Our Imperiled Property Rights: NFIB’s Plan to Restore Constitutional Protections

Date: July 25, 2016

Landowners have a basic right to use and enjoy their property. After all, when you invest in real estate, you expect to be able to put your property to some productive use. Moreover, you expect that government will not meddle with your rights. Unfortunately, we see all too often that local zoning boards operate with a presumption that you should not be allowed to develop your property. 

This contravenes the historic common law principle that landowners are free to put their property to any reasonable use. Yet, as discussed here, it’s often difficult for landowners to protect their property rights in court. We outline a few recurring problems and explain what NFIB Small Business Legal Center is doing to help. Our goal is to restore strong constitutional protections for small business landowners.

Government Must Have a Legitimate Reason for Restricting Property Rights

While it is important to understand that government can legitimately regulate land use, this does not mean that it can regulate in an arbitrary or irrational way. The leading constitutional authority is Village of Euclid v. Ambler Realty Co. Euclid is generally cited for the proposition that a municipality may lawfully regulate development through an enacted zoning code. But Euclid also said that a zoning restriction will run afoul of the Constitution if it does not “reasonably relate” to the advancement of a legitimate public interest. In other words, a restriction must actually do something to advance the public good—as applied to your property.

But sometimes the authorities will deny a requested building permit for illegitimate reasons. For example, the zoning code might allow a zoning board to deny a permit for only specifically listed reasons. Accordingly, it would be improper for the Board to deny your permit application for other reasons. In one especially controversial example, a landowner was denied a permit allegedly because he refused to make a major donation to a union pension fund. We’ve argued that landowners should be allowed to invoke the Due Process Clause of the Constitution to challenge these sort of permit denials. Unfortunately many courts hold that landowners are only allowed to raise Due Process arguments if they can prove that they were entitled to a permit approval. And of course that’s difficult because the authorities almost always have some degree of discretion. This is why we’re asking the Supreme Court to take-up this issue in Stahl v. New York City.

Government Must Allow at Least Some Modest Development

While the authorities may legitimately require you to obtain a permit to build on your land, they cannot unduly restrict your rights without incurring an obligation to pay fair market value for your property. That said, it is generally difficult to prove that regulatory restrictions amount to a taking. There have been cases where regulatory restrictions have radically devalued property values, but where the courts have ruled that there was no taking.  

For our part, NFIB Legal Center is actively working to put teeth in the Takings Clause so that landowners can more easily obtain the compensation they deserve. In fact, in the upcoming term, the Supreme Court will decide a very important case. Murr v. Wisconsin asks whether government should be allowed to treat lawfully divided lots as a single parcel. This question is important because that would enable the authorities to entirely deny development rights on one of those properties. 

As we argued, government cannot evade the Constitution in through this sort of gamesmanship. Government has an obligation to pay for the taking of property if it is refusing to allow development on a lawfully divided piece of land. This is an absolute rule with no exceptions. 

Government Cannot Impose Unconstitutional Conditions

It can be extremely frustrating working with local zoning authorities. They may insist that you scale-back your development plans time-and-again. And because it is difficult to navigate the permitting process, it is often advisable to work with legal counsel—especially if you anticipate push-back. 

But you should know your rights. If the authorities are insisting that you must dedicate part of your land, or pay money as a condition of a permit approval, they are likely violating the Constitution. As explained here, the Constitution forbids extortionate permit conditions. And for this reason government is also forbidden from denying a permit application on account of your refusal to accept unconstitutional conditions. Once again, it is advisable to consult an attorney before accepting or rejecting proposed conditions. 

Unfortunately some jurisdictions allow imposition of extortionate conditions if imposed pursuant to a zoning code. The courts remain intractably divided as to whether these legislatively imposed conditions are lawful. For our part, NFIB Legal Center is asking the Supreme Court to take-up the issue because we want a clear and definitive ruling that extortionate conditions are illegal—regardless of whether approved by a City Council. 

Government Must Pay for Physical Invasions

While government can generally impose regulatory restrictions without incurring takings liability, it must pay just compensation for physical invasions. For example, in Arkansas Game and Fish Commission, we successfully argued that the government must pay for a taking of property as a result of a government induced flood that destroyed thousands of dollars’ worth of timber. Nonetheless, some courts continue to skirt the rules. For example, the California Supreme Court recently issued a disappointing (and controversial) opinion in Property Reserve v. DWI.

In that case we had argued that the State of California must pay for physical invasions of private property when conducting environmental studies on private property.California statutes authorize agencies to enter private property for extended periods of time, boring holes and effecting lasting physical changes. Amazingly, the California Supreme Court held that there was no takings issue here. We certainly disagree and will most likely ask the U.S. Supreme Court to hear the case.

You Should Have a Right to a Jury Trial

Ideally you should have a right to a jury trial when the government takes your property. And the Supreme Court has said as much, at least in suits against municipalities. But despite the fact that the Founding Fathers adopted the Seventh Amendment—guaranteeing your right to a jury trial—with the specific intention that it should apply against the federal government, the courts have presumed that one cannot claim a right to a jury trial in a suit against the United States.

This is highly problematic. Why? Because a jury of one’s peers is more likely to recognize the danger of government overreach. To be sure, most people still believe in property rights and would take umbrage at the idea that the government is trying to take away private property without paying for it. By contrast, judges are all too often inclined to side with government on these questions. 

However, in a potential landmark case, the NFIB Legal Center is urging the Sixth Circuit Court of Appeal to allow Michigan landowners a jury trial. As our brief argues, the Founding Fathers intended the Seventh Amendment to apply against the United States. The case, Brott v. United States, will likely be decided in 2017.

You Should be Able to Go to Federal Court

Finally, it is worth noting another vexing problem facing landowners. Unfortunately the Supreme Court’s 1985 decision in Williamson County Regional Planning Commission v. Hamilton Bank held that takings claims against a state or local authority must generally be prosecuted in state court. Obviously, this is a problem in states like California, where the courts are hostile toward property owners.

Moreover, Williamson County was wrongly decided. Accordingly, NFIB Legal Center has been working with our allies to get the Supreme Court to reconsider that decision. For more on that effort, check out our discussion of a recent brief we filed in Arrignoi v. City of Durham

What Should You Do if You Are Having Problems Getting a Permit Approval?

It is always prudent to consult with a trusted attorney if you think your legal rights may be in jeopardy. Moreover, you may find that the authorities take you more seriously when you are represented by counsel. An attorney who understands zoning and eminent domain law can also help ensure that you are taking the proper steps to protect your rights and potential legal avenues. 

*This article does not provide legal advice. Employers are advised to retain counsel from a trusted attorney with experience in employment law.  

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