The U.S. Supreme Court again has taken on a landmark property rights case, making this group of justices potentially the most influential ever in terms of modern real estate law.

If property rights activists get their way, the case, which was argued on Monday, could results in a broader definition of a "taking." This term, which is found in the Fifth Amendment, says that government cannot take property from private owners without "just compensation."

In this particular case, Tahoe-Sierra Preservation v. Tahoe Regional Planning Agency, hundreds of people purchased property on Lake Tahoe, yet have been denied permission to develop the property since 1981. Meanwhile, although owners have been denied the use of their property, they have been required to pay taxes and mortgage bills associated with the land they hoped to use.

During those years, the Tahoe Regional Planning Agency was concerned that new development would damage the water quality of Lake Tahoe. So the agency imposed a construction moratorium.

The court is specifically ruling on an initial building moratorium, which lasted from 1981 to 1983. The question is whether this short-time period during which building permits were denied amounted to a taking, which would require that compensation be paid to the owners. About 400 landowners have asked for $27 million in damages.

The ban on construction has been extended several times. To this day, these property owners have not been allowed to build homes on their lots, many of which were intended for vacation or retirement use. The lots are located in subdivisions, which are partially developed. Some of the landowners eventually gave up the legal battle and sold their property to the government.

The Supreme Court agreed to hear the case last fall, after the 9th U.S. Circuit Court of Appeals in San Francisco threw out the lawsuit.

Lawyers for the Tahoe Regional Planning Agency based much of their defense on a technicality. The group alleges that halting development for four years was simply a "temporary ban," and did not deserve compensation.

This argument seemed to win points with some justices, who did not want to establish a set amount of time acceptable before a ban constituted a taking because the "temporary" ban from 1981 to 1984 largely continues until this day.

On the other side, Justice Antonin Scalia -- a friend of property rights advocates -- commented that society as a whole should carry the cost of keeping Tahoe's waters pristine, rather than imposing that burden solely on individual property owners.

Surprisingly, the Bush Administration and Solicitor General Theodore Olson came down on the side of the local government agency. Olson argued that government bodies should be given time to develop sensible plans without paying landowners for the delay in new construction.

Scalia did not buy that argument, however, labeling the Tahoe case "extraordinary" since landowners could not use their land at all.

Expect a divided court to rule on the case in the next several months.

For more articles by Lesley Hensell, please press here.

Published: January 11, 2002

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net