Avoiding or Defeating Takings Clause Challenges

The courts, in general, have determined that reasonable land use regulations, including traditional and innovative zoning regulation, open space and agricultural land protections, landmark preservation and design controls, and environmental protection of wetlands and floodplains, will withstand challenges under the Due Process and Takings clauses. Implemented carefully, these types of smart growth policies do not violate Due Process rights or constitute a taking. The starting point is that local land-use regulation must satisfy Due Process standards by being enacted for a purpose that is within the police power.  A Vermont town that wants to adopt land-use and development regulations must, in any event, comply with Vermont statutes requiring towns to adopt a municipal plan and setting forth required elements of land-use bylaws11. Compliance with these state requirements also helps towns to avoid Due Process challenges by helping to show that land-use regulation is reasonably related to a police power purpose.
Complying with the spirit as well as the letter of state requirements includes practices such as the following:

  • Development of a municipal plan that states community objectives after an active public participation process that includes steps like community surveys, focus groups and community forums, and detailed compilation of data about present future needs of the town.
  • Establishment of a rational basis for local policies by incorporating the results of the process—the explanation behind the need—in the plan.
  • Formal public hearings and other procedures required by Vermont statutes for adoption of a municipal plan.
  • Consideration through a public process of the broad array of regulatory tools, like land-use and development regulations, and non-regulatory tools, like capital budget programs, provided by statute to implement policies explained and adopted in the plan.
  • Required formal public hearings and procedures to adopt specific land use and development regulations and other implementation tools in which studies and other sources of data on community needs are clearly presented.
  • Inclusion in land-use and development regulations of procedural provisions that comply with Vermont statutes and allow town officials or boards to hear all appropriate concerns of those affected and to be flexible but even-handed in applying the regulations.

Even when the basic steps just outlined have been taken, a resident or developer may argue that any restrictions imposed by land use regulation result in a regulatory taking.  Such a challenge should not discourage a town from developing smart growth regulations.  There are various ways in which a town can prevent or defend against Loretto, Lucas, Nollan-Dolan, and Penn Central regulatory taking challenges.

  • Loretto takings. If the municipal plan, or a development being considered under land-use regulations, requires even a slight permanent physical invasion of a landowner’s property by the town, the consequences may be anticipated by formal eminent domain proceedings or by an agreement to pay a reasonable compensation.

Note that if eminent domain is used, under the recent U.S. Supreme Court decision of Kelo v. New London,12 eminent domain can be used to take property and transfer it to another private owner as part of an economic development project that serves a general public use. Subsequent Vermont legislation prohibits the use of eminent domain for a taking that is “primarily” for economic development, except as part of an urban renewal project and for certain other purposes13. Careful planning and preparation of a project through the steps described above would allow a town to meet the standards of the Kelo decision as modified by the Vermont legislation.

  • Lucas takings. If implementation of a land use regulation will destroy all economic value in the owner’s property, it must be supported by a plan based on studies and findings clearly demonstrating that the regulation meets a need involving a threat to public health or safety that “background principles of law” existing when the landowner acquired the property, such as the law of nuisance, might address.  The Supreme Court has left open the question whether pre-existing land-use regulations may, in certain instances, be treated as pre-existing law. Alternatively, the town should look for ways to assure that value does remain in the land. For example, if the restrictive regulation does not prohibit all uses in the area regulated, or applies to only a portion of the owner’s property, the value of the other uses or the rest of the parcel may prevent a Lucas taking14. In these instances, the regulation must still be evaluated under the Penn Central standard.
  • Nollan/Dolan takings.  A condition on granting a permit that requires dedication of some portion of the property to a public purpose (an “exaction”) can meet the Nollan/Dolan standard if the condition is based on a detailed plan or findings that make clear the “essential nexus” between the dedication and reasons for which the government might have denied the permit altogether.  Further, the impact of the condition on the owner or developer should be carefully tailored to be “roughly proportional” to the impact of the development.  Careful compliance with the requirements of Vermont legislation concerning the development of municipal plans and regulations may help to meet both aspects of the standard.
  • Penn Central takings.  To meet the Penn Central standard, which is the default position, a regulation must be measured against three criteria, which local officials should weigh in applying regulations to particular properties and in determining the likelihood of success when a regulatory takings challenge is raised15:

1.  Economic impact on the property owner. In cases that are not takings under the Loretto or Lucas standards, Lingle’s “functional equivalent” approach means that economic impact ordinarily should only lead to a taking if it constitutes a very significant loss—perhaps as high as 85% of the value of the property with and without the regulation.
If the economic impact is significant, then two other criteria must be applied on a case-by-case basis:

2.  “Investment-backed expectations” of the owner.  The reasonable expectations of the owner at the time of purchase must be considered.  An owner who had notice of existing regulations or could reasonably foresee future regulation may not be able to claim that the regulation is a taking.  Similarly, an owner who purchased property for one use and used it for that purpose for a significant period is in a weaker position to claim that a regulation prohibiting a different use is a taking.

3.  Character of the governmental action. The “functional equivalent” approach of Lingle has narrowed this criterion  to temporary physical invasions of property or similar impositions, the scope of the regulation, and whether its purpose is to prevent public harm or create a public benefit.  To the extent that, as with ordinary zoning regulations, the landowner directly burdened by a regulation at the same time benefits in other ways because imposition of the same burden on neighbors increases the attractiveness or property values of the area, the regulation is less likely to be considered a taking. Given the importance of health and safety as police power purposes, a regulation intended to prevent harm may be less likely to be considered a taking than one that confers a benefit. Again, careful compliance with Vermont enabling legislation may help to demonstrate these points.11 24 V.S.A. ch. 117, §§ 4301-4476.
12 Kelo v. New London, 545 U.S. 469 (2005).
13 12 V.S.A. § 1040.
14  Tahoe-Sierra Preservation Council , Inc., v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002); Palazzolo v. Rhode Island, 533 U.S. 606 (2001).
15  The following summary is based on a thoughtful article by John D. Echeverria entitled Making Sense of Penn Central, in the UCLA Journal of Environmental Law and Policy, vol. 23, pp. 171-210 (2005).