By a vote of 52-42, the Senate has just killed a proposed law which would protect private property rights . The Bill, known as the Private Property Rights Implementation Act, was intended to afford prompt federal court access to real estate owners and developers who have lost the value of their property due to excessive government regulation.

Examples of the kind of excessive regulation at issue include many environmental laws which completely preclude development on otherwise developable and marketable property. Excessive zoning ordinances are another example of regulation which tends to eliminate property value.

A SIMILAR BILL HAD PASSED IN THE HOUSE

Last year, developers and property owners successfully urged the House to approve a Bill aimed at forcing the government to pay fair market value for property that is over regulated to the point of inutility. Under that proposal, property owners could sue the government in federal court once the state or federal government denied a land use application or a waiver request.

Governments have historically been able to block development by refusing to approve environmental and other land use applications. As a result, they have taken all value from the affected property owners without actually purchasing the property from them . Thus, while the embattled property owners pay taxes, they cannot do anything with the valueless property. Lawyers call this a "regulatory taking" because the impact of the government denial is the same as if it had taken title to the property without paying for it.

HISTORICAL TREATMENT OF TAKINGS CLAIMS

Historically, the government has avoided paying just compensation, as required under the United States Constitution, and State Constitutions, by embroiling property owners in an administrative nightmare called the "exhaustion of administrative remedies" requirement. Many courts have held that an aggrieved property owner may not file suit until all administrative remedies are first exhausted. This can take many years, can be cost prohibitive, and in many instances, is down right futile.

Many have suggested that governments force property owners to jump through these hurdles with the hope that they will tire and the government will effectively obtain the property "for free."

The just defeated law was aimed at streamlining the process so that an aggrieved property owner could have his or her day in federal court before the legal process becomes cost prohibitive. In effect, it would give small property owners a realistic opportunity to confront the government in court.

WHO WILL BE HURT BY THIS DEFEAT

Certain landowners and developers will be affected by this defeat. For example, there are many people holding property that has been in their family for years and was completely buildable until modern environmental laws, such as wetlands laws, endangered species laws, and laws protecting pinelands, went into effect. Under these modern laws, property that used to be very valuable now may have no value at all because no development is allowed.

For example, some coastal property owners in New Jersey were allowed to build on their property until a new law was passed five years ago. That law prohibited any development on the properties, rendering them valueless. If they could be developed, the ocean front properties were worth more that $300,000.00 each. While these property owners could afford the cost of suing the State of New Jersey, it is very difficult for many individuals to raise the needed funds.

Thus, the failure of the Senate to pass the Takings Bill will have the biggest effect on small property owners who have seen their property stripped of its value because of a new environmental or similar kinds of law that restrict development.

However, larger developers will also be affected because they will have to engage in protracted litigation in order to be able to develop affected parcels. In the long run, these litigation costs will be passed on to the consumers.

For years, governments have gotten away with over regulating property to a point of inutility, without paying a dime for the property. Government lobby groups fought to defeat the Senate Bill because governments do not budget money to pay these owners and developers. Environmental groups also opposed the Bill. Since these are strong forces, it is unlikely that a federal Takings Bill will pass in the near future.

However, a new approach is being considered by various States and municipalities. Under this approach, bond revenue is generated to actually purchase open space from property owners. If done correctly, this approach can accomplish legitimate environmental protection without unduly impacting a small group of innocent property owners and developers.

Published: August 5, 1998

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