U.S. Supreme Court to Decide "Critical Question" in Eminent Domain
This summer, the U.S. Supreme Court will decide a critical question that will determine whether some landowners will receive compensation from regulations that restrict the uses of their land. The case, Murr v. Wisconsin, may have widespread implications for commercial property owners, real estate developers, mining, oil and gas, and other industries that own multiple tracts of land that are in various stages of development.
The Murr Court will decide the deceptively straight forward question of how to define property that is being regulated by the government, and whether physically contiguous parcels, even if purchased and taxed separately, should be considered one parcel for purposes of takings claims. In a typical eminent domain case, a governmental entity has exercised its power of eminent domain to take private property, which entitles the landowner to compensation. In a "regulatory takings" claim, a landowner seeks compensation when governmental regulations restrict the uses of the owner's property. Regulations that go "too far" and restrict nearly all uses of the property are typically deemed a taking. A regulation that eliminates only some uses (for example, limiting buildings to no more than two stories) is typically not deemed a taking. Determining when a regulation goes "too far" requires comparing the value of a property before and after the regulation was enacted. In Murr, the U.S. Supreme Court will decide what property should be considered when calculating the "before" value and whether two legally distinct, but commonly owned and physically contiguous, parcels should be considered as one for purposes of a regulatory takings claim.
The dispute in Murr involves two contiguous parcels along the St. Croix River in Wisconsin. Both parcels are owned by the Murr family, but are legally distinct and taxed separately. The Murrs built a vacation cabin on the first parcel, but never developed the second. When the Murrs tried to sell the second parcel, the county prohibited the sale. Under zoning regulations adopted after the parcels were purchased, the second parcel is now too small to be developed.
The Murrs claim the regulations are a taking of the second parcel because they restrict any economically viable use. The county claims there is no taking because the parcels are physically contiguous and under common ownership. Therefore, because the parcels, when combined, can be developed, there is no taking. The Wisconsin courts agreed with the county and denied the Murrs compensation.
The U.S. Supreme Court's decision in Murr could have widespread implications for landowners in myriad industries. For instance, if the Court finds against the Murrs, an owner of investment property adjacent to an existing development like a mall or oil field may be denied compensation if a local government adopts regulations that prohibit further development or exploitation of the land. The Supreme Court is likely to hear oral argument this spring and issue its opinion later this summer.
Ryan Sugden is a member of the firm's Business and Commercial Litigation practice group. He works from the firms' Denver office. For more information please contact Ryan or your usual Stinson Leonard Street contact.