U.S. Supreme Court issues 5th Amendment Takings Claim Decision
On June 23, 2017, the U.S. Supreme Court issued a much-anticipated ruling in Murr v. Wisconsin, a takings case that may have important consequences for property owners owning multiple contiguous parcels. The Court held that it was proper and appropriate to consider two (or more) lots as one parcel for takings purposes, and, since there was a residence on one of the lots and that lot was capable of substantial use, there was no “taking.”
Background of case: Mr. and Mrs. Murr bought a lakefront parcel in 1960 and built a vacation home for their family. Several years later, the Murrs bought the adjoining lakefront lot for investment purposes, with plans to either develop or sell it. Eventually, the Murrs gave the vacation home to their children and then later gifted to them the adjoining undeveloped lot. As a result of various regulations adopted over the years, the undeveloped lot is no longer developable. Although there are “grandfathering” provisions, those provisions do not apply if an undeveloped lot is adjacent to a developed lot with a common ownership.
The Murr children brought an inverse condemnation action claiming that the regulations effected a taking of their undeveloped lot because it could not be developed and therefore had no substantial value. The Wisconsin Court of Appeals held that the “relevant parcel” for a takings claim analysis included both lots, and since the one lot was developed with a home, there was no taking.
The Supreme Court holding: A five-member majority of the Court (Kennedy, Breyer, Ginsburg, Sotomayor, and Kagan) held there can be no “bright line” test in determining what is the “relevant parcel” for a takings analysis, and instead property owners, governments, and courts should look to a number of factors to determine the “relevant parcel.” Here, the majority concludes that it was proper and appropriate to consider the two lots as one parcel for takings purposes, and, since there was a residence on the lot and it was capable of substantial use, there was no taking.
Likely impact: The case will have virtually no impact on most takings cases, since most cases involve only a single lot or parcel. However, where there are two or more adjoining lots, property owners will need to take care to maintain separate, distinct ownership as well as engage in other behavior demonstrating that the lots are not meant to be considered or used as one parcel; otherwise they run the risk that burdensome regulations on one lot will not be considered a taking because the balance of the “relevant parcel” is still capable of economic use.
At a minimum, this case means more work for lawyers, and more uncertainty for property owners of multiple adjoining lots, because the Court has avoided any bright line or clear cut rules in favor of a more murky and subjective test that involves the weighing of various factors and substantial discretion.
For more information on how this development may affect your business, please contact the author or the attorney at the firm with whom you are regularly in contact.