development, a court likely will reject efforts to segment the project acreage in the
regulatory taking analysis. Further relevant-parcel issues arise with land sold off before
the development approval was denied, or before the regulatory scheme in question was
enacted.
The relevant parcel issue also has a functional dimension, under which the court
must assess the loss of one right in a property relative to the bundle of remaining rights.
Finally, the relevant parcel doctrine has a temporal dimension, under which a court must
look not only at the period during which the restriction is in effect, but less restricted
periods of the plaintiff’s ownership before and after.
The physical taking claim asserts that the government has taken property by
causing, or authorizing, a physical encroachment upon that property. Flooding caused by
government dams and overflights by government airplanes are the archetypal federal
examples. Physical takings claims break down into two subcategories, involving (1)
permanent physical occupations, and (2) temporary physical invasions. Permanent
physical occupations are almost invariably held to be takings, because they are seen to
egregiously violate one of the most sacred of property rights: the right to exclude others.
Thus, in assessing physical occupation claims the courts will not inquire into the extent
of the occupation, the magnitude of the economic impact on the property owner, or the
importance of the underlying public purpose. Nor does the relevant parcel rule apply to
permanent physical occupations. The existence of a permanent physical occupation
caused by government, without more, establishes a taking.
Temporary physical invasions are regarded quite differently. They are tested under
the Penn Central balancing test and generally are held nontakings.
The exaction taking claim may be brought when a property owner objects to an
exaction demanded by a land regulatory agency as a condition of its approving a proposed
development. Such exactions are used routinely by local agencies to get developers to pay
for the fire protection, police, school, sewage disposal, and other costs created by
development. They typically take two forms: physical dedications (setting aside land
within the project area for roads, schools, etc.) or impact fees paid in lieu of physical
dedications.
In order not to be a taking, the exaction condition must meet two criteria. First, there
must be an “essential nexus” between the condition and an underlying purpose of the
permit or other approval to which it is attached. Second, the burden imposed on the
property owner by the exaction must be no greater than “roughly proportional” to the
impact that the owner’s proposed development would have on the community. Moreover,
the burden of proving rough proportionality is on the government.
One can readily see that the exactions takings standard places more demands on the
government-defendant than that for regulatory takings. Thus, it is referred to as
“heightened scrutiny.” The Supreme Court has now clarified that the exactions takings
test does not apply outside the exactions context — e.g., to non-exaction conditions on
permits — and has suggested that it does not apply either to monetary assessments
imposed in lieu of physical dedications.
Constitutional Remedy for a Taking
The constitutional remedy for a taking is generally monetary compensation, usually
in the amount of the fair market value of the property taken. With limited exceptions, it
does not satisfy the Constitution for the court to invalidate the offending government
action, or for the agency simply to back off. The reason is that by that time, the taking,
if any, has already occurred. Invalidation or rescission merely converts a permanent
taking into a temporary one.
Invalidation remains the constitutional remedy in a few instances. These include
takings based on government appropriation of a specific fund of money, or on government
actions interfering with the right to pass on property.
Special Characteristics of Takings Claims
Against the United States
At the state and local level, the large majority of takings cases arise in the context
of land use restrictions — zoning and subdivision cases are the staples. In contrast,
takings claims against the United States involve land less than half the time, because the
federal government regulates land use only in selected contexts. Such claims span the
wide spectrum of federal activities — such as the bailout of the savings and loan industry,
restrictions on the location of cigarette vending machines, quarantines to prevent the
spread of animal disease, imposition of liability on employers for employee pension plans
or retiree health benefits, resolution of claims by U.S. citizens against foreign
governments, retroactive taxes, assessments to fund cleanup of government nuclear
enrichment plants, etc.
As noted above, takings claims against the United States must be brought in almost
all circumstances in the U.S. Court of Federal Claims, a court established in 1855 under
Congress’ Article I legislative powers. The CFC is a highly specialized court, hearing only
money claims against the United States. Appeals from the CFC are to the U.S. Court of
Appeals for the Federal Circuit.
The takings jurisprudence of the CFC and Federal Circuit does not always parallel
that of other courts. For example, the CFC and Federal Circuit assert that no taking claim
may be brought based on an “unauthorized act” of the government, a restriction not
recognized by many other courts.